Court Opinion

ID: 3124463
Source: CourtListenerOpinion
Date Created: 2015-10-16 14:53:22.799014+00
Date Added: 2024-06-11T09:16:52.443508
License: Public Domain

Opinion issued March 29, 2012.

In The
Court of
Appeals
For The
First District
of Texas
————————————
NO. 01-11-00087-CV
———————————
George O. Zenner, Jr., Tommye H. Zenner, Thomas H. Zenner and
Meredith Ellen McConn Zenner, Appellants
V.
Lone Star Striping
& Paving, L.L.C., Appellee

 

 
On Appeal from the 270th Judicial District Court 
Harris County, Texas

Trial Court Case No. 0931954
 

 
OPINION
This case concerns the fraudulent
transfer of a beach house and the proceeds from its sale, and whether the
judgment creditor, Lone Star Striping & Paving, L.L.C., sued outside the
limitations period.  After a bench trial,
the trial court rendered judgment against George Zenner,
Tommye Zenner, Thomas Zenner, and Meredith McConn Zenner, (collectively, “the Zenners”)
under the Texas Uniform Fraudulent Transfer Act (TUFTA).  See
Tex. Bus. & Com.
Code Ann. §§ 24.001‑.013 (West 2009).   On
appeal, the Zenners contend that (1) the applicable
statute of repose bars this suit because the discovery rule did not defer the
accrual of Lone Star’s claims, (2) insufficient evidence supports the trial
court’s findings of fact, (3) the trial court erred in denying George Zenner’s counterclaim for declaratory relief, and (4) the
judgment violates the “one satisfaction” rule.  
We conclude that the discovery rule did not defer accrual of Lone Star’s
TUFTA claims against the Zenners, and thus the
applicable statute of repose bars the judgment against them.  Accordingly, we reverse the judgment of the
trial court and render judgment dismissing the suit.
BACKGROUND
On January 10, 2005, Lone Star obtained a $1,022,606 default
judgment against Eric Zenner, the Zenner
Family Trust, L.P, and other Zenner entities, plus
prejudgment interest and attorney’s fees. 
In 2008, more than three years later, Lone Star conducted post-judgment
discovery; Lone Star deposed Eric Zenner, Meredith McConn and Eric’s father, George Zenner,
and it subpoenaed the Zenner Family Trust bank
records.  
On May 21, 2009, Lone Star sued the Zenners.
 Lone Star alleged that transfers related
to Eric Zenner’s Galveston beach house—and the later disbursements of the proceeds
from the mortgage and sale of the house—violated TUFTA.  The Zenners denied the claims and, noting that the transfers
happened more than four years earlier, asserted the applicable statute of
repose as an affirmative defense.  
George Zenner is the sole
beneficiary and trustee of the Zenner Family Trust.   The
trust was formed in November 2001; its sole asset was a beach house in
Galveston County.  A warranty deed
reveals that MKZ Land, L.P., an entity controlled solely by Eric Zenner, had deeded the house to the Zenner
Family Trust in November 2001, four years before Lone Star obtained a default
judgment against him. 
In 2003, George Zenner, through the
Zenner Family Trust, mortgaged the beach house in the
sum of $400,000.   The trust sold the house in 2004.  George Zenner
testified that the purpose of the mortgage and sale was to pay Eric Zenner’s debts to his family.  
George Zenner placed the proceeds
of the mortgage and sale of the beach house in a Compass Bank account in the
trust’s name.  Between 2003 and 2004, George
Zenner transferred assets from the trust account to various
family members to satisfy debts that Eric Zenner owed
to them.  George Zenner
also distributed some of the funds from the account to Eric Zenner’s
wife.  Having expended the funds in it, George
Zenner closed the trust account in January 2005, at
about the same time that Lone Star obtained its default judgment against Eric Zenner. 
Lone Star’s CEO, Brent Taber, testified that Lone Star knew
about the existence of the Zenner Family Trust in
2004 and also knew that the trust owned the beach house.  While pursuing the suit that led to the 2005 default
judgment, Tabor had considered “encumber[ing]
the title of the beach house . . . to prevent the asset from being liquidated .
. . .”  Lone Star’s 2005 pleading alleges
that the “Zenner Family Trust is in possession of Zenner’s assets . . . which include . . . one parcel of
property owned by defendant and located at 13219 Binnacle Way, Galveston, Texas
that can be attached to secure the debt.” 
But Lone Star never encumbered the property.  
In 2005, Lone Star discovered that the trust had sold the
house during the previous year.  Taber learned
about the sale from a local realtor’s website; he also raised the issue of the
sale to his attorney.  At trial, Tabor testified
that Lone Star did not know what happened to the proceeds of the sale.  Tabor further contended that Lone Star did
not discover, and could not reasonably have discovered, that George Zenner was sole trustee and beneficiary of the Zenner Family Trust, or that the trust had made fraudulent disbursements.  Tabor maintained that Lone Star had first learned
of the Compass Bank account in 2008 after Lone Star had deposed members the Zenner family and subpoenaed the trust’s bank records.  
After a bench trial, the trial court found in favor of Lone
Star.   Relevant to this appeal, the trial court found
that:
12. 
The Plaintiff did
not learn of the transfers and disbursement of funds . . . until August of 2008
when the bank records of the Zenner Family Trust were
obtained by way of a subpoena during post judgment discovery.
 
13. 
The Plaintiff
filed its suit within one year after the transfer or obligation was or could
reasonably have been discovered by the claimant.  
 
The trial court also entered the following conclusion of
law relevant to this appeal:
6.     
Plaintiff is
entitled to avail itself of the discovery rule and the statute of limitations
was tolled under Tex. Bus. & Com.
Code § 25.010 (a)(1).
 
The Zenners
moved for a new trial, contending that the record does not support the trial
court’s findings of fact.
DISCUSSION
Standard of Review
We review the sufficiency of the evidence supporting a trial
court’s challenged findings of fact by applying the same standards that we use
in reviewing the legal or factual sufficiency of the evidence supporting jury
findings. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994).  When the appellate record includes the
reporter’s record, the trial court’s factual findings, whether express or
implied, are not conclusive and may be challenged for legal and factual
sufficiency of the evidence supporting them. See Middleton v. Kawasaki Steel Corp., 687 S.W.2d 42, 44 (Tex. App.—Houston [14th Dist.] 1985), writ ref’d n.r.e., 699 S.W.2d 199 (Tex. 1985) (per curiam).
In a bench trial, the trial court determines the credibility
of the witnesses and the weight to be given their testimony. Woods v. Woods, 193 S.W.3d 720, 726 (Tex.
App.—Beaumont
2006, pet. denied); see also City of
Keller v. Wilson, 168 S.W.3d 802, 819 (Tex. 2005).  In resolving factual disputes, the trial court
may believe one witness and disbelieve others, and it may resolve any
inconsistencies in a witness’s testimony.  McGalliard v. Kuhlmann,
722 S.W.2d 694, 697 (Tex. 1986). In making credibility determinations,
the fact-finder “cannot ignore undisputed testimony that is clear, positive,
direct, otherwise credible, free from contradictions
and inconsistencies, and could have been readily controverted.” City of Keller, 168
S.W.3d at 820.  The fact-finder thus
is not “free to believe testimony that is conclusively negated by undisputed
facts.”  Id. 
An appellant may not challenge a trial court’s conclusions of
law for factual sufficiency, but we may review the legal conclusions drawn from
the facts to determine their correctness. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).  In an appeal from a bench trial, we review a
trial court’s conclusions of law as legal questions, de novo, and will uphold
them on appeal if the judgment can be sustained on any legal theory supported
by the evidence. Id.;
In re Moers, 104 S.W.3d 609, 611
(Tex. App.—Houston
[1st Dist.] 2003, no pet.). 
The test for legal sufficiency is “whether the evidence at
trial would enable reasonable and fair-minded people to reach the verdict under
review.” City of Keller, 168 S.W.3d at 827.  In
making this determination, we credit favorable evidence if a reasonable
fact-finder could, and disregard contrary evidence unless a reasonable
fact-finder could not. Id.  If the evidence falls within the zone of
reasonable disagreement, then we may not substitute our judgment for that of
the fact-finder.  Id. at 822.  The fact-finder is the sole judge of the
credibility of the witnesses and the weight to give their testimony.  Id. at 819.  
Statute of Repose under the Texas
Uniform Fraudulent Transfer Act
In general, TUFTA permits creditors to void fraudulent
transfers to family members.  See Tex.
Bus. & Com. Code Ann. §
24.008(a).   However, section 24.010 of TUFTA extinguishes
claims brought under the act unless they are filed within the applicable statutory
time period—within
four years after the fraudulent transfer was made. Tex. Bus. & Com. Code Ann. § 24.010(a)(1).[1]
  But, a creditor may sue later if it
does so within one year after the transfer or obligation was or could
reasonably have been discovered.  Id.  
The trial court determined that the Compass Bank money
transfers from the Zenner Family Trust to various
family members violated TUFTA.  It is
undisputed that these transfers pre-date the four-year limitations period, as
the last one took place before January 10, 2005, when Zenner
closed the Compass Bank account.  See Tex.
Bus. & Com. Code Ann. § 24.010(a)(1).  Lone Star did not sue until May 2009.   The trial
court ruled, however, that Lone Star’s claims were not time-barred under
TUFTA’s discovery-rule exception.  See Tex.
Bus. & Com. Code Ann. § 24.010(a)(1); see Cadle Co. v. Wilson, 136 S.W.3d 345, 350 (Tex. App.—Austin 2004, no pet.); Duran v. Henderson, 71 S.W.3d 833, 838
(Tex. App.—Texarkana
2002, pet. denied).  
Texas courts have compared TUFTA’s statutory discovery rule to
the one that arises under the common law. 
See Duran, 71 S.W.3d at 838–39; see
also Cadle Co., 136 S.W.3d at 351; Johnston v. Crook, 93 S.W.3d 263, 270
(Tex. App.—Houston [14th Dist.] 2002, pet. denied).  The discovery rule traditionally defers the accrual
of a cause of action until a claimant knows, or through the exercise of
reasonable diligence, should know of the facts giving rise to the cause of
action. Wagner &
Brown Ltd. v. Horwood, 58 S.W.3d 732, 734 (Tex.
2001). 
The undisputed evidence at trial
conclusively establishes that Lone Star should have discovered the transfers
within the four years after the Zenner Family Trust
made them.  Lone Star knew that the Zenner Family Trust existed in 2004, and included the name
of the trust and address of the beach house in its 2005 pleadings.  According to Lone Star’s CEO, Lone Star also
knew that Eric Zenner’s beach house—which he had owned free of
encumbrances—had
been transferred to the trust.  Lone Star
also learned that the beach house had been sold in May 2004, based on
information obtained through a local realtor’s website.  These are facts that would prompt a reasonably
diligent creditor to seek further information about the sale proceeds.  See e.g.
Childs v. Haussecker, 974 S.W.2d 31, 47 (Tex.
1998) (noting discovery rule requires plaintiff to exercise reasonable
diligence once apprised of facts that would incite a reasonably diligent person
to seek information about his injury); Pirtle v. Kahn, 177 S.W.3d 567, 571 (Tex. App.—Houston
[1st Dist.] 2005, pet. denied) (“the discovery rule requires a plaintiff to
seek information about his injuries and their likely cause once he is apprised
of facts that would make a reasonably diligent person seek information”); Stewart Title Guar. Co. v. Becker, 930
S.W.2d 748, 756 (Tex. App.—Corpus Christi 1996, writ denied) (holding that
because rule mandates reasonable diligence, tolling of limitations by discovery
rule ends when party claiming benefits of rule acquires knowledge of facts,
conditions, or circumstances that would cause reasonable person to make inquiry
leading to discovery of concealed cause of action), disapproved of on other grounds by Brown v. De La Cruz, 156 S.W.3d 560, 567 (Tex. 2004).
The Texas Rules of Civil Procedure permit post-trial
discovery to obtain information to enforce a judgment.  Tex.
R. Civ. P. 621a.  A party may seek
post-trial discovery at any time after rendition of judgment.  Id.  Rule 621a permits “any discovery proceeding
authorized by these rules for pre-trial matters.”  Id.  Discovery is generally permitted of any
unprivileged information relevant to the subject of a lawsuit, whether it
relates to a claim or defense of the parties. Tex.
R. Civ. P. 192.3(a).  In 2008, Lone Star deposed members of the Zenner family and learned of the transfers from the Zenner Family Trust to Eric Zenner
and other Zenner family members.  It also obtained the Compass Bank records.  These are facts giving rise to Lone Star’s
cause of action.
Lone Star responds that the statute of repose does not bar
its suit, because no available source of information would have revealed what
happened to the specific proceeds of the sale—that the trust had retained the
proceeds in a bank account and had been making disbursements to the Zenner family.  But post-trial
discovery was available to Lone Star in 2005 after it obtained a judgment
against Eric Zenner and the Zenner
Family Trust, L.P. See Tex. R. Civ. P. 621a.   It knew the Zenner Family Trust existed in 2004, knew that Eric Zenner had transferred the beach house to the trust, and
knew that the trust had sold the beach house in May 2005, and yet Lone Star did
not ascertain whether the proceeds of the transaction had been disposed of in a
manner that threatened its rights as a judgment creditor.  Compare
Cadle Co., 136 S.W.3d at 352–53 (discovery rule
did not apply where judgment creditor knew of underlying facts from earlier
deposition that would have prompted reasonably diligent claimant to investigate
transactions further) with Duran, 71
S.W.3d at 839 (discovery rule delayed accrual of claims where judgment creditor
did not know debtor owned home and had transferred home and would not have
known of conveyance based solely on existence of deed in deed records).  
Like the judgment
creditor in Cadle,
Lone Star had notice of sufficient facts to inquire into the disposition of the
proceeds of the sale.  See Cadle Co., 136 S.W.3d at 352–53.  Post-judgment discovery not only would have
revealed the asset transfers between the Zenner
Family Trust to the Zenner family, it did reveal them:  Lone Star learned of the trust arrangement and the asset
transfers after deposing members of the Zenner family
in 2008, still within the four-year limitations period.  
The record conclusively demonstrates that Lone Star was aware
of facts surrounding the transfers that aggrieved its rights as a creditor when
it learned in 2005 of the transfer of the beach house to the trust, its
encumbrance, and its sale.  As a matter
of law, such facts would lead a reasonable creditor to inquire about the
proceeds within the statute of repose.  The
record also conclusively demonstrates that Lone Star had post-judgment
discovery available to it from the date of its default judgment against the Zenners, January 10, 2005. In 2008, post-judgment discovery
revealed the transfers from the Compass Bank account.  By exercising reasonable diligence, Lone Star
should have discovered (and did discover) the facts giving rise to its TUFTA
claims within four years of the transfers. 

 
Conclusion
Because Lone Star’s claims could have been discovered using
reasonable diligence, the discovery rule does not defer accrual of its claims
under TUFTA.  We hold that the trial
court erred in finding that the discovery rule applied; accordingly, Lone
Star’s claims are barred by the four-year statute of repose.  We reverse the judgment of the trial court
and render judgment dismissing Lone Star’s claims. 
 
 
                                                                      Jane
Bland
                                                                      Justice

 
Panel
consists of Justices Keyes, Bland, and Sharp.
 

[1]
Entitled “Extinguishment of
Cause of Action,” section 24.0010 is a statute of repose, rather than a statute
of limitations.  See Tex. Bus. & Com.
Code Ann. § 24.010; Cadle Co. v. Wilson,
136 S.W.3d 345, 350 (Tex. App.—Austin 2004, no pet.); Duran v. Henderson, 71 S.W.3d 833, 837 (Tex. App.—Texarkana 2002,
pet. denied). Texas courts use the terminology “statute of repose” and “statute
of limitations” interchangeably when referring to section 24.010 of TUFTA.