Court Opinion

ID: 7805028
Source: CourtListenerOpinion
Date Created: 2022-08-31 00:00:31.375603+00
Date Added: 2024-06-11T16:29:55.963614
License: Public Domain

Case: 21-10212     Document: 00516453401          Page: 1    Date Filed: 08/30/2022

              United States Court of Appeals
                   for the Fifth Circuit                              United States Court of Appeals
                                                                               Fifth Circuit

                                                                             FILED
                                                                       August 30, 2022
                                   No. 21-10212                         Lyle W. Cayce
                                                                             Clerk

   In the Matter of: Silver State Holdings, Assignee 7901
   Boulevard 26, L.L.C.

                                                                          Debtor,

   Richard N. Morash; Silver State Holdings, Assignee
   7901 Boulevard 26, L.L.C.,

                                                     Appellants/Cross-Appellees,

                                       versus

   Valley Ridge Roofing and Construction, L.L.C.,

                                                       Appellee/Cross-Appellant.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                           USDC No. 4:20-CV-1355

   Before Jones, Haynes, and Costa, Circuit Judges.
   Per Curiam:*

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
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                                    No. 21-10212

          Richard Morash owned a property encumbered by liens. He erased
   one of the liens by purchasing a senior lien and foreclosing on the property.
   The question is whether the creditor whose lien was erased can avoid this
   transfer in a bankruptcy proceeding. We agree with the bankruptcy court that
   it can and therefore affirm.
                                         I
          A property in the Fort Worth suburbs is the focus of this appeal.
   Morash bought that property, a former Home Depot, through his single-
   member limited liability company called 7901. The purchase required a $3.4
   million loan from a bank, which placed a lien on the property. The bank’s
   lien was junior to a pre-existing $100,000 property tax lien issued by Tarrant
   County.
          7901 leased the property to a tenant that wanted to turn it into a
   shooting range. The tenant borrowed $180,000 from the City of North
   Richland Hills, which resulted in another lien on the property. This lien took
   third priority behind the county and bank liens.
          The lien-saddled property suffered setbacks. The first was a violent
   storm that damaged the roof. 7901 employed a roofing company—Valley
   Ridge—to fix the roof, but Valley Ridge’s costs for the repair exceeded what
   7901’s insurance paid. 7901 and Valley Ridge thus went to arbitration, where
   Valley Ridge was awarded over $500,000 plus post-judgment interest.
   Valley Ridge recorded a judgment lien against the property. This was the
   fourth lien on the property. In order of priority, the liens were: (1) the
   $100,000 county lien; (2) the $3.4 million bank lien; (3) the $180,000 city
   lien; and (4) the $500,000-plus judgment lien.
          Meanwhile, the tenant defaulted on and then abandoned its lease.
   7901 tried selling the property but the attempt fizzled. The property
   remained vacant and produced no income. Consequently, 7901 ran out of

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   cash. Morash continued to pay 7901’s bills with money from his other
   companies. And because Valley Ridge’s judgment remained unsatisfied, it
   filed a petition in state court to foreclose on the property.
          Per the bankruptcy court’s findings, Morash’s chicanery began
   sometime around then. He formed a new company called Silver State, which,
   like 7901, was owned and controlled solely by him. Morash and his lawyer—
   who also represented Silver State and 7901—convinced North Richland Hills
   to sell its $180,000 lien to Silver State. Knowing that the city wanted an
   owner who had the time and resources to maintain the property, Morash and
   his lawyer lied to the city that they had a prospective buyer. They also told
   the city that the sale to that buyer would occur only if they “clear[ed] [the]
   title of certain historical liens impacting marketability.” In fact, no buyer
   existed at the time. The city nevertheless sold the lien to Silver State for
   $180,000.
          Silver State then foreclosed on the property. A trustee appointed by
   Silver State convened the sale. The trustee filed and posted all notices about
   the foreclosure required by Texas law. But to speed up the foreclosure
   process, Morash—on behalf of 7901—waived (1) Silver State’s requirement
   to provide thirty days’ notice before the foreclosure and (2) 7901’s right to
   cure its default. At the foreclosure sale, Silver State submitted a credit bid of
   $200,000. The trustee accepted the bid, and the property was Silver State’s.
   The foreclosure extinguished Valley Ridge’s junior judgment lien. And the
   deed conveying the property was recorded five days later.
          Valley Ridge did not find out about the foreclosure until more than a
   month after it happened. While Morash and the lawyer were maneuvering
   to acquire the city lien, they were also stalling Valley Ridge’s foreclosure.
   Acting on 7901’s behalf, they misled Valley Ridge into believing that they
   were going to sell the property to a buyer and satisfy Valley Ridge’s judgment.

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   For example, a few days after Silver State acquired the city lien and its notice
   of foreclosure was filed, Valley Ridge asked the lawyer about the status of the
   property. The lawyer responded that “the buyer has not agreed to final
   terms.” Morash and the lawyer delayed recording the assignment of the city
   lien until after the foreclosure sale. Even after the sale was complete, the
   lawyer continued to lie to Valley Ridge about whether a buyer was interested
   in the property.
          When Valley Ridge eventually found out about the foreclosure, it
   amended its state court petition against 7901 to add claims against Silver
   State under the Texas Uniform Fraudulent Transfer Act (TUFTA). Silver
   State, in turn, filed for Chapter 11 bankruptcy. By this point, Silver State had
   found a legitimate third party to buy the property and wanted to use the
   Bankruptcy Code’s “free and clear” sale provision to sell the property
   without the looming cloud of Valley Ridge’s TUFTA claims. After filing the
   bankruptcy petition, Silver State removed Valley Ridge’s state court
   proceeding to the bankruptcy court.
          In a separate proceeding, Valley Ridge initiated an involuntary
   Chapter 7 bankruptcy against 7901. The trustee in that proceeding filed her
   own complaint against Morash and Silver State alleging preferential transfer
   and fraudulent transfer under the Bankruptcy Code, breach of fiduciary duty,
   conspiracy, and other claims.
          These disparate proceedings were eventually consolidated before the
   bankruptcy court handling Silver State’s Chapter 11. In that proceeding, the
   bankruptcy court allowed Silver State to sell the property to the third party
   with the caveat that the disputed proceeds would be deposited in the court’s
   registry until resolution of the claims against Silver State.
          The property was thus sold. From the proceeds, Silver State paid the
   county and bank liens. The bankruptcy court then approved a compromise

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   whereby Valley Ridge would assume the trustee’s claims against Morash and
   Silver State, and the trustee would receive $50,000 from the sale proceeds.
   When the scores were settled, more than half a million dollars remained in
   the court’s registry. All claims against Silver State and Morash—both Valley
   Ridge’s and the trustee’s (assumed by Valley Ridge)—proceeded in Silver
   State’s bankruptcy.
           The bankruptcy court ruled in Valley Ridge’s favor on multiple, but
   not all, grounds. It held that Valley Ridge could avoid Silver State’s
   foreclosure as (1) an actual fraudulent transfer under section 548 of the
   Bankruptcy Code, (2) a preferential transfer under section 547 of the
   Bankruptcy Code, (3) an actual fraudulent transfer under section
   24.005(a)(1) of TUFTA (through section 544 of the Bankruptcy Code), and
   (4) a constructive fraudulent transfer under section 24.006(b) of TUFTA
   (through section 544 of the Bankruptcy Code). It further held that Morash
   breached his fiduciary duty to 7901 and that Silver State conspired with him
   and aided and abetted the breach. It awarded Valley Ridge the funds
   remaining in the registry—which at this point amounted to $587,750.96—
   and $84,000 in attorney’s fees, plus conditional appellate attorney’s fees.
           Morash appealed1 and Valley Ridge cross-appealed. The bankruptcy
   court certified a direct appeal to this court under 28 U.S.C. § 158(d), which
   we authorized.
                                              II
           Although the bankruptcy court addressed various claims in its 83-page
   ruling, we affirm its judgment based on one: section 24.006(b) of TUFTA as

           1
             As did Silver State and 7901. But given that Morash controls those entities, we
   refer to appellants collectively as “Morash” for the remainder of the opinion.

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   incorporated through section 544 of the Bankruptcy Code.2 The TUFTA
   claim fully supports the judgment awarding Valley Ridge the remaining
   proceeds and attorney’s fees. Indeed, TUFTA was the source of the
   bankruptcy court’s fee ruling. See Tex. Bus. & Com. Code § 24.013
   (“[T]he court may award costs and reasonable attorney’s fees as are
   equitable and just.”).
           Various provisions in the Bankruptcy Code allow creditors to “avoid
   transactions which unfairly or improperly deplete a debtor’s assets or that
   unfairly or improperly dilute the claims against those assets.” 5 Collier
   on Bankruptcy ¶ 548.01. Section 544 is one of them. That gateway
   provision allows trustees to avoid transfers that, under applicable state law,
   are voidable by creditors. 15 U.S.C. § 544(b)(1).
           One such applicable state law is TUFTA. “TUFTA’s purpose is to
   prevent debtors from prejudicing creditors by improperly moving assets
   beyond their reach.” Janvey v. Golf Channel, Inc., 487 S.W.3d 560, 566 (Tex.
   2016). Under TUFTA, creditors can set aside transfers of property afflicted
   by actual or constructive fraud. See, e.g., Tex. Bus. & Com. Code
   § 24.005. Section 24.006(b)—one of the constructive-fraud provisions—
   provides that a “transfer made by a debtor is fraudulent as to a creditor whose
   claim arose before the transfer was made if the transfer was made to an insider
   for an antecedent debt, the debtor was insolvent at that time, and the insider
   had reasonable cause to believe that the debtor was insolvent.”                       Id.
   § 24.006(b).
           The issue is whether this constructive-fraud provision encompasses
   Silver State’s foreclosure. Morash does not contest most elements of the

           2
            We thus do not address the other issues on which the bankruptcy court ruled, like
   preferential transfer and breach of fiduciary duty.

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   statute. Given that both Silver State and the debtor, 7901, were owned and
   controlled by the same person, Morash wisely acknowledges that Silver State
   was an insider of 7901. See In re Holloway, 955 F.2d 1008, 1011 (5th Cir. 1992)
   (explaining that an important factor for insider status is “the closeness of the
   relationship between the transferee and the debtor”). Morash also concedes
   that 7901 was insolvent and that Silver State knew of the insolvency.
          The main dispute is whether Silver State’s foreclosure was a “transfer
   made by a debtor.” Tex. Bus. & Com. Code § 24.006(b). The plain
   meaning of the phrase indicates that it was. 7901 parted with its property
   through a foreclosure and thus transferred it to Silver State. See Transfer,
   Black’s Law Dictionary 1727 (10th ed. 2014) (“The term [transfer]
   embraces every method—direct or indirect, absolute or conditional,
   voluntary or involuntary—of disposing of or parting with property or with an
   interest in property, including retention of title as a security interest and
   foreclosure of the debtor's equity of redemption.”). Morash nonetheless
   contends that it was not.
          First, Morash argues that the transfer of the property to Silver State
   was not “made by a debtor” because the foreclosure trustee, not 7901, signed
   the deed effectuating the transfer. His view is that foreclosures are not
   transfers “made by a debtor” as TUFTA requires but are instead transfers
   made by third parties. But cases hold otherwise. See, e.g., Abramson v.
   Lakewood Bank & Trust Co., 647 F.2d 547, 548–9 (5th Cir. 1981) (construing
   “transfer suffered by such debtor” to encompass foreclosures); In re Cowin,
   492 B.R. 858, 901–03 (S.D. Tex. 2013) (holding that a foreclosure was an
   actual fraudulent transfer under TUFTA); PDVSA Petroleo S.A. v. Trigeant,
   Ltd., 2012 WL 3249531, at *10 (S.D. Tex. Aug. 7, 2012) (“[T]he foreclosure
   sale constituted a transfer of an asset [under TUFTA].”). This view is also
   inconsistent with Morash’s concession that collusive foreclosures can
   constitute actual fraudulent transfers, given that such transfers also must be

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   made by a debtor. See Tex. Bus. & Com. Code § 24.005(a)(1); 11 U.S.C.
   § 548(a)(1)(A). Indeed, the case on which Morash principally relies—BFP
   v. Resol. Trust Corp.—explains that “foreclosure sales fall within the general
   definition of ‘transfers’” in the Bankruptcy Code and that “a transfer may
   be avoided as fraudulent even if it was against the debtor’s will.” 511 U.S.
   531, 543 n.7 (1994); see also Janvey, 487 S.W.3d at 572 (noting that TUFTA
   and the Bankruptcy Code are often construed similarly because TUFTA is
   drawn from analogous bankruptcy authority).
          TUFTA defines “transfer” broadly; a “transfer” is “every mode,
   direct or indirect, absolute or conditional, voluntary or involuntary, of
   disposing of or parting with an asset or an interest in an asset.” Tex. Bus.
   & Com. Code § 24.002(12).           This expansive definition suggests no
   distinction between voluntary transfers made personally by the debtor and
   involuntary transfers effectuated by third parties. The mode of the transfer
   does not matter; what matters is whether property changes hands from
   debtors to creditors. TUFTA’s broad language—not to mention its implicit
   recognition that foreclosures are transfers made by debtors, see id.
   § 24.004(b)—defeats Morash’s first argument.
          Second, Morash contends that the foreclosure was not a transfer
   because the property that Silver State foreclosed on was not an “asset.”
   Recall that under TUFTA, the transfer must be of “an asset or an interest in
   an asset.” Id. § 24.002(12). An asset, in turn, is the “property of a debtor,”
   but, as relevant here, only to the extent that the property is not “encumbered
   by a valid lien.” Id. § 24.002(2). Morash argues that the property was not
   an “asset” when it was transferred because the liens on it exceeded its value.
          We disagree. To determine whether the property was an “asset,” the
   bankruptcy court had to determine its value when it was transferred. It found
   that the value was $4.2 million. Ample evidence supports this factual

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   finding—which we can disturb only if clearly erroneous. See In re Renaissance
   Hosp. Grand Prairie Inc., 713 F.3d 285, 293 (5th Cir. 2013). The court looked
   to testimony valuing the property at $4.9 million as well as conflicting
   testimony about the effect foreclosures have on property value. It also
   considered that, less than two months after the foreclosure, the property sold
   for over $4.2 million despite being encumbered by the county and bank liens
   and despite no changes in market conditions. Indeed, Silver State itself
   valued the property at $4.2 million in its bankruptcy schedules and in an
   interrogatory. See In re Rollings, 451 F. App’x 340, 348 (5th Cir. 2011) (noting
   that statements in bankruptcy schedules could be treated as judicial
   admissions).
          BFP does not dictate a different result. See 511 U.S. 531. That case
   was about a bankruptcy statute that sets aside transfers in which debtors
   receive less than “reasonably equivalent value” for their property. Id. at 535
   (addressing 11 U.S.C. § 548(a)(2)(A)). The Supreme Court held that the
   sales price at a regularly conducted and noncollusive foreclosure constitutes
   “reasonably equivalent value” and that courts should not second-guess
   foreclosure prices by searching for “fair market value.” Id. at 537. The Court
   rejected the use of an alternative measure of reasonably equivalent value
   because doing so would have cast a “federally created cloud” over
   foreclosure sales conducted under state law. Id. at 544. But BFP’s concern
   that bankruptcy law might “displace traditional state regulation” is absent
   when the underlying claim is under state law. Id. In other words, the meaning
   of “reasonably equivalent value” in the Bankruptcy Code does not control
   what value courts should assign a property in calculating whether it is an asset
   under TUFTA. BFP does not constrain the more generalized factual inquiry
   required to determine a property’s value. See In re 1701 Commerce, LLC, 511
   B.R. 812, 831 (N.D. Tex. 2014) (using fair market value as the relevant
   benchmark); PDVSA, 2012 WL 3249531, at *7 (not using foreclosure price

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   as property’s value). To be sure, the $200,000 that the property sold for in
   foreclosure is relevant in determining its market value. See 1701 Commerce,
   511 B.R. at 831 (noting that foreclosure “still affects fair market value
   negatively”). And here the bankruptcy court did consider the foreclosure
   price, as part of “all relevant evidence,” before arriving at its conclusion on
   the property’s worth. Given the considerable evidence that the property was
   worth more than what it was sold for, the bankruptcy court did not clearly err
   in finding that the property was worth $4.2 million at the time of transfer.
          Nor did the liens on the property exceed its $4.2 million value when it
   was transferred. The transfer occurred when the deed was recorded days
   after the foreclosure. See Tex. Bus. & Com. Code § 24.007(1)(A) (“[A]
   transfer is made . . . with respect to an asset that is real property . . . when the
   transfer is so far perfected that a good faith purchaser of the asset from the
   debtor . . . cannot acquire an interest in the asset that is superior to the
   interest of the transferee.”); Corpus v. Arriaga, 294 S.W.3d 629, 635 (Tex.
   App.—Houston [1st Dist.] 2009, no pet.) (holding that a transfer is perfected
   when the deed is recorded). At that point, the remaining liens on the
   property were the county lien of $99,508.99 and bank lien of $3,236,995.55.
   Under TUFTA, “the value of property in excess of a valid lien encumbering
   the property is an ‘asset.’” Citizens Nat’l Bank of Tex. v. NXS Constr., Inc.,
   387 S.W.3d 74, 82 (Tex. App.—Houston [14th Dist.] 2012, no pet.). The
   property was therefore an asset to the extent of the difference between its
   value and the sum of the liens—$863,495.46.
          Morash’s next argument is that a transfer is fraudulent under section
   24.006(b) only if it was made in exchange for insider debt. But the text of
   section 24.006(b) has no insider-debt requirement. The debt only needs to
   be antecedent. See Tex. Bus. & Com. Code § 24.006(b); Osadon v.
   C&N Renovation, Inc., 2018 WL 2126821, at *6 (Tex. App.—Dallas May 9,
   2018, pet. denied). In other words, the debt must exist “before a debtor’s

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   transfer of an interest in a property.” Antecedent Debt, Black’s Law
   Dictionary 488 (10th ed. 2014). The debt that 7901 owed Silver State
   (after Silver State assumed it from the city) was plainly antecedent because it
   existed before the foreclosure took place.
           The last question is whether Morash is entitled to the value of the lien
   on which he foreclosed. TUFTA has a safe-harbor provision under which
   good faith transferees are entitled to a reduction in liability equal to the
   amount they paid. See Tex. Bus. & Com. Code § 24.009(d)(1).3 But
   Morash cannot benefit from this provision.               He was not a good faith
   transferee. As the district court found, Morash and his lawyer lied to and
   misled Valley Ridge about the foreclosure. Morash thus receives no liability
   reduction under the safe harbor.4
                                            ***
           Valley Ridge can avoid Silver State’s foreclosure under section
   24.006(b) of TUFTA and section 544 of the Bankruptcy Code.
           AFFIRMED.

           3
             This safe harbor tempers Morash’s concerns that allowing Valley Ridge to avoid
   the Silver State foreclosure will throw all foreclosure markets into a tailspin.
           4
            Accordingly, we need not address the equitable-subordination issue that Valley
   Ridge cross-appealed. In any event, that issue—which would not have expanded Valley
   Ridge’s full victory at the bankruptcy court—should have been raised in Valley Ridge’s
   appellee brief as an alternative ground for affirmance rather than in a cross-appeal. See
   Domain Protection, L.L.C. v. Sea Wasp, L.L.C., 23 F.4th 529, 539–40 (5th Cir. 2022).

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   EDITH H. JONES, Circuit Judge, Dissenting
            Thank goodness this opinion is unpublished and therefore non-
   precedential. I respectfully but ardently dissent. The upshot of the majority
   opinion is essentially to revivify the discredited Durrett
   1
       rule under the guise of interpreting TUFTA. In one sense, this decision
   applies only to TUFTA as enacted in Texas, and our court’s interpretation
   of Texas law doesn’t even bind state courts. More broadly, if taken seriously,
   this decision could affect the finality of foreclosures in other states that have
   adopted materially similar versions of TUFTA.
            The Durrett decision wrought havoc in the market for nonjudicial
   foreclosure sales by holding that regularly conducted non-collusive
   nonjudicial foreclosure sales for less than the “reasonably equivalent value”
   of the property could be avoided in bankruptcy as constructive fraudulent
   transfers.     See 11 U.S.C. § 548(a)(1)(B).2             Durrett determined that
   “reasonably equivalent value” could be based on a standard real estate
   appraisal technique rather than the sale price determined at the forced sale.
   The Supreme Court reversed. Among other things, the Court carefully
   explained that such a mode of valuation simply does not represent the real-
   world effect of a valid non-collusive forced sale on the value of real property.3

            1
             Durrett v. Washington Nat. Ins. Co., 621 F.2d 201 (5th Cir. 1980), abrogated by
   BFP v. Resol. Tr. Corp., 511 U.S. 531, 114 S. Ct. 1757 (1994).
            2
              For instance, in BFP v Resolution Trust, which overruled Durrett more than a
   decade after Durrett was decided, the Supreme Court observed that title insurers had
   “reacted to the Durrett rule by including specially crafted exceptions from coverage in
   many policies issued for properties purchased at foreclosure sales.” BFP, 511 U.S. at 544,
   114 S. Ct. at 1765 (citation omitted).
            3
            The Court explained that “[a]n appraiser’s reconstruction of ‘fair market’ value
   could show what similar property would be worth if it did not have to be sold within the

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           In this case, the majority finds a “constructive fraudulent transfer,”
   Tex. Bus. Comm. Code § 24.006(b), because the debtor’s involuntary
   “transfer” was of “an asset or an interest in an asset,” § 24.002(12), and an
   “asset” must be the “property of a debtor” to the extent that the property is
   not “encumbered by a valid lien.” § 24.002(2). The majority then holds,
   just as this court erroneously did in Durrett, that the combined TUFTA
   definitions allowed the court to “value” the foreclosed property not at the
   date of foreclosure and based on the foreclosure auction, but at the amount for
   which it was sold in a non-foreclosure sale months later.4
           Essentially, the majority moves the Durrett valuation error into the
   definitional framework of TUFTA in all its applications. The BFP decision,
   to be sure, interpreted the Bankruptcy Code’s fraudulent conveyance
   provision and does not control our interpretation of Texas law. But BFP
   described the parallel history of fraudulent transfer law and foreclosure law
   and found that they “enjoyed over 400 years of peaceful coexistence in
   Anglo-American jurisprudence until the Fifth Circuit’s unprecedented 1980
   decision in Durrett.” BFP, 511 U.S. at 542, 114 S. Ct. at 1764. Likewise in

   time and manner strictures of state prescribed foreclosure. But property that must be sold
   within those strictures is simply worth less. No one would pay as much to own such
   property as he would pay to own real estate that could be sold at leisure and pursuant to
   normal marketing techniques.” BFP, 511 U.S. at 539-40.
           4
              The majority opinion neglects to mention that the bankruptcy court found no
   legal fault in the way in which Silver State’s foreclosure on the City lien was handled and
   conducted by Morash (using his name synonymously with his wholly owned entities). The
   majority also neglects to mention that for all the “misleading” conduct on behalf of
   Morash, he owed no duty in Texas law to inform Valley Ridge about the upcoming
   foreclosure, for which valid public notice was provided. See Tex. Prop. Code § 51.002(b);
   see also Am. Sav. & Loan Ass’n v. Musick, 531 S.W.2d 581, 588 (Tex. 1975) (a junior lienor
   is not entitled to particularized notice of the foreclosure).

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   this case, we have found no Texas court case that has ever construed TUFTA
   to impugn a regularly conducted noncollusive nonjudicial foreclosure.
           The indications from Texas law, instead, are contrary to the majority
   opinion. As noted before, the trustee points to not a single Texas case that
   has ever avoided under TUFTA a regularly conducted noncollusive
   nonjudicial foreclosure sale; indeed, the trustee sniffs at the idea such a
   citation is even necessary.5 Yet as with the distinct novelty of the Durrett
   opinion’s alleged plain reading of the Bankruptcy Code, one would think that
   some venerable case law might have construed TUFTA or its predecessor
   statutes to undo a creditor’s foreclosure sale. The silence of precedent is
   deafening. Further, in Yokogawa Corp. v. Skye Intern Holdings, the court
   upheld summary judgment in favor of two secured creditors who foreclosed
   on the borrower’s assets and sold them to a third defendant. Yokogawa Corp.
   of Am. v. Skye Int'l Holdings, Inc., 159 S.W.3d 266 (Tex. App. 2005). The
   court stated:
           “We agree that the foreclosure and subsequent transfer of
           assets to Skye Delaware are not covered by TUFTA. A
           secured party is entitled to foreclose on its security interest in
           the event of default . . . . Nor is the subsequent transfer of the
           assets from the foreclosure sale actionable under TUFTA.
           Under TUFTA, ‘transfer’ means disposing or parting with an
           asset. Tex. Bus. & Com. Code Ann. § 24.002(12) (Vernon
           2002). Because the property Moore and Trojan purchased at
           the foreclosure sale was encumbered by a valid lien, TUFTA is
           inapplicable.” Yokogawa, 159 S.W.3d at 269.

           5
             Only one case is on point, PDVSA Petroleo S.A. v. Trigeant, Ltd., WL 3249531
   (S.D. Tex. Aug. 7, 2012). But that case issued from a bankruptcy court, is not binding on
   our interpretation of Texas law, and during appeal to the Fifth Circuit the parties settled,
   preventing any more definitive ruling.

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          Moreover, the majority’s application of two definitions in TUFTA
   effectively overrides a specific provision, which defines “value” accruing
   from foreclosure sales to override Durrett. Section 24.004(b) provides that:
          For the purposes of Sections 24.005(a) and 24.006 of this code,
          a person gives reasonably equivalent value if the person
          acquires an interest of the debtor in an asset pursuant to a
          regularly conducted, noncollusive foreclosure sale…for the
          acquisition or disposition of the interest of the debtor upon
          default under a mortgage, deed of trust, or security agreement.

          According to the relevant comment to section 3 of the Uniform Act,
   from which this provision is derived, subsection (b) “rejects the rule of such
   cases as Durrett and Abramson . . . [and] adopts the view taken in . . . In re
   Madrid . . ., that the price bid at a regularly conducted and noncollusive
   foreclosure sale determines the fair value of the property sold.” Unif.
   Fraudulent Transfer Act § 3 cmt. 5. By its terms, Section 24.004(b)
   encompasses Sec. 24.006(b), on which the majority here relies. I contend
   that this specific withdrawal of liability for regularly conducted noncollusive
   foreclosure sales controls, under standard principles of statutory
   construction, over the general statutory definitions. A. Scalia & B. Garner,
   Reading Law: The Interpretation of Legal Texts 183-88 (2012) (Scalia &
   Garner). If it were otherwise, the definitions could render Sec. 24.004(b)
   practically meaningless.
          A final note about the majority’s pejorative description of the facts.
   The bankruptcy court found Morash’s attorney less than candid about
   maneuverings that preceded Silver State’s foreclosure on 7901’s real
   property, although the bankruptcy court almost exclusively uses the term
   “misled” rather than “lied.” But the majority omits to note that for nearly
   two years, Morash personally kept 7901’s bank loan current and paid upkeep
   on 7901’s vacant parcel, all at a cost of thousands per month, and sought to

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Case: 21-10212        Document: 00516453401              Page: 16        Date Filed: 08/30/2022

                                          No. 21-10212

   market the property unsuccessfully. Ultimately, Valley Ridge secured a
   fourth lien on the parcel. When Silver State purchased the City’s third lien
   for nearly full value, as it was entitled to do, and noticed foreclosure, Valley
   Ridge or any outside party could have bid in at the foreclosure sale, subject
   to whatever prior liens were not cut off. Morash properly notes that had the
   parcel been sold through a bankruptcy trustee’s sale pursuant to 11 U.S.C.
   § 363 (sale free and clear of liens), Morash or Silver State could have
   accomplished exactly the same result that obtained here outside of
   bankruptcy. Valley Ridge was not fully paid for roofing the building at 7901,
   but Morash’s losses from this venture surely exceed those of Valley Ridge.6
           If this were a precedential opinion, I fear it would subject regularly
   conducted, nonjudicial foreclosure sales in Texas to the same post hoc
   challenges and market uncertainty that followed in the wake of Durrett. I
   respectfully dissent.

           6
             The majority declines to review the bankruptcy court’s additional findings that
   Morash’s transactions actually intended to hinder, defraud, or delay creditors, Tex. Bus. &
   Comm. Code Sec. 24.005(a), constituted a preferential transfer pursuant to 11 U.S.C. Sec.
   547, and somehow violated some fiduciary duty of some kind owed by Morash. I would
   reverse the bankruptcy court on those grounds for liability and reverse the judgment in toto.

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