In Re Pace
456 B.R. 253
Bankr. W.D. Tex.2011Background
- Debtor Ronnie Pace filed chapter 7; Chaparral Resources, Inc. ( Pace’s company) had a prior chapter 11 that was dismissed; condo in Austin was transferred from Chaparral to CFM via deed in March 2006.
- Randolph Osherow, the chapter 7 trustee, filed adversary against Nelson Hensley and Consolidated Fund Management (CFM) to avoid the condo transfer and recover value for Pace’s estate.
- Plaintiff alleges actual fraud under TUFTA §24.005(a)(1) and constructive fraud under TUFTA §§24.005(a)(2), 24.006, plus breach of fiduciary duty for attorney Hensley’s involvement.
- Defendants contend the condo was transferred for fair, value-based consideration to a good-faith transferee, with payments evidenced by multiple loans/advances.
- Court found the transfer was made with actual intent to hinder, delay, or defraud creditors, determined there was no reasonably equivalent value, and held Hensley/CFM jointly liable under Section 550; fiduciary-duty claim related back and is resolved in plaintiff’s favor overall.
- The court awarded turnover of the condo or its value, considered prejudgment interest and reasonable attorney’s fees, and declined exemplary damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| TUFTA actual fraud is shown? | trustee shows actual intent to defraud | transferee argues value and good faith | Yes, actual fraud established under §24.005(a)(1) |
| TUFTA constructive fraud—reasonably equivalent value | transfers to Pace/Chaparral received no value | some value via third-party transfers | Yes, no reasonably equivalent value; §24.006(a) satisfied |
| Insolvency at transfer | Pace insolvent; presumption under §24.003(b) | disputed timing | Yes, Pace insolvent at transfer; insolvency proven |
| Good faith defense under TUFTA §24.009 | Hensley acted with knowledge of fraud | transferee claims good faith | No, Hensley lacked good faith; knowledge/inquiry sufficient to negate good faith |
| Recovery under §550 against initial/alter ego transferees | can recover condo or its value from CFM and Hensley | potential limits on liability | Yes; Hensley pierced via alter-ego/veil-piercing theory; joint and several liability |
Key Cases Cited
- Soza v. Hill (In re Soza), 542 F.3d 1060 (5th Cir.2008) (badges of fraud considered for actual intent under TUFTA)
- SEC v. Resource Development Int'l., LLC, 487 F.3d 295 (5th Cir.2007) (reasonably equivalent value focus on debtor's net worth preservation)
- Smith v. Am. Founders Fin. Corp., 365 B.R. 647 (S.D.Tex.2007) (analysis of reasonably equivalent value in related-party transfers)
- Swaggart Ministries v. Hayes (In re Hannover), 310 F.3d 796 (5th Cir.2002) (constructive knowledge and good faith standard for TUFTA)
- In re JNS Aviation, Inc., 376 B.R. 500 (N.D. Tex.2007) (veil piercing considerations and alter-ego implications)