612 S.W.3d 338
Tex. App.2019Background
- Spencer & Associates (the Firm) obtained a final 1999 county-court judgment against Stephen Harper for unpaid legal fees and has been unable to collect the balance for decades.
- The Firm pursued extensive post-judgment discovery from Stephen Harper, his wife Vicki Harper, and ZO Energy (Vicki owns 100% of ZO Energy) to locate nonexempt assets.
- The Firm sued the Harper parties (2016) for common-law fraud, fraud by nondisclosure, TUFTA violations, and conspiracy, alleging material misrepresentations in discovery responses and that Harper funneled income/assets through ZO Energy and Vicki.
- Key evidentiary points offered by the Firm: (1) May 2013 interrogatory answers in which Harper identified only a Broadway Bank account (balance <$1), (2) USAA account statements showing portfolio value ~ $12,117 in 2013 and near-empty by mid-2014, (3) 2013 tax returns and 1099s showing significant income, and (4) testimony that ZO Energy paid Harper’s personal bills and Harper performed substantial work for ZO Energy without payroll.
- Harper and Vicki moved for no-evidence summary judgment on all claims; the trial court granted it and entered a take-nothing judgment. The court of appeals reversed and remanded, finding the Firm raised fact issues on fraud, fraud-by-nondisclosure, TUFTA, and conspiracy claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Harper’s discovery statements about bank accounts were materially false and support common-law fraud | Harper omitted/disclosed only Broadway Bank when he also had a USAA account containing >$12k in 2013; this was material to collection efforts and the Firm relied on it | Harper/defendants contend accounts belonged to ZO Energy or were disclosed; characterization disputes and insufficiency of proof | Court: Genuine fact issues exist as to material misrepresentation, knowledge of falsity, intent to induce reliance, actual reliance, and injury — summary judgment improper |
| Whether omissions/supporting facts give rise to fraud by nondisclosure | Failure to disclose the USAA account and to supplement interrogatories while knowing the Firm was ignorant deprived the Firm of ability to attach assets | Defendants argued disclosure occurred and no duty existed or info belonged to non-debtor entities | Court: Duty to disclose under discovery rules and nondisclosure badges create fact issues — claim survives summary judgment |
| Whether Harper’s retention of income/asset-structure (funds retained in ZO Energy / payments of personal bills by ZO Energy) constitutes a fraudulent transfer under TUFTA | Harper effectively transferred income/assets to ZO Energy or Vicki (insiders) to place assets beyond reach; badges of fraud exist (insider, control retained, concealment, transfers while judgment outstanding) | Defendants argue transfers were for value or belonged to ZO Energy; dispute over ownership and value | Court: Circumstantial evidence and badges of fraud raise fact issues as to actual intent and fraudulent transfer — summary judgment improper |
| Whether the conspiracy claim survives absent underlying tort | Conspiracy is derivative of underlying fraud/TUFTA claims and requires agreement and overt acts to thwart collection | Defendants argued no actionable underlying tort proved so conspiracy fails | Court: Because underlying tort claims survive on fact issues, there is also a fact issue on conspiracy — claim survives summary judgment |
Key Cases Cited
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (defines elements and materiality for common-law fraud)
- Emerald Oil & Gas Co. v. Exxon Corp., 348 S.W.3d 194 (Tex. 2011) (fraud elements and reliance principles)
- Janvey v. Golf Channel, Inc., 487 S.W.3d 560 (Tex. 2016) (interpreting reasonably equivalent value under TUFTA)
- City of Richardson v. Oncor Elec. Delivery Co., 539 S.W.3d 252 (Tex. 2018) (standard of review for summary judgment)
- Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572 (Tex. 2006) (no-evidence summary judgment burden shifting)
- Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913 (Tex. 2010) (actual and justifiable reliance in fraud claims)
- Helix Energy Sols. Grp., Inc. v. Gold, 522 S.W.3d 427 (Tex. 2017) (resolving inferences and doubts for nonmovant on summary judgment)
- Anderson v. Durant, 550 S.W.3d 605 (Tex. 2018) (measures of damages for fraud claims)