Esse v. Empire Energy III, Ltd.
333 S.W.3d 166
Tex. App.2010Background
- BP and Empire entered a 50/50 JOA with security interests in the Preston Well; Westgate formed in 2002 to participate share of costs and later acquired Empire's interest, becoming a 25% holder; Westgate paid initial costs and later refused to pay additional costs after production failed; Brent and Todd Esse were Westgate’s controlling figures and formed 5E Oil & Gas in 2003 as a new vehicle; Westgate transferred the Mallet prospect to 5E for $37,715 and paid Boone $10,000 nine months after work was performed; BP and Empire filed suit, Westgate and Havis as trustee pursued counterclaims including fraudulent transfer and alter ego, and a bankruptcy followed in 2004; the trial court found Westgate liable for contract damages and the Esses/5E liable for fraudulent transfer and conspiracy; a June 5, 2009 nunc pro tunc judgment was later found void and not considered on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent transfer requires intent or lack of value under TUFTA | Esse lack intent not required under TUFTA | Evidence required intentional fraud | Intent not required for TUFTA liability; no-evidence on intent not fatal under 24.006(a) |
| Counsel advice as defense to liability | Advice of counsel should shield from liability | No waiver under Texas law; pleadings waive defense | Advice of counsel not a valid defense; waived; liability upheld |
| Whether transfers lacked reasonably equivalent value | Transfers deprived Westgate of value; Mallet to 5E undervalued | 5E paid fair value for Mallet; Boone/Empire valuations unreliable | Transfers to 5E did not receive reasonably equivalent value; court sustained fraud finding |
| Whether 5E is alter ego of Westgate | 5E as alter ego liable for transfers | Alter ego theory only relevant if judgment against Westgate; nunc pro tunc void | Issue moot; June 5, 2009 judgment void; no alter ego liability considered on appeal |
| Attorney's fees allocation | Fees relate to fraudulent transfer and breach claims; should be awarded | Segregation required; some fees incurred for unrelated claims | Fees may be awarded under interrelated claims; exception to segregation applied; fees upheld |
Key Cases Cited
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (no-evidence standard; guidance on sufficiency review)
- Escobar v. Escobar, 711 S.W.2d 230 (Tex. 1986) (distinguishes clerical from judicial errors for nunc pro tunc)
- Riner v. Briargrove Park Property Owners, Inc., 976 S.W.2d 680 (Tex. App.-Hou. 1996) (judgment nunc pro tunc limits; cannot correct judicial errors after plenary power)
- Arias v. Brookstone, L.P., 265 S.W.3d 459 (Tex. App.-Hou. 2007) (no-evidence standard and weight of evidence framework)
- Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991) (attorney's fees segregation exception for interrelated claims)
- Hahn v. Love, 321 S.W.3d 517 (Tex. App.-Hou. 2009) (TUFTA framework and intent considerations)