Court Opinion

ID: 4307263
Source: CourtListenerOpinion
Date Created: 2018-08-24 17:53:07.594463+00
Date Added: 2024-06-11T14:40:56.138271
License: Public Domain

Opinion issued August 23, 2018

                                   In The

                            Court of Appeals
                                  For The

                        First District of Texas
                          ————————————
                            NO. 01-16-01008-CV
                          ———————————
              JAMIE W. JONES AND OBES, INC., Appellants
                                     V.
       DYNA DRILL TECHNOLOGIES, LLC F/K/A DYNA DRILL
                TECHNOLOGIES, INC., Appellee

                  On Appeal from the 281st District Court
                           Harris County, Texas
                     Trial Court Case No. 2014-62251

                        MEMORANDUM OPINION

     Dyna Drill Technologies, LLC sued Jamie W. Jones and OBES, Inc. for

damages arising under the Texas Uniform Fraudulent Transfer Act. See TEX. BUS.

& COM. CODE §§ 24.001–.013. A jury found Jones and OBES liable for fraudulent
transfer, with damages of $62,500. The trial court awarded to Dyna Drill attorney’s

fees, pre- and post-judgment interest, and costs of court.

      On appeal, Jones and OBES challenge the legal and factual sufficiency of the

evidence to support the jury’s verdict that they were liable for fraudulent transfer

and that Dyna Drill’s claims were timely filed. They also challenge the award of

attorney’s fees as unreasonable and not properly segregated.

      Finding that the appellate record supports the trial court’s judgment, we

affirm.

                                    Background

      Dyna Drill Technologies, LLC is a manufacturing company that manufactures

and repairs equipment used for directional drilling of oil-and-gas wells. Ole Brook

Energy Services, Inc. was a drilling company that was founded in 2005 by its sole

owner, Jamie Jones. From July 2008 through January 2009, Ole Brook Energy

purchased equipment and obtained repair services, on account, from Dyna Drill.

      After a downturn in the oil-and-gas business at the end of 2008 and beginning

of 2009, Ole Brook Energy fell behind on its payments to Dyna Drill. In December

2009, Dyna Drill sued Ole Brook Energy in Johnson County.

      In March 2010, while the Johnson County litigation was pending, Jones

formed OBES, Inc., and he filed a certificate designating “Ole Brook Directional

Services” as its assumed name. Jones was the sole owner and president of both Ole

                                          2
Brook Energy and OBES, and both businesses operated from the same location and

employed the same bookkeeper. In June 2010, Ole Brook Energy sold five vehicles

and some, but not all, of its directional-drilling equipment to OBES for $96,420.13,

due to be paid twenty years later, in 2030. On July 30, 2010, the Secretary of State

notified Ole Brook Energy that its charter was forfeited for “failure to file a franchise

tax return and/or pay state franchise tax.” In October 2010, Ole Brook Energy sold

the remainder of its equipment to OBES for unspecified “good and valuable

consideration.” At trial, Jones testified that the value of the assets transferred in

October was approximately $200,000 and that OBES never paid any money to Ole

Brook Energy.

      Dyna Drill was not informed about these transactions. On December 17, 2010,

it entered into a settlement agreement with Ole Brook Energy in the Johnson County

case. The parties signed an agreed judgment for the entire amount of the unpaid debt,

in the amount of $106,420.13. Ole Brook Energy promised to pay $1,000 per month

on the debt, which was to be secured by the agreed judgment. Dyna Drill promised

to hold the agreed judgment in trust and file it only if Ole Brook Energy failed to

pay or cure a delinquent payment under the terms of the settlement agreement.

      Dyna Drill began receiving scheduled payments made by checks from “Ole

Brook Directional Services, Inc.,” which had notes on the memo line reading:

“Olebrook Energy Acc’t.” Two years after the settlement agreement, Jones filed for

                                           3
reinstatement of Ole Brook Energy’s charter, and the following day the business was

terminated “due to total insolvency.” Nevertheless, the scheduled payments under

the settlement agreement continued until 2014. Then Dyna Drill filed the agreed

judgment.

        Dyna Drill subsequently filed suit against Jones in Harris County to recover

the outstanding balance of $62,500. It asserted claims for fraud and fraudulent

transfer. In particular, Dyna Drill alleged that Jones transferred the assets of Ole

Brook Energy to OBES for little to no consideration and that this transfer was

fraudulent because it depleted assets that should have been available to satisfy debts

owed to Ole Brook Energy’s creditors. Dyna Drill also alleged that at the time of the

transfer, Ole Brook Energy was unable to pay its creditors, and it had been sued or

threatened with suit. Dyna Drill contended that these transfers were made for the

benefit of Jones, who was an insider of Ole Brook Energy when the transfer was

made.

        In 2015, Dyna Drill took Jones’s deposition. Jones testified about the

formation of OBES and the asset transfers. In June 2015, approximately eight

months after the original petition was served on Jones, Dyna Drill sued OBES.

Among other defenses, Jones and OBES pleaded the affirmative defense that a

statute of repose rendered the claim against them untimely.

                                          4
      At trial Catherine Braxton, the customer-services manager for Dyna Drill,

testified that she oversaw employees and customer accounts. Braxton confirmed that

when Dyna Drill agreed to settle the Johnson County suit, it had not received

information about the formation of OBES or the transfer of assets from Ole Brook

Energy. Although Dyna Drill received checks from “Ole Brook Directional Services,

Inc.,” Braxton was unaware of any company by that name. She testified: “We didn’t

do any other business with any other company that had Ole Brook in its name. So it

was always thought that these checks were coming to pay for the Ole Brook Energy

Services, Inc. amount, and we never thought differently.”

      Dyna Drill first received the information that Ole Brook Energy no longer

existed after it hired a lawyer to execute the agreed judgment from the Johnson

County suit. Dyna Drill also discovered that Jones had continued to do directional

drilling under the name OBES or Ole Brook Directional Services. According to

Braxton, Dyna Drill was unaware of the asset transfers from Ole Brook Energy to

OBES until Jones’s deposition. Braxton maintained that Dyna Drill would not have

entered into a settlement agreement with Ole Brook Energy in 2010 if it had been

informed about the asset transfers in June and October 2010 or the tax forfeiture. On

cross-examination, Braxton testified that she did not investigate whether Ole Brook

Energy had paid its taxes prior to the settlement agreement, but she “supposed” that

may have been a reasonable thing to do. She also did not investigate the source of

                                         5
the payments that were made on “Ole Brook Directional Services” checks because

Dyna Drill was “receiving the agreed-upon payments.” Braxton testified: “There

was never any reason to go look further for any other problems. We were getting the

payments at this time.”

      Jones was the only other witness at trial. He testified that he was the sole

owner and president of both Ole Brook Energy and OBES. He did not dispute the

accuracy of the invoices and charges from Dyna Drill. He acknowledged that he

transferred assets out of Ole Brook Energy at a time when it owed money to Dyna

Drill and other creditors and during the Johnson County litigation. Jones did not

inform Dyna Drill about asset transfers to OBES. He stated: “I didn’t know that I

needed to.” He said his deposition was the first time he “was asked.”

      Jones said he did not intend to defraud creditors when he made the June and

October 2010 asset transfers. He said he was trying to pay the creditors. Jones had

considered bankruptcy, but he decided against it after talking to several people. Jones

did not identify them at trial, and he conceded that they were not bankruptcy experts.

He testified that he tried to sell some of the equipment, but ultimately he decided

against liquidating assets because everybody he consulted about buying the

equipment “was not interested or was offering way less than what it was worth.” He

conceded that he had spoken with only two individuals in Houston about selling

motors used in directional drilling, and only one person and one company about

                                          6
equipment. He made no attempt to sell any equipment by auction. Jones said that he

had previously tried to sell equipment during his 30-year career, but he never had

been successful. With respect to the vehicles formerly owned by Ole Brook Energy,

Jones testified that he sold a pickup truck to an employee for $9,000, he was driving

one truck, and he gave a sport utility vehicle to his daughter.

      Rather than declaring bankruptcy or liquidating his business, Jones continued

directional-drilling work, operating through OBES. He represented that he had

created OBES and transferred the Ole Brook Energy assets so that he could “do

business to try to pay the debts that were owed by Ole Brook Energy Services, Inc.

at the time.”

      Jones maintained that Ole Brook Energy received value from the asset

transfers, despite receiving no cash consideration, because OBES paid some of its

debt. He testified that over $400,000 of Ole Brook Energy’s debts to all of its

creditors had been repaid by OBES. He also testified that the total value of the assets

transferred in June 2010 was $96,420.13, as stated in a promissory note that was

admitted as evidence, and he said that the value of the assets transferred in October

2010 was $200,000.

      On cross-examination, Jones explained why he thought it was better to form

a new company to conduct the same business as the old company:

                                          7
      Q.     So what specifically was it about transferring the assets that
             allowed you to do business better than you could have with the
             first company?

      A.     We were having issues with people trying to collect their money
             that they were owed, so it was easier with us being able to have
             money that we could get in and to pay the bills and to maintain
             operations to pay more bills.

      ....

      Q.     So it was easier to do business with the new company because it
             was easier for the new company to evade the old company’s
             creditors, right?

      A.     No, it was easier to pay them creditors.

      Q.     How was it easier to pay those creditors?

      A.     Because I could pay who I could pay. I could pay everybody that
             I could possibly pay.

      Q.     Why couldn’t you have done that with the old company? Why
             couldn’t you have paid who you could possibly pay with the old
             company?

      A.     Because you have creditors that will come in and garnish your
             bank accounts and do other things like that where I can’t pay
             creditors.

      Jones testified that he stopped making scheduled payments under the

settlement agreement when OBES experienced financial difficulty in 2014. But he

did not contact Dyna Drill about the payments because OBES had been making those

payments “out of goodwill.” Jones said: “I didn’t feel that OBES, Inc. was—needed

to. We are not—the debt is not with OBES, Inc.; it was with Ole Brook Energy

Services.”

                                          8
      Because the parties agreed before trial to try the issue of attorney’s fees to the

trial court, the jury questions concerned liability, damages, and the statute of repose.

The jury found that Ole Brook Energy transferred its assets to OBES “with the actual

intent to hinder, delay, or defraud” Dyna Drill; the value of the property transferred

in 2010 was $296,420.13; Dyna Drill was owed $62,500; and the asset transfers were

made for Jones’s benefit. Finally the jury found that Dyna Drill filed its fraudulent

transfer claims against Jones and OBES within one year after it “did discover or

could reasonably have discovered” that Ole Brook Energy had transferred the assets

listed on the June and October 2010 bills of sale.

      In a post-trial motion, Dyna Drill sought over $74,000 for attorney’s fees and

expenses. It supported its lawyer’s affidavit with unredacted billing records and

invoices.

      Jones and OBES opposed the attorney’s fees award, arguing that it would not

be just or equitable to require them to pay attorney’s fees when Jones’s actions in

operating as OBES allowed for the payment of more than $400,000 to Ole Brook

Energy’s creditors. They argued that Jones’s actions resulted in a more favorable

result for creditors of Ole Brook Energy than could have been obtained by

liquidation or bankruptcy. In addition, they objected that the fees were not

segregated between the fraudulent-transfer claim and a Tax Code claim which was

                                           9
nonsuited before trial. Finally, Jones and OBES’s attorney averred that the billable

rates and certain specific charges were not reasonable.

      The trial court awarded $59,000 in reasonable and necessary attorney’s fees

through trial, as well as contingent appellate attorney’s fees. In its findings of fact

and conclusions of law, it stated that it had disregarded some entries from the billing

records based on the evidence, objections, arguments of counsel, and the partial

agreement of Dyna Drill’s counsel. It found that the hourly rates were consistent

with those charged by other attorneys in the area providing the same type of services

and that the fees were reasonable based on the time and labor required; the novelty

and difficulty of the questions involved; the skill required to perform the legal

services properly; the amount in controversy and the results obtained; and the

experience, reputation, and ability of the lawyers performing the services.

      After their motion for new trial was overruled by operation of law, Jones and

OBES appealed.

                                        Analysis

      On appeal, Jones and OBES argue that the evidence was legally and factually

insufficient to support the jury’s verdict on liability and the application of the statute

of repose. They also challenge the award of attorney’s fees as unreasonable and the

amount of fees as unsupported by properly segregated evidence.

                                           10
I.    Sufficiency of the evidence

      The jury found that Ole Brook Energy “transfer[red] the property in the June

10, 2010 Bill of Sale and the October 15, 2010 Bill of Sale to OBES with the actual

intent to hinder, delay, or defraud any creditor of the debtor.” See TEX. BUS. & COM.

CODE § 24.005(a)(1). The jury also found that Dyna Drill filed its claims against

Jones and OBES within one year after it discovered or reasonably could have

discovered that Ole Brook Energy had transferred the assets described in the June

and October 2010 bills of sale to OBES. Jones and OBES challenge the legal and

factual sufficiency of the evidence to support these findings.

      We review legal-sufficiency challenges to determine whether the evidence

“would enable reasonable and fair-minded people to reach the verdict under review.”

City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). Evidence is legally

insufficient if the record shows a complete absence of proof of a vital fact, the lone

proof supporting the judgment is incompetent and cannot be considered, the proof is

no more than a scintilla of evidence and jurors would have to guess whether a vital

fact exists, or the proof conclusively shows the opposite of a vital fact. See id. at

811–14. We review the evidence in the light most favorable to the judgment. See id.

at 822. The factfinder is the sole judge of the weight and credibility of the evidence.

See id. at 819.

                                          11
      To determine the factual sufficiency of the evidence, we are required to

examine all of the evidence, and we will set aside the judgment only if it is so

contrary to the overwhelming weight of the evidence as to be clearly wrong and

unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam). Unlike a

legal-sufficiency review, a factual-sufficiency review requires that we review the

evidence in a neutral light. Nelson v. Najm, 127 S.W.3d 170, 174 (Tex. App.—

Houston [1st Dist.] 2003, pet. denied). The trier of fact may choose to “believe one

witness and disbelieve others” and “may resolve inconsistencies in the testimony of

any witness.” McGalliard v. Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986); see also

City of Keller, 168 S.W.3d at 820.

      A.     Actual-intent fraudulent transfer

      The jury found that Ole Brook Energy transferred property in June and

October 2010 to OBES “with the actual intent to hinder, delay, or defraud any

creditor of the debtor.” See TEX. BUS. & COM. CODE § 24.005(a)(1). Jones and OBES

contend that this answer is not supported by legally sufficient evidence because some

of the statutory factors relevant to a determination of actual intent were not satisfied,

and the evidence to support the others was weak. In addition, they argue that the

evidence is legally insufficient because OBES’s payment of Ole Brook Energy’s

debt conclusively negated intent to defraud. Similarly, they argue that the evidence

is factually insufficient to support the jury’s answer because the evidence that OBES

                                           12
paid Ole Brook Energy’s debts after the transfer outweighs any evidence of intent to

defraud.

      The Texas Uniform Fraudulent Transfer Act was “designed to protect

creditors from being defrauded or left without recourse due to the actions of

unscrupulous debtors.” KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 89 (Tex. 2015).

Under the statute, a creditor may set aside a debtor’s fraudulent transfer of assets or

obtain a judgment for money damages up to the value of the assets transferred. See

TEX. BUS. & COM. CODE §§ 24.008, 24.009(b)–(c); Chu v. Chong Hui Hong, 249
S.W.3d 441, 446 (Tex. 2008).

      A creditor may prevail on a claim of fraudulent transfer by showing that a

transfer was made or an “obligation incurred” by a debtor “with actual intent to

hinder, delay, or defraud any creditor of the debtor.” TEX. BUS. & COM. CODE

§ 24.005(a)(1). “Actual fraudulent intent is rarely susceptible to direct proof;

therefore, the requisite intent may be proved circumstantially by presenting evidence

of certain ‘badges of fraud’ that may cumulatively give rise to an inference of intent

to hinder, delay, or defraud.” ASARCO LLC v. Americas Mining Corp., 396 B.R.
278, 370 (S.D. Tex. 2008); see also Nwokedi v. Unlimited Restoration Specialists,

Inc., 428 S.W.3d 191, 203–05 (Tex. App.—Houston [1st Dist.] 2014, pet. denied).

In determining whether the debtor acted with actual intent, the factfinder may

consider whether:

                                          13
      (1)    the transfer or obligation was to an insider;

      (2)    the debtor retained possession or control of the property
             transferred after the transfer;

      (3)    the transfer or obligation was concealed;

      (4)    before the transfer was made or obligation was incurred, the
             debtor had been sued or threatened with suit;

      (5)    the transfer was of substantially all the debtor’s assets;

      (6)    the debtor absconded;

      (7)    the debtor removed or concealed assets;

      (8)    the value of the consideration received by the debtor was
             reasonably equivalent to the value of the asset transferred or the
             amount of the obligation incurred;

      (9)    the debtor was insolvent or became insolvent shortly after the
             transfer was made or the obligation was incurred;

      (10) the transfer occurred shortly before or shortly after a substantial
           debt was incurred; and

      (11) the debtor transferred the essential assets of the business to a
           lienor who transferred the assets to an insider of the debtor.

TEX. BUS. & COM. CODE § 24.005(b). These statutory factors—sometimes called

“badges” of fraud—are non-exclusive, and no single factor alone can prove fraud

per se. Hahn v. Love, 321 S.W.3d 517, 525–26 (Tex. App.—Houston [1st Dist.]

2009, pet. denied). “Intent is a fact question uniquely within the realm of the trier of

fact because it so depends upon the credibility of the witnesses and the weight to be

                                          14
given to their testimony.” Id. (quoting Flores v. Robinson Roofing & Constr. Co.,

161 S.W.3d 750, 754 (Tex. App.—Fort Worth 2005, pet. denied)).

      At trial Dyna Drill argued that all of the factors, except the second and

eleventh, were satisfied in this case. In closing argument, Dyna Drill conceded that

that the second factor, whether the debtor retained possession or control after the

transfer, did not apply because Ole Brook Energy ceased to exist after the transfer.

Dyna Drill also argued to the jury that the eleventh factor, whether assets were

transferred to a lienor, did not apply.

             1.     Legal sufficiency

      Jones and OBES do not challenge the legal sufficiency of the evidence to

support the first, fourth, fifth, and ninth statutory factors. The transfer of assets from

Ole Brook Energy to OBES was undisputedly to an insider. See TEX. BUS. & COM.

CODE § 24.002(7)(B) (defining “insider”); Hahn, 321 S.W.3d at 525 n.8 (stating that

insider status is not “limited to the four subjects listed in section 24.002(7)”); Tel.

Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d 601, 609 (Tex. App.—

Houston [1st Dist.] 2002, no pet.) (stating that an insider is “an entity whose close

relationship with the debtor subjects any transactions made between the debtor and

the insider to heavy scrutiny”). The appellants agree that Dyna Drill sued Ole Brook

Energy in 2009, before the transfers were made. Finally, they admit that

                                           15
“substantially all” of the assets of Ole Brook Energy were transferred to OBES,

leaving Ole Brook Energy insolvent.

                   a.     Concealment of transfer or assets

      The third statutory factor concerns whether the transfer was concealed, and

the seventh factor concerns whether the debtor removed or concealed assets. Without

reference to authority, Jones and OBES argue that there was no evidence of

concealment because they did not use “fictitious names in the bill of sale” or

“otherwise attempt to cover up the transfers.” They also contend that the

fraudulent-transfer statute would be “extremely dangerous” if creditors could prove

concealment simply because they were not told about a transfer.

      Jones testified that he created and operated his directional-drilling business as

OBES instead of Ole Brook Energy “because you have creditors that will come in

and garnish your bank accounts and do other things like that where I can’t pay

creditors.” This was circumstantial evidence that Jones understood that the assets

transferred from Ole Brook Energy to OBES would not be available to creditors

attempting to collect a debt. See ASARCO, 396 B.R. at 388 (intent to hinder, delay,

or defraud creditors may be inferred from debtor’s actions taken with knowledge

that proceeding with a transaction as structured was substantially certain to hinder,

delay, or defraud creditors); Nwokedi, 428 S.W.3d at 206–07; cf. RESTATEMENT

(SECOND) OF TORTS § 8A (1965) (“The word ‘intent’ is used . . . to denote that the

                                          16
actor desires to cause consequences of his act, or that he believes that the

consequences are substantially certain to result from it.”). Moreover, while Jones

testified that he wanted to pay the creditors, the jury was free to disregard this

testimony if it determined that it was not credible. Flores, 161 S.W.3d at 754 (intent

depends on the credibility of the witnesses).

      Jones did not inform Dyna Drill about the asset transfers before the parties

entered into the settlement agreement, though the transfer of all of the assets away

from Ole Brook Energy meant that there were no assets available for collection and

no equipment available to enable Ole Brook Energy to earn money and make the

scheduled payments. This is some evidence that both the transfer and the assets

themselves were concealed. Cf. In re Cowin, No. 13-30984, 2014 WL 1168714, at

*18 (Bankr. S.D. Tex. Mar. 21, 2014) (in bankruptcy proceeding, considering

omission of material facts to be evidence of concealment of transfer).

                   b.     Debtor’s abscondence

      The sixth statutory factor considers whether the debtor absconded. Again

without reference to authority, Jones and OBES contend that there was no evidence

that the debtor absconded because dissolving a legal entity does not constitute

absconding. “Abscond” is not defined by the fraudulent-transfer statute. See TEX.

BUS. & COM. CODE § 24.002. At the time this provision was enacted, Black’s Law

Dictionary defined “abscond” as: “To go in a clandestine manner out of the

                                         17
jurisdiction of the courts, or to lie concealed, in order to avoid their process. To hide,

conceal, or absent oneself clandestinely, with the intent to avoid legal process.”

Abscond, BLACK’S LAW DICTIONARY (5th ed. 1979).

      In considering the statutory “badges” of fraud, at least one bankruptcy court

has held that the transfer of assets by a business in conjunction with that entity

ceasing to operate was “a form of absconding to avoid collection.” Sherman v.

Netsch (In re Prism Graphics, Inc.), No. 08-31914-HDH-7, Adversary

No. 10-3092-HDH, 2014 WL 3844623, at *4 (Bankr. N.D. Tex. Aug. 5, 2014).

Another bankruptcy court has found that a debtor absconded by avoiding service of

process. West v. Seiffert (In re Houston Drywall, Inc.), Case No. 05–95161–H4–7,

Adv. No. 06–03415, 2008 WL 2754526, at *23 (Bankr. S.D. Tex. July 10, 2008).

      The evidence showed that Ole Brook Energy transferred its assets to OBES,

and after that time it ceased operations. Jones, who controlled both entities, testified

that he made the transfer to avoid collection efforts by creditors. This was some

evidence that Ole Brook Energy absconded within the meaning of the statutory

badges of fraud.

                    c.     Failure to pay reasonably equivalent value

      The eighth statutory factor considers whether the value of the consideration

received by the debtor was reasonably equivalent to the value of the asset transferred.

                                           18
The jury found the value of the assets transferred to be $296,420.13, and this finding

has not been challenged on appeal.

      Jones and OBES argue that the evidence was legally insufficient to support

this factor because there was evidence that OBES paid $304,846.19 to creditors of

Ole Brook Energy. Because this repayment exceeds the value of the assets

transferred, Jones and OBES contend that Ole Brook Energy received reasonably

equivalent value for the assets that were transferred to OBES.

      Both “value” and the related concept of “reasonably equivalent value” have

been statutorily defined in this context as follows:

      (a)    Value is given for a transfer or an obligation if, in exchange for
             the transfer or obligation, property is transferred or an antecedent
             debt is secured or satisfied, but value does not include an
             unperformed promise made otherwise than in the ordinary course
             of the promisor’s business to furnish support to the debtor or
             another person.

      ....

      (d)    “Reasonably equivalent value” includes without limitation, a
             transfer or obligation that is within the range of values for which
             the transferor would have sold the assets in an arm’s length
             transaction.

TEX. BUS. & COM. CODE § 24.004; see Janvey v. Golf Channel, Inc., 487 S.W.3d
560, 569 (Tex. 2016).

      “[B]oth value and reasonable equivalency are determined as of the time of the

transaction, not in hindsight.” Janvey, 487 S.W.3d at 569. To constitute value or

                                          19
reasonably equivalent value, the transfer itself must “confer some direct or indirect

economic benefit to the debtor, as opposed to benefits conferred solely on a

third-party, transfers that are purely gratuitous, and transactions that merely hold

subjective value to the debtor or transferee.” Id. at 574.

      The evidence showed that Ole Brook Energy signed bills of sale in June and

October 2010 transferring all of its property to OBES. In exchange for the property

transferred in June, OBES executed a promissory note in June 2010, which provided

that the entire principal amount of $96,420.13 was due in June 2030. The October

2010 bill of sale simply stated that OBES gave “good and valuable consideration”

in exchange for the Ole Brook Energy property. And Jones testified that OBES never

paid anything to Ole Brook Energy.

      Jones and OBES contend that Ole Brook Energy received value because they

paid its creditors. But Jones testified that the debts were paid “out of goodwill,” and

that he did not regard OBES to be obligated to satisfy Ole Brook Energy’s debt to

Dyna Drill. There was no evidence at trial that any debt was satisfied in exchange

for the property from Ole Brook Energy.

      In light of Jones’s testimony that Ole Brook Energy never received any

payments in exchange for the property that was transferred, the evidence supported

a conclusion that it received no more than an unperformed promissory note. This did

not constitute value for purposes of the fraudulent-transfer statute. See TEX. BUS. &

                                          20
COM. CODE § 24.004(a) (“value does not include an unperformed promise made

otherwise than in the ordinary course of the promisor’s business to furnish support

to the debtor or another person”). Consequently, there was some evidence that Ole

Brook Energy did not receive reasonably equivalent value in exchange for the

transfer of assets.

                      d.   Timing of transfer relative to incurring substantial debt

       The tenth factor considers whether the transfer occurred shortly before or

shortly after a substantial debt was incurred. Jones and OBES contend that there was

no evidence of this factor because Ole Brook Energy’s debt to Dyna Drill was

incurred in 2008 and 2009 when the purchases were made. They contend that the

settlement agreement was the renewal of a preexisting debt, not a new obligation.

Dyna Drill responds that the settlement agreement was a new obligation.

       The original petition in the Johnson County case was admitted as evidence at

trial, as was the settlement agreement. In that case, Dyna Drill sought to recover the

unpaid outstanding debt of $106,541.43, 18% interest, and attorney’s fees. The

settlement agreement provided for a repayment schedule of $1,000 per month until

a balance of $106,000 was repaid. But the settlement agreement did not finally settle

the lawsuit. Dyna Drill did not agree to dismiss the suit; it only agreed to abate it and

afford Ole Brook Energy an opportunity to repay the existing, acknowledged debt.

                                           21
The evidence is undisputed that Ole Brook Energy entered into a binding settlement

agreement in December 2010, when it had no charter and no assets.

      The jury was entitled to consider these facts when assessing the totality of the

evidence to determine if there was evidence of actual intent to hinder, delay, or

defraud Dyna Drill.

                                        ***

      Jones and OBES argue that the evidence is legally insufficient because the

evidence was too weak to show actual intent. However, the evidence adduced at trial

supported nearly all of the statutory badges of fraud. It is undisputed that Ole Brook

Energy transferred substantially all of its assets to an insider after it was sued by

Dyna Drill, leaving it insolvent. In addition, Jones testified that he transferred Ole

Brook Energy’s assets to OBES to avoid creditors’ collection efforts and that he

regarded the payments to Ole Brook Energy’s creditors a matter of goodwill, not an

obligation. The evidence also showed that Ole Brook Energy did not receive value

or reasonably equivalent value in exchange for the transfer. And, although the

transfer did not precede the incurring of new debt, it did precede the obligations

assumed under the settlement agreement. That is, Ole Brook Energy agreed to a

repayment plan in the settlement agreement at a time when it had no charter to

operate in Texas and no equipment with which to perform its work. Considering all

                                         22
of the evidence together, there was evidence of actual intent to hinder, delay, or

defraud.

      The appellants argue that the evidence was legally insufficient because the

statutory factors used to show actual intent were outweighed by evidence of

payments to creditors, just as in both Texas Custom Pools, Inc. v. Clayton, 293
S.W.3d 299 (Tex. App.—El Paso 2009, order [mand. denied]), and Van Slyke v. Teel

Holdings, LLC, No. 01-08-00600-CV, 2010 WL 2788876 (Tex. App.—Houston [1st

Dist.] July 15, 2010, no pet.) (mem. op.). This is not a proper challenge to the

sufficiency of the evidence because we do not weigh the evidence in a

legal-sufficiency review. See City of Keller, 168 S.W.3d at 820. The courts in

Clayton and Van Slyke did not hold that evidence of subsequent payment of creditors

negates evidence of intent to defraud. Instead, these cases stand for the proposition

that determining actual intent is fact-specific and requires consideration of the

evidence, not mere counting of factors. See Clayton, 293 S.W.3d at 311; Van Slyke,

2010 WL 2788876, at *5–6; see also Williams v. Houston Plants & Garden World,

Inc., Civil Action No. H-11-2545, 2014 WL 3665764, at *7 (S.D. Tex. July 22,

2014) (noting that Van Slyke depended heavily on its facts).

      In Clayton and Van Slyke the contested transfers were made directly to

creditors. In contrast, the contested transfers at issue in this appeal were to a

company that was wholly owned and controlled by an insider, the sole owner of the

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debtor company. There was evidence that an insider benefited personally from the

transfer by using a truck previously owned by Ole Brook Energy and giving another

vehicle to his daughter. In this case, the vast majority of the badges of fraud were

present, and the evidence of actual intent was strong. In light of both our standard of

review and our review of the statutory factors, we hold that the evidence was legally

sufficient to support a finding of actual intent.

             2.     Factual sufficiency

      Jones and OBES argue that the evidence was factually insufficient to support

the jury’s finding of actual intent because the payments made to creditors exceeded

the value of the assets transferred. This is similar to the argument made regarding

legal sufficiency. Our factual sufficiency review requires us to view all of the

evidence in a neutral light, while still restricting us from second-guessing the

factfinder’s credibility determinations. See Cain, 709 S.W.2d at 176; Nelson, 127
S.W.3d at 174.

      To succeed on a factual sufficiency challenge, Jones and OBES had to show

that a finding of actual intent was against the great weight and preponderance of the

evidence. See Cain, 709 S.W.2d at 176. The evidence of debt-repayment consisted

of Jones’s testimony and lists of payments printed from accounting records. The

payment history was not supported by evidence of the actual debts or the payments,

such as a promissory note, canceled check, or bank statement. More importantly,

                                           24
even if the jury believed that OBES made all the payments described in his

testimony, that was not inconsistent with a finding of actual intent to defraud. The

evidence supported findings of most of the statutory badges of fraud. We conclude

that the jury’s finding of actual intent was not against the great weight and

preponderance of the evidence.

      B.     Statute of repose

      Jones and OBES contend that the evidence was legally and factually

insufficient to support the jury’s finding that Dyna Drill filed its claims within one

year after it discovered or reasonably could have discovered that Ole Brook Energy

had fraudulently transferred the property listed in the bills of sale. They assert that

Dyna Drill filed its fraudulent-transfer claims more than four years after the transfer

and more than one year after it reasonably could have discovered the transfer. They

rely on evidence that Dyna Drill received payments from a different company at a

different address than the one listed in the settlement agreement. They also rely on

public records showing that Ole Brook Energy’s charter had been forfeited. They

maintain that this evidence put Dyna Drill on notice of facts that would have led to

the discovery of its claim if it had exercised reasonable diligence.

      The statute of repose extinguishes actual-intent fraudulent-transfer claims

unless brought “within four years after the transfer was made or the obligation was

incurred or, if later, within one year after the transfer or obligation was or could

                                          25
reasonably have been discovered by the claimant.” TEX. BUS. & COM. CODE

§ 24.010(a)(1). When determining whether the discovery rule embodied in this

statute applies, Texas courts apply the rules developed under the common law. See

Zenner v. Lone Star Striping & Paving, L.L.C., 371 S.W.3d 311, 315 (Tex. App.—

Houston [1st Dist.] 2012, pet. denied). Whether a fraudulent-transfer claim has been

extinguished by the statute of repose ordinarily presents a question of fact for the

factfinder to resolve. See Ryland Grp., Inc. v. Hood, 924 S.W.2d 120, 121 (Tex.

1996) (per curiam); Walker v. Anderson, 232 S.W.3d 899, 910 (Tex. App.—Dallas

2007, no pet.); see also Hooks v. Samson Lone Star, LP, 457 S.W.3d 52, 58 (Tex.

2015) (“reasonable diligence is an issue of fact”).

      The statute of repose is an affirmative defense on which the defendant has the

burden of proof on all elements. Ryland Grp., 924 S.W.2d at 121. Thus, a defendant

pleading that a claim has been extinguished by the statute of repose has the burden

to prove when the transfer was or reasonably could have been discovered.

      The fraudulent transfers were made in June and October 2010. The parties

stipulated that Dyna Drill filed suit against Jones in October 2014, and it filed suit

against OBES on June 5, 2015. Jones’s deposition was taken on October 6, 2015.

The jury was asked:

      Did Dyna Drill file its fraudulent transfer claim against OBES, Inc.
      within one year after Dyna Drill did discover or could reasonably have
      discovered that Ole Brook Energy Services, Inc. had transferred the

                                         26
      property listed on the June 10, 2010 Bill of Sale and the October 15,
      2010 Bill of Sale to OBES?
      The payments to Dyna Drill were made by checks from “Ole Brook

Directional Services” with a memo line identifying “Olebrook Energy Acc’t.” This

evidence could have suggested that the payments were being made by a business

entity other than the particular entity that had been Dyna Drill’s contractual

counterparty. But Jones and OBES do not explain how this evidence conclusively

shows that Dyna Drill was put on notice of a fraudulent transfer. The evidence did

not suggest a transfer of assets without an accompanying transfer of obligations.

Similarly, Jones and OBES do not explain why the forfeiture of Ole Brook Energy’s

charter, which was a matter of public record, put Dyna Drill on notice of a fraudulent

transfer of assets.

      At trial Jones testified that he did not inform Dyna Drill about the transfers

prior to his deposition, which took place in October 2015. He said: “That’s when I

was asked.” He had no knowledge of anyone telling Dyna Drill about the asset

transfers before his deposition. Moreover, Jones was the sole owner of both entities,

and the record does not demonstrate that anyone else had knowledge of the asset

transfers when they were made. Finally, the jury’s finding that Dyna Drill filed suit

within one year of when it did discover or reasonably could have discovered the

fraudulent transfer was supported by Braxton’s testimony that Dyna Drill first

                                         27
learned of the existence of OBES in 2015, and that it would have sued that entity

earlier if it had known of its existence and activities.

      Based on the evidence at trial, the jury reasonably could have concluded that

Dyna Drill filed suit against Jones and OBES within one year after it “did discover

or reasonably could have discovered” the asset transfers. We hold that the evidence

is legally and factually sufficient to support that determination. See City of Keller,
168 S.W.3d at 822; Cain, 709 S.W.2d at 176.

II.   Attorney’s fees

      In their third issue, Jones and OBES argue that the trial court abused its

discretion because the attorney’s fees award was not equitable and just and because

Dyna Drill did not segregate its fees by cause of action.

      A.     Equitable and just standard

      The appellants contend that the award of attorney’s fees was not equitable and

just because there was overwhelming evidence that they made payments to Ole

Brook Energy’s creditors.

      Under the fraudulent-transfer statute, the court “may award costs and

reasonable attorney’s fees as are equitable and just.” TEX. BUS. & COM. CODE

§ 24.013. We review a trial court’s award of attorney’s fees for an abuse of

discretion. See Bocquet v. Herring, 972 S.W.2d 19, 20–21 (Tex. 1998); Walker, 232
S.W.3d at 919. A district court abuses its discretion if it acts without reference to

                                           28
any guiding principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238,

241–42 (Tex. 1985). To determine whether a district court abused its discretion, we

consider whether its action was arbitrary or unreasonable. Id. at 242.

      Jones and OBES provide no legal authority for the proposition that payments

to third parties who are strangers to the lawsuit should exempt them from liability

for Dyna Drill’s legal fees. Dyna Drill successfully prosecuted its fraudulent transfer

claims. The law provides a legal remedy in these circumstances, and an award of

attorney’s fees for successfully proving the claim was not inequitable or unjust. See

Esse v. Empire Energy III, Ltd., 333 S.W.3d 166, 183 (Tex. App.—Houston [1st

Dist.] 2010, pet. denied) (holding that trustee was entitled to legal fees for

successfully prosecuting a fraudulent transfer claim).

      B.     Segregation of fees

      Jones and OBES contend that Dyna Drill did not properly segregate its

attorney’s fees for the fraudulent-transfer claims from the Tax Code claims that

ultimately were abandoned before trial. Initially, Dyna Drill sought approximately

$74,000 in attorney’s fees and expenses. The appellants raised several objections

and challenges to the motion for attorney’s fees, which were discussed in some detail

at a hearing. The trial court allowed the fees for the original petition filed in October

2014, which included a fraudulent-transfer claim against Jones.

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      Parties seeking attorney’s fees under Texas law “have always been required

to segregate fees between claims for which they are recoverable and claims for which

they are not.” Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006).

Attorney’s fees that relate solely to a claim for which fees are unrecoverable must

be segregated. Id. at 313. “An exception exists only when the fees are based on

claims arising out of the same transaction that are so intertwined and inseparable as

to make segregation impossible.” Kinsel v. Lindsey, 526 S.W.3d 411, 427 (Tex.

2017). “[I]t is only when discrete legal services advance both a recoverable and

unrecoverable claim that they are so intertwined that they need not be segregated.”

Chapa, 212 S.W.3d at 313–14. In Chapa, the Court observed:

      Many of the services involved in preparing a contract or DTPA claim
      for trial must still be incurred if tort claims are appended to it; adding
      the latter claims does not render the former services unrecoverable.
      Requests for standard disclosures, proof of background facts,
      depositions of the primary actors, discovery motions and hearings, voir
      dire of the jury, and a host of other services may be necessary whether
      a claim is filed alone or with others. To the extent such services would
      have been incurred on a recoverable claim alone, they are not
      disallowed simply because they do double service.

Id. at 313.

      After the jury verdict in its favor, Dyna Drill filed a motion for attorney’s fees.

Among the evidence attached to its motion were: an affidavit from its attorney, Blake

Hamm; a summary of the fees charged in the case; a summary of the expenses; and

unredacted invoices that corresponded to the summary of charges. Jones and OBES

                                          30
filed a response with an affidavit from their attorney, Andrew Lemanski, challenging

the reasonableness of the fees.

      At the hearing on the motion for attorney’s fees, Dyna Drill waived its entire

request for expenses, which amounted to $2,000. Dyna Drill agreed to reduce its fee

request on several line items that the appellants had challenged as unreasonable. It

reduced the time billed for a scheduling order. It waived the fees billed for drafting

a garnishment and an emergency motion to compel, both of which were never filed.

It reduced the time spent responding to a motion for summary judgment. It wrote

down charges for work related to the Johnson County matter. In all, Dyna Drill

agreed to waive approximately $14,000 in fees and expenses.

      Lemanski raised the issue of fee segregation, identifying a billing-record entry

that stated: “Analyze case law regarding tax code claim.” Dyna Drill agreed to waive

its request for the $487.50 charged for that reason. The court asked Lemanski,

“Anything else on fees?” He responded, “No, Your Honor, other than, of course, the

availability. But in terms of the amount, no.”

      Jones and OBES filed a motion for new trial arguing, among other things, that

the court erred by not requiring Dyna Drill to segregate attorney’s fees for the Tax

Code claim. As an example, they referred to the same entry in the billing records

which Dyna Drill already had agreed to waive. Without citation to the record or

authority, Jones and OBES argued: “Unless Plaintiff’s counsel spent all the time

                                         31
claimed pursuing a theory they had no evidence of at the time, at least a portion of

this time was surely due to work on the tax code claim.” No specific entries were

identified as relating only to the Tax Code claim.

      On appeal, Dyna Drill contends that it did segregate its fees, referring to the

entry expressly mentioning the Tax Code claim. This complied with Chapa’s

directive to segregate fees that relate solely to a claim for which fees are

unrecoverable. See id. at 313.

      The original petition included a fraudulent-transfer claim against Jones, and

the subsequent petitions alleged a fraudulent-transfer claim against OBES as well.

The second amended petition dropped the Tax Code allegations. Although Dyna

Drill originally pleaded for relief under both the Tax Code and the

fraudulent-transfer statute, those allegations were two alternative ways to impose

liability on Jones or OBES for the unpaid debt of Ole Brook Energy. The billing

records that were attached to Dyna Drill’s motion for attorney’s fees show that

various services were billed during the time period from October 2014 to October

2015 when the Tax Code claim remained pending: propounding and responding to

discovery requests; reviewing pleadings and responses from Jones and OBES;

communication with the court, client, and opposing counsel; and scheduling and

preparing for Jones’s deposition. These are the kinds of services that were necessary

                                         32
whether the fraudulent-transfer claim had been filed alone or with the Tax Code

claim. See id.

      Dyna Drill’s billing records did segregate services that pertained only to the

Tax Code claim. The appellants have not shown that any of the other entries were

capable of further segregation because they pertained only to the Tax Code claim.

                                   Conclusion

      We affirm the judgment of the trial court.

                                             Michael Massengale
                                             Justice

Panel consists of Justices Keyes, Bland, and Massengale.

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