Court Opinion

ID: 4356453
Source: CourtListenerOpinion
Date Created: 2019-01-07 09:54:44.893684+00
Date Added: 2024-06-11T14:46:23.491791
License: Public Domain

REVERSE and REMAND; and Opinion Filed January 3, 2019.

                                             In The
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                      No. 05-17-00577-CV

    RENATE NIXDORF GMBH & CO. KG AND WATERCREST PARTNERS, L.P.,
                                 Appellants
                                    V.
   TRA MIDLAND PROPERTIES, LLC, PILLAR INCOME ASSET MANAGEMENT,
INC., TRA APT WEST TX, L.P., TRANSCONTINENTAL REALTY INVESTORS, INC.,
AMERICAN REALTY INVESTORS, INC., WINTER SUN MANAGEMENT, INC., H198,
LLC, TRIAD REALTY SERVICES, LTD., REGIS REALTY PRIME, LLC, CHICKORY
I, L.P., SUNCHASE AMERICAN, LTD., LONGFELLOW ARMS APARTMENTS, LTD.,
VISTAS OF VANCE JACKSON, LTD., DONALD C. CARTER, ROBERT T. SHAW SR.,
                SCOTT C. LONG, AND RYAN PHILLIPS, Appellees

                      On Appeal from the 191st Judicial District Court
                                   Dallas County, Texas
                           Trial Court Cause No. DC-17-06190

                             MEMORANDUM OPINION
                         Before Justices Bridges, Brown, and Whitehill
                                   Opinion by Justice Brown
       Appellants Renate Nixdorf GmbH & Co. KG (RNKG) and Watercrest Partners, L.P.

(Watercrest) appeal the trial court’s orders dismissing their claims against appellees TRA Midland

Properties, LLC, Pillar Income Asset Management, Inc., TRA Apt West TX, L.P.,

Transcontinental Realty Investors, Inc., American Realty Investors, Inc., Winter Sun Management,

Inc., H198, LLC, Triad Realty Services, Ltd., Regis Realty Prime, LLC, Chickory I, L.P., Sunchase

American, Ltd., Longfellow Arms Apartments, Ltd., Vistas of Vance Jackson, Ltd., Donald C.

Carter, Robert T. Shaw Sr., Scott C. Long, and Ryan Phillips. In two issues, appellants contend
the trial court erred in granting (1) appellees TRA Midland Properties, LLC’s and Pillar Income

Asset Management, Inc.’s pleas to the jurisdiction and (2) the remaining appellees’ rule 91a1

motion to dismiss. Because appellants’ second amended petition alleges facts sufficient to both

state causes of action and establish the trial court’s jurisdiction over the causes of action, we

reverse the trial court’s orders dismissing the claims and remand for further proceedings consistent

with this opinion.

                                                               BACKGROUND

            Appellant RNKG obtained a $48.75 million judgment against W. Eric Brauss and appellant

Watercrest obtained a $300,000 judgment against Christine Martin, Brauss’s former wife, in

December 2009.2 Just a month earlier, Brauss and Martin fled to Brazil after assigning their

interests in several general-partner and limited-partner entities that owned appellee TRA Apt West

TX, L.P. (Apt West) to Midland Residential Investment, LLC (MRI).3 No consideration was paid

for the assignments of interests. Apt West wholly owned appellee TRA Midland Properties, L.L.C.

(TRA), a limited liability company. TRA’s sole asset was a portfolio of twenty-one apartment

complexes in Midland, Texas. In 2012, TRA sold the apartment complexes to Midland Investors,

LLC (Midland) for $170 million, netting a $40.7 million profit.4 Midland, however, paid the $40.7

million to appellee Pillar Income Asset Management, Inc. (Pillar), which had no ownership interest

in TRA.5

     1
         TEX. R. CIV. P. 91a.
     2
         See generally Brauss v. Triple M Holding GmbH, 411 S.W.3d 614 (Tex. App.—Dallas 2013, pet. denied).
     3
        Prior to the transfers, Brauss managed Apt West and either Brauss or Martin owned the controlling interests in each of the entities with
ownership interests in Apt West, including its general partner, TRA Apt GP, Inc., a corporation owned by Brauss. See Renate Nixdorf GmbH &
Co. KG v. Midland Investors, LLC., No. 05-14-01258, 2016 WL 1719054, at *1 ns.1, 2 (Tex. App.—Dallas Apr. 28, 2016, pet. dism’d) (mem. op.
on reh’g) (Nixdorf I).
     4
         The complexes were encumbered by a Fannie Mae-backed mortgage in the amount of $130 million.
     5
        According to a Pillar interrogatory answer, it received the sale proceeds because it “is an asset manager for the entities that owned [TRA] as
of the closing date of the sale of the Apartment Complexes.” See Nixdorf I, 2016 WL 1719054, at *2 n.4.

                                                                        –2–
         In 2013, appellants brought this action against TRA, MRI, Pillar, and Midland, asserting

claims under the Texas Uniform Fraudulent Transfer Act (TUFTA).6 Appellants alleged the

defendants knowingly structured the assignment of ownership interests in Apt West and

subsequent sale of TRA’s apartment complex portfolio to divert the proceeds away from TRA in

order to delay, hinder and defraud appellants from collecting on their judgments and for far less

than a reasonably equivalent value. Appellants subsequently supplemented their petition to add a

cause of action for aiding and abetting fraudulent transfer against TRA, MRI, and Pillar and also

asserted TRA’s corporate veil should be pierced because it was used as a sham to perpetrate a

fraud.

         Midland moved for summary judgment on appellants’ claims against it, contending, among

other things, appellants failed to show they were creditors of TRA and, thus, lacked standing to

assert a fraudulent transfer claim concerning the 2012 transaction. The trial court granted the

motion and severed appellants’ claims against Midland from the claims against the other

defendants. Appellants appealed Midland’s summary judgment, and this Court affirmed it. See

Nixdorf I, 2016 WL 1719054.                    The Court concluded appellants’ allegations and summary

judgment evidence did not show “any relationship that made appellants creditors of TRA or

Midland” and, therefore, “appellants failed to allege or present any evidence of standing to seek

relief under [TUFTA] concerning TRA’s sale of the apartment complexes to Midland and

Midland’s transfer of the $40 million at closing.” Id. at *5. In resolving the issue, the Court did

not consider appellants’ aiding and abetting causes of action or allegations of corporate veil-

piercing because, although appellants raised them on rehearing, they had not been raised in

appellants’ original briefing. Id. at *3 n.5.

   6
       See TEX. BUS. & COM. CODE ANN. §§ 24.001–.013.

                                                        –3–
       After submission of Midland’s appeal but before the Nixdorf I opinion issued, appellants

filed a second amended petition. The amended petition added Apt West as a defendant, asserting

claims against it for fraudulent transfer and aiding and abetting fraudulent transfer. The amended

petition also added as defendants Transcontinental Realty Investors, Inc., American Realty

Investors, Inc., Winter Sun Management, Inc., H198, LLC, Triad Realty Services, Ltd., Regis

Realty Prime, LLC, Chickory I, L.P., Sunchase American, Ltd., Longfellow Arms Apartments,

Ltd., Vistas of Vance Jackson, Ltd., Donald C. Carter, Robert T. Shaw Sr., Scott C. Long, and

Ryan Phillips (collectively, Pillar transferees). Appellants asserted fraudulent transfer claims

against the Pillar transferees, alleging Pillar distributed over $33.6 million of the $40.7 million in

proceeds from the sale of the apartment complex portfolio to the Pillar transferees and those

transferees paid no value in return. Like the supplemental petition, the second amended petition

also included allegations of corporate veil-piercing, asserting both TRA and Apt West were sham

entities organized and operated as a mere tool or business conduit of Brauss and Martin to

perpetrate fraud.

       The second amended petition also contained the following new allegations:

       (1) TRA, Apt West, MRI, and Pillar had knowledge that Brauss’s and Martin’s
       conduct related to the assignment of ownership interest in Apt West constituted a
       tort, intentionally assisted and encouraged Brauss and Martin in committing the
       tort, and were a substantial factor in causing the tort;

        (2) the transfer of Brauss’s and Martin’s ownership interests in Apt West to MRI
       could not have been accomplished without TRA and Apt West, which, acting under
       the control of Brauss and Martin, authorized the transfer and accepted MRI as a
       new member of TRA despite a lack of written acknowledgement from MRI to be
       bound by the TRA Company Agreement and a representation the transfer was made
       in accordance with federal securities laws, both required by the TRA Company
       Agreement;

       (3) the fact that the transfer occurred at the Apt West-ownership level concealed
       the transfer of membership interests in TRA to MRI;

        (4) TRA’s deed of trust in return for the $130 million mortgage loan on the
       apartment complex portfolio provided that any transfer of control over TRA
                                                 –4–
        constituted an event of default, and, despite efforts by TRA, Apt West, MRI, and
        Pillar to conceal the assignments to MRI, the lender discovered them in 2011 and
        threatened to accelerate TRA’s $130 million debt obligation;

        (5) faced with the looming threat of foreclosure, TRA, Apt West, MRI, and Pillar
        sought and found a buyer, Midland, which marketed the opportunity to its capital
        partners as an “off-market” transaction to acquire the apartment complexes from a
        “distressed seller” for a purchase price “at a significant discount to market” due to
        “lack of effective market exposure;”

        (6) by diverting the $40.7 million to Pillar’s operating account (where the proceeds
        were commingled with other Pillar funds), TRA, Apt West, MRI, and Pillar hoped
        to launder the proceeds and prevent them from being traced to the ultimate
        beneficiaries: MRI and the Pillar transferees; and

        (7) TRA, Apt West, MRI, and Pillar structured the 2009 and 2012 transactions to
        delay, hinder, and defraud appellants, to obtain property for far less than reasonably
        equivalent value, and all to ultimately benefit the Pillar transferees.

        TRA and Pillar separately filed pleas to the jurisdiction. Apt West and the Pillar transferees

filed a joint rule 91a motion to dismiss appellants’ causes of action against them on several

grounds. The trial court granted the pleas to the jurisdiction and rule 91a motion, dismissed all of

appellants’ claims against appellees, awarded attorney’s fees to the rule 91a movants as the

prevailing parties on the motion, and severed appellants’ claims against appellees, allowing

appellants to pursue this appeal.

                                          APPLICABLE LAW

                                         Standard of Review

        A plea to the jurisdiction challenges a trial court’s power to exercise subject matter

jurisdiction over a claim and “may challenge the pleadings, the existence of jurisdictional facts, or

both.” Alamo Heights Indep. Sch. Dist. v. Clark, 544 S.W.3d 755, 770-71 (Tex. 2018); Texas

Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 225-26 (Tex. 2004). We review the trial

court’s denial of a plea to the jurisdiction de novo. Miranda, 133 S.W.3d at 228. In determining

whether the plaintiff has met its burden of alleging facts that affirmatively establish the trial court’s

subject matter jurisdiction, we look to the allegations in the plaintiff’s pleadings, accept them as
                                                  –5–
true, and construe them in favor of the plaintiff. Miranda, 133 S.W.3d at 226; Tex. Ass’n of Bus.

v. Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993). If the plea challenges jurisdictional

facts with supporting evidence, the standard of review is like that of a traditional summary

judgment. Id. at 226-28. We consider the evidence submitted by the parties to resolve the

jurisdictional inquiry. Id. at 227-28. After a movant asserts and introduces evidence that the trial

court lacks subject matter jurisdiction, the nonmovant must raise a genuine issue of material fact

to overcome the challenge to jurisdiction and avoid dismissal. Id. at 221, 228. In determining

whether a material fact issue exists, we must take as true all evidence favorable to the nonmovant,

indulging every reasonable inference and resolving any doubts in the nonmovant’s favor. Id. at

228.

       Texas Rule of Civil Procedure 91a authorizes a defendant to move for dismissal of a cause

of action that has no basis in law or in fact. TEX. R. CIV. P. 91a; see City of Dallas v. Sanchez, 494
S.W.3d 722, 724-25 (Tex. 2016). The motion must state that it is made pursuant to rule 91a,

identify each cause of action to which it is addressed, and state specifically the reasons the cause

of action has no basis in law, no basis in fact, or both. TEX. R. CIV. P. 91a.2. “A cause of action

has no basis in law if the allegations, taken as true, together with inferences reasonably drawn from

them, do not entitle the claimant to the relief sought.” Id. 91a.1. “A cause of action has no basis

in fact if no reasonable person could believe the facts pleaded.” Id. In deciding a rule 91a motion,

the trial court may consider only the live pleading and any attachments thereto. Id. 91a.6 (“the

court may not consider evidence in ruling on the motion and must decide the motion based solely

on the pleading of the cause of action, together with any pleading exhibits permitted by Rule 59”);

AC Interests, L.P. v. Tex. Comm’n on Envt’l Quality, 543 S.W.2d 703, 706 (Tex. 2018). The trial

court is to award the prevailing party on a rule 91a motion all costs and reasonable and necessary

                                                 –6–
attorney fees incurred with respect to the challenged cause of action in the trial court. TEX. R. CIV.

P. 91a.7.

              We review a trial court’s decision on a rule 91a motion de novo; “the availability of a

remedy under the facts alleged is a question of law and the rule’s factual-plausibility standard is

akin to a legal-sufficiency review.” City of Dallas, 494 S.W.3d at 724. In doing so, we construe

the pleading liberally. See id. at 725; Wooley v. Schaffer, 447 S.W.3d 71, 76 (Tex. App.—Houston

[14th Dist.] 2014, pet. denied). We apply the fair-notice pleading standard to determine whether

the allegations of the petition are sufficient to allege a cause of action. Wooley, 447 S.W.3d at 76.

                                                                      TUFTA

            Consistent with its purpose to prevent debtors from defrauding creditors by placing assets

beyond the creditors’ reach, TUFTA provides a comprehensive statutory scheme through which a

creditor may seek recourse for a fraudulent transfer of assets or property. See Challenger Gaming

Solutions, Inc. v. Earp, 402 S.W.3d 290, 293-94 (Tex. App.—Dallas 2013, no pet). It delineates

the types of transfers and obligations that are fraudulent, enumerates the remedies available to a

creditor, prescribes the measure of liability of a transferee, and lists defenses and protections

afforded a transferee. See id.; BUS. & COM. §§ 24.005–.006, 24.008–.009.

           Under sections 24.005(a) and 24.006(a), the provisions relevant to appellants’ causes of

action, a fraudulent transfer is established either by showing a debtor intended to defraud a creditor

or made the transfer without receiving reasonably equivalent value.7 See BUS. & COM. §§ 24.005–

      7
         Specifically, under section 24.005(a), 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 ...
     (1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or
     (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor
           (A) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were
           unreasonably small in relation to the business or transaction; or

           (B) 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.

                                                                         –7–
.006. Section 24.008 provides the forms of equitable relief, including avoidance of a transfer, to

which a defrauded creditor may be entitled.8 To the extent a transfer is voidable, the creditor may

recover a money 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). The judgment may be rendered against the

first transferee, the person for whose benefit the transfer was made, or any subsequent transferee

other than a good faith transferee who takes for value or from any subsequent transferee. Id. A

fraudulent transfer under TUFTA is a tort. Challenger Gaming Solutions, Inc., 402 S.W.3d at 295-

96.

                                                          Corporate Veil-Piercing

            Generally, a corporation is a separate legal entity and insulates its owners or shareholders

from personal liability for the corporation’s obligations. See Willis v. Donnelly, 199 S.W.3d 262,

271 (Tex. 2006); Nichols v. Tseng Hsiang Lin, 282 S.W.3d 743, 747 (Tex. App.—Dallas 2009, no

pet.). However, “[a] corporate veil may be pierced on an alter ego theory ‘where a corporation is

organized and operated as a mere tool or business conduit of another ….’” Tryco Enterprises, Inc.

v. Robinson, 390 S.W.3d 497, 508 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d) (quoting

BUS. & COM. §§ 24.005(a). Section 24.006(a) identifies a fraudulent transfer as to present creditors, providing as follows:
      A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the
      obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in
      exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer
      or obligation.
BUS. & COM. §§ 24.006(a).
      8
          Specifically, section 24.008 provides a defrauded creditor may be entitled to:
      (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.
BUS. & COM. § 24.008(a). A transfer is not voidable under section 24.005(a)(1), however, “against a person who took in good faith and for a
reasonably equivalent value or against any subsequent transferee or oblige.” Id. § 24.009(a).

                                                                           –8–
Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986) (superseded in part by TEX. BUS.

CORP. ACT art. 2.21, recodified at TEX. BUS. ORGS. CODE ANN. § 21.223)); see also Matthews

Constr. Co. v. Rosen, 796 S.W.2d 692, 693 (Tex. 1990) (“When the corporate form is used as an

essentially unfair device – when it is used as a sham – courts may act in equity and disregard the

usual rules of law to avoid an inequitable result.”); Wilson v. Davis, 305 S.W.3d 57, 69–70 (Tex.

App.—Houston [1st Dist.] 2009, no pet.). The principles applicable to piercing the corporate veil

apply equally to limited liability companies. See BUS. ORGS. § 101.002(a) (providing section

21.223 applies to limited liability companies and their members); McCarthy v. Wani Venture, A.S.,

251 S.W.3d 573, 590–91 (Tex. App.—Houston [1st Dist.] 2007, pet. denied).

       Most often, a trial court disregards a corporate fiction to hold individuals liable for the

debts of the corporation, but Texas courts also apply the doctrine in reverse to allow a corporation’s

assets to “be held accountable to satisfy the liabilities of individuals who treated the corporation

as their alter-ego.” Clement v. Blackwood, No. 11-16-00087-CV, 2018 WL 826856, *5–6 (Tex.

App.—Eastland Feb. 8, 2018, pet. denied) (mem. op.); Wilson, 305 S.W.3d at 70–71; Boyo v.

Boyo, 196 S.W.3d 409, 419 (Tex. App.—Beaumont 2006, no pet) (recognizing courts will reverse

pierce to hold corporations liable for debts of controlling shareholders who have used corporations

to hide assets). In a reverse piercing case, the goal is to treat the shareholders and the corporation

as one and the same rather than disregard the corporate fiction to hold shareholders accountable.

Cappuccitti v. Gulf Indus. Prods., Inc., 222 S.W.3d 468, 481–82 (Tex. App.—Houston [1st Dist.]

2007, no pet.) (quoting Zahra Spiritual Trust v. United States, 910 F.2d 240, 243–44 (5th Cir. 1990)

(concluding Texas law would allow a creditor to reach a corporation’s assets when there is a

showing of an alter ego relationship between the individual debtor and the corporation)).

       To pierce the corporate veil and impose liability under an alter ego theory, a plaintiff must

show (1) the persons or entities on whom it seeks to impose liability are alter egos of the debtor;

                                                 –9–
and (2) the corporate fiction was used for an illegitimate purpose, satisfying the requirement of

section 21.223 of the Texas Business Organizations Code. Tryco Enterprises, Inc., 390 S.W.3d at

508. Section 21.223 requires the plaintiff to show (1) actual fraud and (2) that the fraud was

perpetrated primarily for the direct personal benefit of the corporation’s shareholder, beneficial

owner, subscriber, or affiliate. See BUS. ORGS. § 21.223(b); Tryco Enterprises, Inc., 390 S.W.3d

at 508; Ocram, Inc. v. Bartosh, No. 01-11-00793-CV, 2012 WL 4740859, at *3 (Tex. App.—

Houston [1st Dist.] Oct. 4, 2012, no pet.) (mem. op.). An attempt to pierce the corporate veil, in

and of itself, is not a cause of action, but rather a means of imposing liability in an underlying

cause of action. Matthews Const. Co., 796 S.W.2d at 693 n.1.

                                       Aiding and Abetting

       To prevail on an aiding and abetting claim, a plaintiff must prove a defendant, with

unlawful intent, gave substantial assistance and encouragement to a wrongdoer in a tortious act.

See Juhl v. Airington, 936 S.W.3d 640, 644 (Tex. 1996); West Fork Advisors, LLC v. SunGard

Consulting Servs., LLC, 437 S.W.3d 917, 921 (Tex. App.—Dallas 2014, pet. denied). Aiding and

abetting is a dependent claim premised on an underlying tort; there can be no aiding and abetting

claim related to an underlying tort claim that fails. See Ernst & Young, L.L.P v. Pacific Mutual

Life Ins. Co., 51 S.W.3d 573, 583 (Tex. 2007); West Fork Advisors, LLC, 437 S.W.3d at 921.

                                            ANALYSIS

                                     Plea to the Jurisdiction

       Both TRA’s and Pillar’s pleas to the jurisdiction rely on the law of the case doctrine and,

specifically, this Court’s conclusion in the Nixdorf I opinion that appellants “failed to allege or

present any evidence of standing to seek relief under [TUFTA] concerning TRA’s sale of the

apartment complexes to Midland and Midland’s transfer of $40 million at the closing.” According

to TRA and Pillar, appellants’ claims against them relate only to the 2012 sale of the apartment

                                              –10–
complex portfolio, so neither TRA nor Pillar can be a debtor, a transferee, or a subsequent

transferee as required for a TUFTA defendant.

       In their second issue, appellants contend the trial court erred in granting the pleas to the

jurisdiction because the second amended petition, with its new factual allegations, sufficiently

states causes of action for fraudulent transfer against TRA and Pillar. Specifically, appellants

assert their second amended petition alleges their status as judgment creditors seeking enforcement

against TRA and Apt West as sham entities used to perpetrate fraudulent transfer and Pillar as both

a transferee and as a party that aided and abetted fraudulent transfer. And, because the second

amended petition contained new claims and factual allegations not considered by this Court in

Nixdorf I, appellants maintain the law of case doctrine does not apply.

       TUFTA is intended to prevent debtors from defrauding creditors by moving assets out of

reach. See Challenger Gaming Solutions, Inc., 402 S.W.3d at 293–94. It broadly defines

“transfer” as including “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 ....” BUS. & COM. §

24.002(12); see Rocklon, LLC v. Paris, No. 09-16-0070-CV, 2016 WL 6110911, at *3–4 (Tex.

App.—Beaumont Oct. 20, 2016, no pet.) (mem. op.) (quoting Spencer W. Creed & Bobbie G.

Bayless, Fraudulent Transfers in Texas, 39 HOUS. L. REV. 28, 29 (Sept./Oct. 2001) (explaining

“transfer” includes “virtually every conceivable method by which a debtor may part with an asset

or an interest in an asset”)). A “creditor” is a person who has a claim; a “debtor” is a person who

is liable on a claim. BUS. & COM. § 24.002(4), (6).

       The second amended petition alleges, and appellees do not dispute, that appellants are

creditors with respect to judgment debtors Brauss and Martin. And, just a month before appellants

obtained judgments against them, Brauss and Martin assigned their interests in “a maze of entities”

owning Apt West, which also indirectly effected a transfer of their TRA membership interests and,

                                               –11–
as a result, interest in and control over the equity in TRA’s sole asset – the apartment complex

portfolio, to MRI for no consideration. The second amended petition alleges both that TRA and

Apt West (1) were sham entities organized and used by Brauss and Martin as mere tools and

business conduits to defraud investors, and (2) gave substantial assistance to, and acted in concert

with, Brauss and Martin to effectuate the fraudulent transfer of Apt West ownership interests and

TRA membership interests to MRI, including by authorizing the assignments of interests and

accepting MRI as a new TRA member even though requirements of the TRA Company Agreement

had not been satisfied. The petition further alleges TRA, Apt West, MRI, and Pillar attempted to

conceal the transfer of TRA membership and, because the assignments occurred at the Apt West-

ownership level, they were concealed. Finally, the petition alleges TRA, Apt West, MRI, and

Pillar ultimately arranged for the sale of the apartment complex portfolio to Midland and diversion

of Midland’s $40.7 million payment to MRI-controlled Pillar hoping to launder and prevent the

proceeds being traced to the ultimate beneficiaries, MRI and the Pillar transferees, which paid no

consideration in exchange for those proceeds.

       Accepting the allegations in the second amended petition as true and construing them in

favor of appellants, we conclude the second amended petition alleges facts that support treating

TRA and Apt West as alter egos of Brauss and Martin and, thus, debtors of appellants under

TUFTA. See BUS. & COM. § 24.002(3), (6); see, e.g., Rocklon, LLC, 2016 WL 6110911, at *3–4

(relying on reverse veil piercing, the trial court properly enjoined LLC from accessing,

distributing, or disbursing proceeds from sale of LLC’s property based on evidence that defendant

had used LLC as his alter ego, transferred his interest in LLC to a relative, and then LLC sold its

real property with intent of putting assets out of reach of a judgment); cf. Clement, 2018 WL
826856, at *5–6 (LLC was liable for the fraudulent actions of its members under reverse veil-

piercing principles when a loan by the plaintiffs to avoid foreclosure on a ranch owned by the LLC

                                                –12–
was the product of actual fraud and for the LLC’s members’ direct personal benefit). We further

conclude the second amended petition alleges facts supporting TUFTA causes of action against

TRA and Pillar based on the indirect transfers of TRA membership interests and apartment

complex portfolio sales proceeds.

       Other than stating the trial court, in granting the rule 91a motion to dismiss, had decided

appellants lacked standing to bring claims for fraudulent transfer, aiding and abetting, and piercing

the corporate veil in connection with the apartment complex portfolio sale, neither TRA nor Pillar

addressed the allegations of aiding and abetting and veil piercing in their pleas to the jurisdiction.

Instead, they asserted appellants’ TUFTA claims against them relate solely to the sale of the

apartment complex portfolio and sought dismissal relying on Nixdorf I as law of the case for the

proposition that appellants have no valid fraudulent transfer claim related to the 2012 sale of the

apartment complex portfolio.

       Under the law of the case doctrine, questions of law decided on appeal to a court of last

resort ordinarily will govern the case throughout its subsequent stages. Briscoe v. Goodmark

Corp., 102 S.W.3d 714, 716 (Tex. 2003). The doctrine is intended to achieve uniformity of

decision, judicial economy, and efficiency by narrowing the issues in successive stages of the

litigation. Id. (quoting Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986)). However, it does

not necessarily apply when either the issues or the facts presented in successive appeals are not

substantially the same as those involved in the first one. Hudson, 711 S.W.2d at 630. Thus, when

in a second trial or proceeding, one or both of the parties amend their pleadings, the issues or facts

may have sufficiently changed so the law of the case no longer applies. Id. Further, the law of the

case is not an absolute bar to reconsideration of an issue. See Briscoe, 102 S.W.3d at 716. We

retain discretion to revisit an issue depending upon the particular circumstances of the case. Id.

                                                –13–
           In Nixdorf I, this Court decided the summary judgment in favor of Midland based on the

allegations in appellants’ amended petition. The Court distinguished the 2009 transfer of Apt West

ownership interests from TRA’s subsequent sale of the apartment complex portfolio, which TRA

held before the transfer of Apt West ownership interests. The Court, however, did not consider

the second amended petition’s allegations that TRA and Apt West were used as sham entities for

the purpose of defrauding investors and, along with Pillar, aided and abetted the fraud. And, unlike

the amended petition, the second amended petition alleges affirmative acts on the part of TRA and

Apt West, under the control of Brauss and Martin, to aid in (1) assigning the Apt West ownership

interests and, indirectly, the TRA membership interests, which included interests in the equity in

TRA’s assets, and (2) TRA’s diversion of the proceeds from the sale of the apartment complex

portfolio to Pillar, an MRI-controlled entity, and the Pillar transferees. Because the second

amended petition contains allegations, including allegations of an alter-ego relationship between

TRA and Apt West and Brauss and Martin, that constitute substantial changes to the amended

petition, we conclude the law of the case doctrine does not preclude us from considering the trial

court’s jurisdiction over the second amended petition’s TUFTA causes of action against TRA and

Pillar. See, e.g., El Paso Educ. Initiative, Inc. v. Amex Props., LLC, No. 08-17-00049-CV, ___

S.W.3d ___, 2018 WL 5641470, at *5–6 (Tex. App.—El Paso Oct. 31, 2018, no pet. h.); Gillum

v. Sante Fe Indep. Sch. Dist., No. 01-14-00186-CV, 2016 WL 828055, at *4 (Tex. App.—Houston

[1st Dist.] Mar. 3, 2016, no pet.) (mem. op.). 9

           The second amended petition complains of conduct on the part of both TRA and Pillar

related to the 2009 transfer of ownership interests in TRA’s apartment complex portfolio equity

and the 2012 distribution of that equity. The petition also alleges appellants are creditors of TRA

       9
          Under their second issue, appellants also urge that we reconsider Nixdorf I’s conclusion that status as a “creditor” under TUFTA presents
a jurisdictional requirement related to standing as opposed to simply satisfying one of the elements of a TUFTA causes of action. However, because
of our disposition of this issue, we need not address this additional argument.

                                                                     –14–
under an alter ego theory. After considering the allegations in the second amended petition,

accepting them as true and construing them in favor of appellants, and the record before the trial

court, including this Court’s opinion in Nixdorf I, we conclude TRA and Pillar did not establish

the trial court lacked subject matter jurisdiction over appellants’ TUFTA causes of action against

them. Accordingly, the trial court erred in granting their pleas to the jurisdiction. We sustain

appellant’s second issue.

                                                          Rule 91a Dismissal

           In their first issue, appellants contend the trial court erred in granting the joint rule 91a

motion filed by Apt West and the Pillar transferees. Because the trial court did not specify the

ground(s) on which it granted the motion, appellants are required to show each independent ground

alleged in the motion is insufficient to support the trial court’s order. See Estate of Savana, 529
S.W.3d 587, 592 (Tex. App.—Houston [14th Dist.] 2017, no pet.); Parkhurst v. Office of the Att’y

Gen. of Tex., 481 S.W.3d 400, 402 (Tex. App.—Amarillo 2015, no pet.). Appellants have

challenged each ground, and we address them in turn. Appellants further request that, in the event

we conclude the trial court erred in granting the Rule 91a motion to dismiss, we also vacate that

portion of the trial court’s order awarding the movants attorney’s fees as the prevailing party on

the motion.10 See TEX. R. CIV. P. 91a.7.

           1. TUFTA Limitations

           Citing TUFTA section 24.010(a), certain Pillar transferees11 moved for dismissal asserting

the statute of limitations bars the TUFTA claims against them because appellants did not serve

     10
          The trial court awarded Apt West and the Pillar transferees $19,350 in costs and reasonable and necessary attorney fees and additional
reasonable and necessary attorney fees of $15,000 conditioned on an unsuccessful appeal by appellants in this Court, $10,000 in the event of a
petition for review to the supreme court, and another $10,000 in the event the supreme court grants review.
     11
         Specifically, defendants alleged untimely service of process on American Realty Investors, Inc., Transcontinental Realty Investors, Inc.,
Robert T. Shaw, Sr., Winter Sun Management, Inc., H198, LLC, Chickory I, L.P., Triad Realty Services, Ltd., Longfellow Arms Apartments, Ltd.,
Donald C. Carter, and Ryan Phillips. The Rule 91a motion erroneously lists the service dates in 2012, instead of 2016 when the parties were added
as defendants, but the movants corrected the error in a reply.

                                                                     –15–
them with process until more than four years after those transferees received a distribution of the

apartment complex portfolio sale proceeds from Pillar. Under section 24.010(a), a fraudulent

transfer cause of action brought under sections 24.005 and 24.006(a) is extinguished unless it is

brought within four years after the fraudulent transfer was made or, in the case of section

24.005(a)(1), within one year after the transfer was or could reasonably have been discovered by

the claimant. See BUS. & COM. § 24.010(a)(1), (2). Section 24.010(a) is a statute of repose,

however, and not a statute of limitations. See Nathan v. Whittington, 408 S.W.3d 870, 872–74

(Tex. 2013) (per curiam). Statutes of limitation “operate procedurally to bar the enforcement of a

right, a statute of repose takes away the right altogether, creating a substantive right to be free of

liability after a specified time.” Id. at 873 (quoting Galbraith Eng’g Consultants, Inc. v. Pochucha,

290 S.W.3d 863, 866 (Tex. 2009)).

       Even were section 24.010(a) a statute of limitations, service made on a defendant outside

an applicable limitations period is valid if the plaintiff exercised diligence in procuring it, see

Ashley v. Hawkins, 293 S.W.3d 175, 179 (Tex. 2009), and the exercise of due diligence is generally

a question of fact. See Parsons v. Turley, 109 S.W.3d 804, 808 (Tex. App.—Dallas 2003, pet.

denied). In deciding a rule 91a motion, a trial court may consider only the live pleading and any

attachments thereto, see TEX. R. CIV. P. 91a.6, and appellants’ second amended petition addresses

neither the dates appellants served process on the Pillar transferees nor their diligence in doing so.

Taking the second amended petition’s allegations as true, together with any inferences reasonably

drawn from them, we conclude the trial court erred to the extent it granted the rule 91a motion to

dismiss on the ground there is no basis in law for appellants’ TUFTA claims due to the statute of

limitations. See, e.g., AC Interests, L.P., 543 S.W.3d at 706 (rule 91a motion is not proper motion

for issue of timely service of citation because it cannot be resolved by looking only at the

allegations in the pleadings).

                                                –16–
           2. Debtor and Creditor Status under TUFTA

           The rule 91a movants also asserted appellants’ TUFTA causes of action against them have

no basis in law because, with respect to the distributions made by Pillar, neither Pillar not the Pillar

transferees are debtors to appellants and appellants are not creditors to any appellee “in this case.”

TUFTA sections 24.005 and 24.006 require a plaintiff to establish a fraudulent transfer of an asset

by a debtor as to a creditor, but a trial court may enter a judgment avoiding the transfer against the

first transferee and certain subsequent transferees of the asset. See BUS. & COM. §§ 24.005(a)(1)

& (a)(2), 24.006(a), 24.009(b). Appellants contend the second amended petition alleges appellants

are creditors with a claim against debtors TRA and Apt West as alter egos of Brauss and Martin,

and, as discussed above, we agree. Appellants need not allege that either Pillar or the Pillar

transferees are debtors to maintain a claim against them, but may seek a judgment against them as

transferees, see BUS. & COM. § 24.008–.009, and the rule 91a motion does not challenge their

status as transferees or subsequent transferees. Because the second amended petition’s allegations,

taken as true and together with any inferences reasonably drawn from them, do not demonstrate a

clear legal bar to appellants’ TUFTA causes of action because Pillar and/or the Pillar transferees

are not debtors to appellants or appellants are not creditors to any appellee, the trial court erred to

the extent it granted the rule 91a motion to dismiss on this ground.12

           3. Good Faith Transferees

           The Pillar transferees also sought dismissal of appellants’ TUFTA section 24.005(a)(1)

causes of action against them, asserting they were “good faith purchasers” because they had no

knowledge or notice of the alleged intent to “delay, hinder, or defraud” appellants on the part of

       12
          In a reply filed in the trial court and their brief on appeal, the rule 91a movants also argue the law of the case in support of dismissal.
However, they did not raise the argument in the rule 91a motion or amend the motion to include it. See TEX. R. CIV. P. 91a.2 (“A motion to
dismiss ... must state specifically the reasons the cause of action has no basis in law ....”); Drake v. Walker, No. 05-14-00355-CV, 2015 WL
2160565, at *3 n.2 (Tex. App.—Dallas May 8, 2015, no pet.) (mem. op.) (refusing to consider argument raised in brief but not in motion to dismiss).
In any event, and for the same reasons stated above, we have concluded that the law of the case doctrine does not preclude us from considering the
trial court’s jurisdiction over appellants’ TUFTA causes of action.
                                                                      –17–
TRA, Brauss, Martin, or Pillar. TUFTA provides a transfer of property made with the actual intent

to hinder, delay, or defraud creditors is not voidable “against a person who took in good faith and

for a reasonably equivalent value or against any subsequent transferee or obligee.” BUS. & COM.

§ 24.009(a); see also Janvey v. Golf Channel, Inc., 487 S.W.3d 560, 564 (Tex. 2016) (whether

transferee takes an asset in good faith and for a reasonably equivalent value is an affirmative

defense to a TUFTA claim). However, appellants respond, and we agree, that whether the Pillar

transferees took proceeds from the sale of the apartment complex portfolio in good faith and for a

reasonably equivalent value is a fact question the trial court could not have determined by

considering only appellants’ second amended petition. See TEX. R. CIV. P. 91a.1; AC Interests,

L.P, 543 S.W.2d at 706. The second amended petition does not address specifically whether the

Pillar transferees took in good faith, but asserts the asset transfers were structured to ultimately

benefit them. The petition further alleges the Pillar transferees gave no consideration for the

proceeds. Because the allegations, taken as true and together with any inferences reasonably drawn

from them, do not establish the Pillar transferees’ good-faith purchaser affirmative defense under

TUFTA, the trial court erred to the extent it granted the rule 91a motion to dismiss on the ground

there is no basis in law for appellants’ TUFTA section 24.005(a)(1) causes of action against the

Pillar transferees because they were good faith transferees.

       4. Aiding and Abetting Limitations

       Apt West sought dismissal of the aiding and abetting claim against it, asserting the statute

of limitations bars the claim because appellants allege acts of aiding and abetting related only to

Brauss’s and Martin’s assignment of ownership interests in 2009, which was beyond the applicable

underlying four-year statute of limitations period. Appellants, citing a Houston court of appeals

opinion, contend that the scope of a rule 91a motion does not encompass judicial inquiry into the

merits of a defendant’s affirmative defense. However, this Court and others have upheld rule 91a

                                               –18–
dismissals on the basis of affirmative defenses when the pleadings established the applicable

defense. See, e.g., Bethel v. Willing, Selander, Lownds, Winslett & Moser, P.C., No. 05-17-00850-

CV, 2018 WL 2434410, at *2 (Tex. App.—Dallas May 30, 2018, pet. filed) (mem. op.) (attorney

immunity); Highland Capital Management, LP v. Looper Reed & McGraw, P.C., No. 05-15-

00055-CV, 2016 WL 164528, at *4–6 (Tex. App.—Dallas Jan. 14, 2016, pet. denied) (mem.

op.) (attorney immunity); Galan Family Tr. v. State, No. 03-15-00816-CV, 2017 WL 744250, at

*3 (Tex. App.—Austin Feb. 24, 2017, pet. denied) (mem. op.) (statute of limitations);

GoDaddy.com, LLC v. Toups, 429 S.W.3d 752, 754-55 (Tex. App.—Beaumont 2014, pet. denied)

(immunity from suit under the Communications Decency Act). That is not the case here.

       Dismissal on the pleadings is a harsh remedy, requiring courts to strictly construe rule 91a’s

requirements. See Gaskill v. VHS San Antonio Partners, LLC, 456 S.W.3d 234, 238 (Tex. App.—

San Antonio 2014, pet. denied). And, under the rule, a cause of action has no basis in law only if

the plaintiff’s allegations, taken as true, together with inferences reasonably drawn from them, do

not entitle the claimant to the relief sought. TEX. R. CIV. P. 91a.1. “In short, the plaintiff must

plead sufficient facts to supply a legal basis for his claim but not so much that he affirmatively

negates his right to relief.” Reaves v. City of Corpus Christi, 518 S.W.3d 594, 609 (Tex. App.—

Corpus Christi 2017, no pet.) (quoting Guillory v. Seaton, LLC, 470 S.W.3d 237, 240 (Tex. App.—

Houston [1st Dist.] 2015, pet. denied)).

       Here, a rule 91a dismissal is appropriate only if the allegations in the second amended

petition establish Apt West is entitled to prevail on its statute of limitations affirmative defense.

See Galan Family Tr., 2017 WL 744250, at *3. In Galan Family Trust, the Austin Court of

Appeals concluded the trial court properly dismissed the plaintiff’s takings claim on the

defendant’s statute of limitations affirmative defense based solely on the pleadings, which

demonstrated the claim was filed 140 years after the alleged taking and well past the ten-year

                                               –19–
limitations period for the claim. Id. In this case, however, the second amended petition alleges a

complicated set of facts that do not affirmatively demonstrate Apt West is entitled to prevail on its

statute of limitations defense. Although the second amended petition alleges acts of aiding and

abetting related to Brauss’s and Martin’s 2009 assignment of ownership interests, it also alleges

Apt West, along with others, subsequently attempted to conceal the 2009 assignments and hoped

to launder and prevent the apartment complex portfolio sale proceeds from being traced to MRI

and the Pillar transferees. Construing the second amended petition liberally, we conclude it does

not allege facts that affirmatively negate appellants’ right to relief by establishing Apt West’s

statute of limitations defense. Accordingly, the trial court erred to the extent it granted the rule

91a motion to dismiss on the ground there is no basis in law for appellant’s aiding and abetting

cause of action against Apt West.

       5. Veil-Piercing Claim

       Apt West also sought dismissal of appellants’ veil-piercing claim because it is not a

separate cause of action and, therefore, has no basis in law. The second amended petition refers

to appellants’ veil-piercing allegations as a claim, but we do not construe, and appellants concede,

the allegations do not give rise to a separate cause of action. See Matthews Const. Co., Inc., 796
S.W.2d at 693 n.1. Texas courts have recognized use of veil piercing and, in this case, reverse veil

piercing theories to hold alter egos liable for another’s debts if the alter ego has been used to hide

assets. See, e.g., Wilson, 305 S.W.3d at 70–71. And, as discussed above, appellants have alleged

facts that, taken as true, support their theory that TRA and Apt West are alter egos of debtors

Brauss and Martin for purposes of their TUFTA claims. Thus, we conclude the trial court erred to

the extent it granted the rule 91a motion because there is no basis in law for appellants’ veil-

piercing “claim.”

                                                –20–
        6. No Basis in Fact

        Lastly, Apt West and the Pillar transferees sought dismissal of appellants’ causes of action

against them, asserting the causes of action have no basis in fact. Appellants contend the trial court

erred to the extent it granted the motion on this ground because Apt West and the Pillar transferees

cannot show that “no reasonable person could believe the facts pleaded” as required for dismissal

under rule 91a.

        According to the rule 91a motion, none of the second amended petition’s factual allegations

support appellants’ fraudulent transfer claims against them. Specifically, Apt West and the Pillar

transferees complain the allegations that (1) Pillar distributed $33.6 million in sales proceeds to

the Pillar transferees, who paid no value in turn, and (2) MRI and the Pillar transferees were the

ultimate beneficiaries of the sales proceeds do not support the TUFTA section 24.005(a)(1),

24.005(a)(2) or 24.006(a) causes of action against them. A cause of action has no basis in fact if

“no reasonable person could believe the facts pleaded.” TEX. R. CIV. P. 91a.1. Apt West and the

Pillar transferees have not asserted no reasonable person could believe the facts pleaded; instead,

they have simply isolated certain statements referring to the Pillar transferees and argued those

statements are not sufficient to state a TUFTA cause of action against them. Therefore, we

conclude the trial court erred to the extent it granted the rule 91a motion on the basis that

appellants’ TUFTA causes of action have no basis in fact. Further, after reviewing the second

amended petition under rule 91a’s factual-plausibility standard, we conclude it is possible a

reasonable person could believe the facts as alleged. Having concluded nothing in the second

amended petition triggers a clear legal or factual bar to appellants’ causes of action, we conclude

the trial court erred in granting the rule 91a motion to dismiss. Accordingly, we sustain appellants’

first issue.

                                                –21–
                                          CONCLUSION

       We reverse the trial court’s orders granting TRA’s and Pillar’s pleas to the jurisdiction and

granting Apt West’s and the Pillar transferees’ rule 91a motion to dismiss and awarding costs and

attorney’s fees to Apt West and the Pillar transferees as the prevailing parties on the motion. We

remand this cause to the trial court for further proceedings, including a new hearing and

determination of recoverable costs and attorney’s fees to be awarded to the prevailing party under

rule 91a.7, see TEX. R. CIV. P. 91a.7; Zheng v. Vacation Network, Inc., 468 S.W.3d 180, 187 (Tex.

App.—Houston [14th Dist.] 2015, pet. denied), consistent with this opinion.

                                                      /Ada Brown/
                                                      ADA BROWN
                                                      JUSTICE

170577F.P05

                                               –22–
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                         JUDGMENT

 NIXDORF GMBH & CO. KG AND                            On Appeal from the 191st Judicial District
 WATERCREST PARTNERS, L.P.,                           Court, Dallas County, Texas
 Appellants                                           Trial Court Cause No. DC-17-06190.
                                                      Opinion delivered by Justice Brown;
 No. 05-17-00577-CV           V.                      Justices Bridges and Whitehill
                                                      participating.
 TRA MIDLAND PROPERTIES, LLC,
 PILLAR INCOME ASSET
 MANAGEMENT, INC., TRA APT WEST
 TX, L.P., TRANSCONTINENTAL
 REALTY INVESTORS, INC.,
 AMERICAN REALTY INVESTORS,
 INC., WINTER SUN MANAGEMENT,
 INC., H198, LLC, TRIAD REALTY
 SERVICES, LTD., REGIS REALTY
 PRIME, LLC, CHICKORY I, L.P.,
 SUNCHASE AMERICAN, LTD.,
 LONGFELLOW ARMS APARTMENTS,
 LTD., VISTAS OF VANCE JACKSON,
 LTD., DONALD C. CARTER, ROBERT
 T. SHAW SR., SCOTT C. LONG, AND
 RYAN PHILLIPS, Appellees

        In accordance with this Court’s opinion of this date, the trial court’s order granting plea
to the jurisdiction and order granting defendants’ rule 91a motion to dismiss are REVERSED
and this cause is REMANDED to the trial court for further proceedings consistent with this
opinion.

       It is ORDERED that appellants NIXDORF GMBH & CO. KG AND WATERCREST
PARTNERS, L.P. recover their costs of this appeal from appellees TRA MIDLAND
PROPERTIES, LLC, PILLAR INCOME ASSET MANAGEMENT, INC., TRA APT WEST
TX, L.P., TRANSCONTINENTAL REALTY INVESTORS, INC., AMERICAN REALTY
                                            –23–
INVESTORS, INC., WINTER SUN MANAGEMENT, INC., H198, LLC, TRIAD REALTY
SERVICES, LTD., REGIS REALTY PRIME, LLC, CHICKORY I, L.P., SUNCHASE
AMERICAN, LTD., LONGFELLOW ARMS APARTMENTS, LTD., VISTAS OF VANCE
JACKSON, LTD., DONALD C. CARTER, ROBERT T. SHAW SR., SCOTT C. LONG, AND
RYAN PHILLIPS.

Judgment entered this 3rd day of January, 2019.

                                             –24–