456 B.R. 253
Bankr. W.D. Tex.2011Background
- Pace filed Chapter 7 on August 15, 2007; Chaparral filed Chapter 11 in November 2006 and was later dismissed.
- A Texas condo in Austin was transferred from Chaparral to Consolidated Fund Management (CFM) on March 10, 2006.
- Randolph Osherow, as Chapter 7 trustee, filed an adversary proceeding July 21, 2009 against Hensley and CFM to avoid the condo transfer.
- Plaintiff alleged actual fraud under TUFTA §24.005(a)(1) and constructive fraud under TUFTA §§24.005(a)(2), 24.006 and §548, plus breach of fiduciary duty under Rule 1.08.
- Court found the condo transfer was made with actual intent to hinder, delay, or defraud creditors and that Pace/Chaparral received little to no reasonably equivalent value.
- Court concluded Pace/Chaparral were insolvent at the time of transfer or rendered insolvent by the transfer, justifying avoidance and recovery under 11 U.S.C. §544 and §550, with veil-piercing against Hensley.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the condo transfer was an actual fraudulent transfer under TUFTA §24.005(a)(1). | Trustee argues transfer lacked value and was to hinder creditors. | Defendants contend consideration was provided and transfer was in good faith. | Yes; transfer was made with actual intent to defraud creditors. |
| Whether the condo transfer was a constructively fraudulent transfer under TUFTA §24.006 and §24.005(a)(2). | Evidence shows no reasonably equivalent value; debtor insolvent at transfer. | Some loans/ties to transfer could be deemed value to Pace/Chaparral. | Yes; no reasonably equivalent value and solvency criteria met; constructive fraud established. |
| Whether Hensley’s conduct triggers a good faith defense under TUFTA §24.009(a). | Hensley acted in bad faith and was closely connected to the transfer. | Hensley argues good faith and value for a later transferee. | No; Hensley did not act in good faith and did not provide reasonably equivalent value. |
| Whether the trustee may recover the condo or its value under §550 from CFM and Hensley. | Recovery from initial transferee and/or veil-pierced entities is appropriate. | CFM and Hensley contend defenses and limits on §550 reach. | Yes; recovery from initial transferee (CFM) and piercing of the veil against Hensley permitted; joint/separate liability discussed. |
| Whether breach of fiduciary duty claim against Hensley is time-barred or relates back, and its merits. | Hensley breached fiduciary duties per Rule 1.08; conduct related to the same transaction. | Limitations defense and separate accrual considerations. | Relates back to original complaint; breach of fiduciary duty claim viable and damages limited to condo loss; no exemplary damages. |
Key Cases Cited
- Soza v. Hill (In re Soza), 542 F.3d 1060 (5th Cir. 2008) (badges of fraud govern actual-intent analysis under TUFTA)
- SEC v. Resource Development International, LLC, 487 F.3d 295 (5th Cir. 2007) (reasonably equivalent value and net-worth preservation framework)
- Parklane Hosiery Co. v. Shore, 439 U.S. 322 (Supreme Court 1979) (mutuality and preclusion principles in collateral estoppel context)