Essex Crane Rental Corp. and Vincent A. Morano v. David W. Farley

Directory: C:\Documents and Settings\erak\Desktop\090813m - saved

Opinion issued August 25, 2011.

In The

Court

of Appeals

For The

First

District of Texas

————————————

NOS. 01-09-00813-CV;

01-11-00688-CV; &

01-11-00689-CV

———————————

Essex Crane Rental Corp. and Vincent

A. Morano , Appellants

V.

Eric G. Carter D/B/A Eric G. Carter & Associates, Appellee

Essex Crane Rental Corp. and Vincent

A. Morano , Appellants

V.

KENNETH BEVERLY , Appellee

Essex

Crane Rental Corp. and Vincent A. Morano , Appellants

V.

David W.

Farley , Appellee

On Appeal from the 151st District

Court

Harris County, Texas

Trial Court Case Nos. 2002-62464-A,

2002-62464-B, & 2002-62464-C

O P I N I O

N

Appellants Essex Crane Rental Corp. and Vincent A. Morano

(collectively, “Essex”) appeal

the trial court’s judgments in favor of appellees

Eric G. Carter d/b/a Eric G. Carter & Associates, David W. Farley, and

Kenneth Beverly, and the trial court’s order granting Beverly’s motion to quiet

title. In four issues, Essex contends

that the trial court (1) improperly sustained Beverly’s objections to their

summary judgment evidence, (2) erroneously

rendered summary judgment in favor of Beverly , (3) erroneously rendered summary judgments in favor of Carter

and Farley, and (4) erroneously granted Beverly’s motion to quiet title.

We reverse and remand.

Factual Background

A.

The TWC

Litigation and Settlement Agreement

In the mid-1990s, the Texas Workers’ Compensation Insurance

Fund (the “Fund”) and the Texas Workers’ Compensation Facility (the “Facility”)

filed separate suits against several business entities (the “McPherson

Entities”) owned and/or operated by James W. McPherson, Sr. (“McPherson, Sr.”) seeking

to collect millions in unpaid workers’ compensation dues (the “Fund Litigation”

and the “Facility Litigation,” collectively the “TWC Litigation”). Among the McPherson Entities sued in the TWC

Litigation was Coastal Terminal Operators, Inc. (“Coastal”).

The TWC Litigation was settled prior to judgment in May 1999

when, pursuant to a plea and probation agreement in connection with criminal

charges pending against him in federal court, McPherson, Sr. and the McPherson

Entities entered into a settlement agreement (the “TWC Settlement Agreement”)

whereby they agreed to pay a total of $900,000 to the Fund and the

Facility over a period of several year s, collateralized in part by

equipment owned by the McPherson Entities.

In the event the McPherson Entities filed bankruptcy, receivership, or

insolvency proceedings, the Fund and the Facility reserved the right to seek

damages against them of up to $3,147,844, the total amount of unpaid workers’

compensation dues, with credit for payments previously made. In return, the Fund and the Facility released

the McPherson Entities from any liability relating to the facts of the TWC

Litigation.

These agreements were set out in Paragraph 10 of the TWC

Settlement Agreement, which provided:

In the event of a bankruptcy, receivership, or

insolvency proceeding, of any kind, by way of Coastal Defendant(s) or McPherson

Interests, Ltd., that adversely affects in any manner the enforceability of any

term of this Agreement or reduces any of the consideration to be derived from

the Fund or the Facility hereunder, the Fund and the Facility’s release of that

defendant shall be null and void and the Fund and the Facility will be free to

assert all causes of action, including causes of action for fraud and to

contest the dischargeability of debts, that the Fund

or the Facility now or hereunder may have against that defendant relating to

the facts that form the basis for the Fund Lawsuit or the Facility Lawsuit

seeking actual damages in the aggregate that do not exceed $3,147,844. In such event, all amounts previously paid

toward the settlement hereunder will be credited against any Judgment obtained

against that defendant. Any such

bankruptcy proceeding shall not affect the validity of the remainder of this

Agreement or the obligations of the other Parties hereto.

B.

The Essex

Litigation and Judgment in Favor of Essex

In the late 1990s, Coastal, one of the McPherson Entities and

a settling defendant in the TWC Litigation, contracted to rent cranes from

Essex. McPherson, Sr. personally

guaranteed the payment of all rentals to Essex.

In 2000, Essex sued Coastal and McPherson, Sr., seeking recovery of

unpaid crane rental fees (the “Essex Litigation”). On August 23, 2002, Essex was

awarded judgment against Coastal and McPherson, Sr. in the principal amount of

$491,261.87 (the “First Essex Judgment”). The principal and interest portion of that

judgment was affirmed on appeal in August 2004.

See Coastal Terminal Operators v. Essex Crane Rental Corp. , No. 14-02-00627-CV, 2004 WL

1795355 , at *9 (Tex. App.—Houston [14th Dist.] Aug. 12, 2004,

pet. denied ) ( mem .

op). The issue of attorney’s fees was

severed and remanded. Id. T he

trial court tried and awarded attorney’s fees and statutory interest on the

claim on March 22, 2006 (the “Second Essex Judgment”). Essex contends that the amount owed by Coastal

and McPherson on the two Essex Judgments, including post-judgment interest, now

exceeds $900,000.

C. The Underlying Lawsuit

In the latter part of 2002, Essex

began collection efforts on the First Essex Judgment, entered on August 23,

2002. Having no success, on December 10,

2002, they filed the underlying suit against McPherson, Sr. and Coastal Terminal, along with

seven other defendants, [1]

alleging that all of the defendants “conspired with each other to fraudulently

transfer, hide, secrete or otherwise conceal assets with the intent to avoid

payment of the debt” to Essex. Essex subsequently

amended its petition to raise similar allegations of fraud and conspiracy

against appellees Beverly, Carter, and Farley. Specifically, Essex alleged that Beverly,

Carter, and Farly conspired with the McPherson

Entities to fraudulently transfer assets in an attempt to avoid satisfaction of

the Essex Judgments.

D. The Agreed Judgments in the TWC Litigation and the Assignment of the

Fund’s and the Facility’s Rights Under the TWC Settlement Agreement to HII

The summary judgment evidence establishes that following

entry of the First Essex Judgment, in late 2002, attorneys

Carter and Farley, representing McPherson, Sr. and the McPherson Entities, began

negotiating with the Fund and the Facility for an assignment of the Fund’s and

the Facility’s rights under the TWC Settlement Agreement (the “Assignment”). The Fund and the Facility agreed to assign

whatever rights they had under the Agreement to Houston Industrial Investments,

LLC (“HII”), an entity incorporated by Farley on March 8, 2002, in exchange for

payment to them of the remaining balance of $275,000 due under the terms of the

Agreement. James W. McPherson, Jr.,

McPherson, Sr.’s son, was the sole owner and managing member of HII, and Carter

was the registered agent. McPherson, Jr.

testified at his deposition that he sought the Assignment “in order to protect

[his] assets” and that HII was created to separate its assets from his

own. Carter and Farley drafted the

assignment.

Following the execution of the Assignment, HII entered into

two agreed judgments, likewise drafted and signed by Carter and Farley with

McPherson, Sr. in the TWC Litigation (the “TWC Agreed Judgments”). In both the Fund Litigation and the Facility

Litigation, HII, as successor in interest to the Fund and the Facility, took a

final judgment against several of the McPherson Entities for $1.5 million in

actual damages, $250,000 in attorneys’ fees, and foreclosure on certain

property the McPherson Entities had used to collateralize the TWC Settlement

Agreement. The TWC Agreed Judgments

totaled over $3 million.

McPherson, Sr. testified that HII took the Agreed Judgments

to help out the family. He also

testified that he consulted with Carter before he took the Agreed

Judgments. The Travis County court that

entered the Agreed Judgments was not informed of the relationship between the

plaintiff, HII, and the defendant, McPherson, Sr.—i.e., that HII was controlled

by the son of McPherson, Sr. Nor was it

informed that HII had obtained the Assignment of the Fund’s and the Facility’s

rights as judgment creditors against McPherson, Sr. and the McPherson Entities

in exchange for fully paying off the debt owed to the Fund and the Facility

under the terms of the TWC Settlement Agreement. Nor was it informed that the events that triggered

the Fund’s and the Facility’s right to seek actual damages against the

McPherson Entities under paragraph 10 of the TWC Settlement Agreement—“[A]

bankruptcy, receivership, or insolvency proceeding, of any kind, by way of

Coastal Defendant(s) or McPherson Interests, Ltd., that adversely affects in

any manner the enforceability of any term of this Agreement or reduces any of

the consideration to be derived from the Fund or the Facility hereunder”—had

not occurred. Writs of execution were

issued under the TWC Agreed Judgments, and the collateralized assets of the

McPherson Entities (including equipment valued at $625,000) were transferred to

HII.

Essex contends, both at trial and on appeal, that the Agreed

Judgments were fraudulently procured and are a sham. It asserts that the TWC Settlement Agreement

capped the McPherson Entities’ liability to the Fund and the Facility at

$900,000; that all but $250,000 of this debt was paid over a period of time, and

that the remaining $250,000 was paid in return for the assignment of the Fund’s

and the Facility’s rights to payment from McPherson, Sr. and the McPherson

entities to HII; and that, under the terms of the TWC Settlement Agreement and

the Assignment, the Fund and the Facility had no remaining rights to payment by

McPherson or the McPherson Entities to assign to HII, an entity wholly owned

and controlled by McPherson, Sr.’s son.

Therefore, the Agreed Judgments taken by HII and upon which execution

issued were fraudulent. Appellees , however, contend that the provision Essex relies

upon, set out in Paragraph 10 of the TWC Settlement Agreement, did not provide

the exclusive remedy of the Fund and

the Facility against McPherson, Sr. and the McPherson Entities and that HII, as

assignee of the rights of the Fund and the Facility was entitled to seek from

McPherson and the McPherson entities the full amount of the judgments the Fund

and the Facility had originally obtained.

E.

The Transfer of the Montgomery House

At the time of the Essex Judgments, McPherson, Sr. owned a

house in Montgomery County, Texas (the “Montgomery House”). Essex obtained a lien on the Montgomery

House, then in McPherson, Sr.’s name, through the filing of an abstract of

judgment relating to the Essex Judgments.

Beverly had worked as McPherson, Sr.’s accountant since 1989

or 1990 and was also a long-time friend. Following the entry of the two Essex

Judgments, and without ever seeing the subject property, Beverly purchased a

bank note and second lien on the Montgomery House. Beverly purchased the bank note with the

assistance of Dr. Jules Balette . Beverly and Balette had a long-standing relationship, and Balette testified that he trusted Beverly. Over the course of several months, Balette and his fiancée, Cathy Muriel, loaned Beverly over $200,000

with respect to the Montgomery House. Balette testified that he believed he was loaning the money

for the Montgomery House to McPherson, Sr. as a favor.

After McPherson, Sr. defaulted on his primary home loan on

the Montgomery House, Beverly, holder of the second mortgage, purchased the house

at a foreclosure sale. Beverly claimed

that he was not attempting to help McPherson, Sr. and that this was nothing

more than a real estate investment. However,

McPherson, Sr., who was living in the house although it was not his homestead,

was never forced to move out. Instead,

Beverly rented the Montgomery House back to McPherson, Sr. and his family. McPherson, Sr., either personally, or through

one of the McPherson Entities, paid monthly rent on the home and reimbursed

Beverly for taxes and homeowners’ insurance costs, even though he no longer

owned the property.

Despite being McPherson, Sr.’s accountant and friend, and

despite having purchased the Montgomery House at foreclosure, Beverly testified

that he had not previously known that McPherson, Sr. owned the house. McPherson, Sr. testified, however, that

Beverly purchased the Montgomery House to try to help him out. Specifically, McPherson, Sr. testified that,

by purchasing the note on the Montgomery House, Beverly allowed him “more time

to get some money together to buy the property back.” Dr. Balette

confirmed McPherson, Sr.’s version of events by testifying that he understood

he was giving money to Beverly and that “Beverly was going to do something to

help Mr. McPherson with his house.” Balette also testified that everything Beverly had said

about the Montgomery House had been “a mixture of lies and truth” and that he

never would have gotten involved had he known the truth because this “was not a

clean deal.”

Following the sale of his homestead in Harris County,

McPherson, Sr . attempted to buy back the Montgomery

House. His intent was to use the

proceeds from the sale of his Harris County homestead to buy back the

Montgomery House from Beverly, designate it as his homestead, and thus protect

the Montgomery House from seizure.

However, Stewart Title declined to issue a title policy for McPherson,

Sr.’s repurchase because the person seeking to purchase the property (McPherson,

Sr.) was the same person who had owned the property prior to foreclosure, which

made the entire foreclosure questionable.

On December 22, 2005, around the time that the proceeds from

the sale of McPherson, Sr.’s Harris County homestead property would lose their

statutory exemption from execution, McPherson, Sr. wire-transferred $150,000 to

Beverly. Beverly testified that, at the

time he received these funds, he was not sure why they were sent to him. McPherson, Sr. claimed the payment was

intended for the repurchase of the Montgomery House, despite the fact that the

transfer occurred after the date scheduled for the closing on the sale of the

Montgomery House. As a result of Stewart

Title’s reservations, however, the repurchase of the Montgomery House was never

consummated and title to the Montgomery House remains in Beverly’s name. Beverly ultimately returned to McPherson over

$60,000 of the funds originally wire-transferred to him.

Procedural Background

On August 17, 2006, Carter filed a no-evidence motion for summary

judgment on Essex’s fraud and civil conspiracy claims against him. Essex timely responded and the motion was set

for submission on September 11, 2006. The trial court did not rule on Carter’s

first summary judgment motion.

On July 19, 2007, Carter filed a second motion, entitled

“Motion for Traditional Summary Judgment and Motion for Severance” with respect

to the civil conspiracy to commit fraud claim pending against him.

Four days later, on July 23, 2007, Beverly filed a no-evidence

motion for summary judgment on Essex’s fraud and civil conspiracy claims against

him and a “Motion for Partial Summary Judgment on Lien Element of Conspiracy to

Commit Fraudulent Transfer.” Beverly’s partial

motion for summary judgment also included a motion to quiet his title to the

Montgomery House.

Also on July 23, 2007, Carter filed another, separate no-evidence

motion for summary judgment on Essex’s civil conspiracy claims, together with a

motion for summary judgment on damages and a motion for joinder

in co-defendant Beverly’s motion for summary judgment.

Essex timely responded to Beverly’s and Carter’s various

motions.

On August 10, 2007, Carter filed objections to Essex’s

summary judgment evidence. The trial

court never ruled on these objections.

On August 15, 2007, following a

hearing on August 13, the trial court granted Beverly’s no-evidence motion for summary

judgment. Also on August 15,

2007, the trial court signed separate orders (1) granting Carter’s motion for summary

judgment as to Essex’s fraud and civil conspiracy claims [2]

and (2) severing Essex’s claims against Carter and Beverly into the same

severed cause of action. [3]

On August 27, 2007, Essex filed a motion to set aside and/or amend

the severance orders and a separate motion to reconsider the summary judgments

rendered in Carter’s and Beverly’s favor.

On August 30, 2007, Farley filed a motion for summary judgment

and severance on the same grounds raised by Carter in his previously granted

motion for summary judgment. Farley

incorporated by reference the arguments presented in Carter’s prior motions and

contended that, as an attorney similarly situated to Carter, he was entitled to

summary judgment for the same reasons as Carter. Essex again timely responded and the matter

was fully briefed.

On September 4, 2007, Beverly filed his “Objections to Evidence

Cited in Plaintiffs’ Response to No-Evidence Motion for Summary Judgment”—a

motion which the trial court had already granted on August 15. Essex did not respond to Beverly’s

objections.

On September 24, 2007, the trial court denied Essex’s motion

to set aside or amend the severance orders and its motion to reconsider the

summary judgments rendered in Carter’s and Beverly’s favor. That same day, the trial court signed an order

quieting Beverly’s title to the Montgomery House. The next day, September 25, 2007, the trial

court granted Farley’s motion for summary judgment and motion to sever. [4]

On September 26, 2007, the trial court signed an order

granting Beverly’s objections to Essex’s summary judgment evidence in their

entirety. This is the only trial court

order sustaining any objections to the summary judgment evidence.

To avoid trying the remaining case against only some of the

defendants, Essex entered into a tolling agreement with the remaining

defendants and agreed to nonsuit their claims against

them without prejudice pending appeal of the motions granted by the trial

court.

STANDARD OF REVIEW

We review a trial court’s grant of summary

judgment de novo. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d

211, 215 (Tex. 2003) .

When a party has filed both a traditional

and a proper no-evidence summary judgment motion, we first review the trial

court’s summary judgment under the no-evidence standard of Texas Rule

of Civil Procedure 166a( i ) . See Ford Motor Co. v.

Ridgway, 135 S.W.3d 598, 600 (Tex.

2004) .

To prevail on a no-evidence motion for summary judgment, the movant must establish that there is no evidence to support

an essential element of the non- movant’s claim on

which the nonmovant would have the burden of proof at

trial. Tex.

R. Civ. P. 166a( i ); Hahn v. Love , 321 S.W.3d 517 , 523–24

(Tex. App.—Houston [1st Dist.] 2009, pet. denied); see Flameout Design &

Fabrication, Inc. v. Pennzoil Caspian Corp. , 994 S.W.2d 830, 834 (Tex. App.—Houston [1st Dist.] 1999, no

pet.). The burden then shifts to the nonmovant to present evidence raising a genuine issue of

material fact as to each of the elements specified in the motion. Mack Trucks, Inc. v. Tamez ,

206 S.W.3d 572, 582 (Tex. 2006); Hahn ,

321 S.W.3d at 524 . “The movant ‘must be specific in challenging the evidentiary

support for an element of a claim or defense; paragraph ( i )

does not authorize conclusory motions or general

no-evidence challenges to an opponent’s case.’”

Hahn , 321 S.W.3d at 524

(quoting Tex. R. Civ. P. 166a( i ), 1997 cmt .).

“The trial court must grant the motion unless the nonmovant produces more than a scintilla of evidence

raising a genuine issue of material fact on the challenged elements.” Flameout Design & Fabrication , 994 S.W.2d at 834 .

More than a scintilla of evidence

exists if the evidence “rises to a level that would enable reasonable and

fair-minded people to differ in their conclusions.” Merrell Dow Pharms ., Inc. v. Havner ,

953 S.W.2d 706, 711 (Tex. 1997).

However, “[w]hen the evidence offered to prove a vital fact is so weak

as to do no more than create a mere surmise or suspicion of its existence, the

evidence is no more than a scintilla and, in legal effect, is no

evidence.” Kindred

v. Con/ Chem , Inc. , 650 S.W.2d 61, 63 (Tex. 1983). In determining whether a material fact

question exists, we may consider both direct and circumstantial evidence. Ridgway , 135 S.W.3d at 601 .

To prevail on a traditional summary judgment motion, the movant has the burden of proving that he is entitled to

judgment as a matter of law and that there are no genuine issues of material

fact. Tex.

R. Civ. P . 166a(c); Cathey v. Booth , 900 S.W.2d 339, 341 (Tex. 1995). Paragraph ( i ), governing

no-evidence summary judgment motions, “does not apply to ordinary motions for

summary judgment under paragraphs (a) or (b), in which the movant

must prove that it is entitled to summary judgment by establishing each element

of its claim or defense as a matter of law.”

Hahn , 321 S.W.3d at 524

(quoting Tex. R. Civ. P. 166a( i ), 1997 cmt .);

Brown v. Hearthwood II Owners Ass’n ,

Inc. , 201 S.W.3d 153 , 157–58 & n.7 (Tex. App.—Houston [14th Dist.]

2006, pet. denied).

A defendant

moving for summary judgment based on his own affirmative defense

must conclusively establish each element of that defense as a matter of law. See Sci. Spectrum, Inc.

v. Martinez , 941 S.W.2d 910, 911

(Tex. 1997). Therefore, to avoid summary judgment in favor

of a defendant on the defendant’s affirmative defense, a plaintiff must raise a

fact issue as to at least one element of the defense. See id. ; City of Houston v. Clear

Creek Basin Auth ., 589 S.W.2d 671, 678 (Tex. 1979).

In

reviewing the trial court’s summary judgment, we take all evidence favorable to

the non- movant as true, and indulge every reasonable

inference in his favor. Sci. Spectrum , 941 S.W.2d at 911 .

SUMMARY

JUDGMENTS IN FAVOR OF CARTER AND FARLEY

In its third issue, Essex contends that Carter and Farley engaged in a civil

conspiracy with several of the other original defendants in the underlying suit

to fraudulently transfer assets of McPherson, Sr. and the McPherson Entities out

of their reach in violation of the Texas Uniform Fraudulent Transfer Act (“TUFTA”). Essex does not contend that either Carter or

Farley is directly liable for violating TUFTA. [5]

In their no-evidence

motions for summary judgment, Carter and Farley argued

that there was no evidence that their “zealous representation of [their]

former clients involved acts which are contrary to law, wrongful and harmful

toward Plaintiff or were carried out by unlawful means” and that there was no evidence that they

enjoyed the fruits of the transaction or that their legal fees depended upon keeping

the assets from Essex.

In their traditional motions for summary judgment, Carter and

Farley contended that they were entitled to summary judgment because Essex

failed to plead an actionable claim against them. They argued that Essex’s claims were premised

on conduct undertaken by them as attorneys in the representation of their clients

in litigation and that they were immune from suit by non-clients in the

litigation for such conduct. Carter and

Farley also contended that, even if Essex had pled an actionable claim against

them for civil conspiracy, no genuine issues of material fact precluded the

granting of their traditional or no-evidence motions for summary judgment on

those conspiracy claims.

Essex contends that the trial court

erred in rendering summary judgmentin Carter and

Farley’s favor because (1) Essex produced more than a scintilla of evidence

that Carter and Farley “knowingly participated in a conspiracy to fraudulently

transfer assets out of the reach of Essex and Morano ,

as judgment creditors” and (2) Carter and Farely were

not immune from suit for their actions in furtherance of the conspiracy.

A.

Fraudulent Transfer

“A transfer made or

obligation incurred by a debtor is fraudulent as to a creditor, whether the

creditor’s claim arose before or within a reasonable time after the transfer

was made or the obligation was incurred, if the debtor made the transfer or

incurred the obligation . . . with actual intent to hinder, delay, or

defraud any creditor of the debtor.” Tex. Bus. & Com. Code Ann. §

24.005(a )( 1) (Vernon 2009); see Nobles v. Marcus , 533 S.W.2d 923, 925 (Tex. 1976); Hahn , 321 S.W.3d at 524–25.

The actual intent to defraud is shown by, among other things,

evidence that the transfer was made to an insider, including a relative; the

debtor retained possession or control of the transferred property after the

transfer; the transfer or obligation was concealed; the debtor was sued or

threatened with suit before the transfer was made or the obligation incurred; the

value of the consideration received by the debtor was reasonably equivalent to

the value of the asset transferred; the debtor was insolvent or became

insolvent shortly after the transfer was made or obligation incurred; the

transfer occurred shortly before or after a substantial debt was incurred; and

the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the

debtor. Tex. Bus. & Com. Code Ann. § 24.005(b) (Vernon 2009); see Hahn , 321 S.W.3d at 525 .

The facts and circumstances

set out in section 24.005(b) to be considered in determining fraudulent intent

are mere “badges of fraud” and are non-exclusive. Flores v. Robinson Roofing & Constr.

Co., Inc. , 161 S.W.3d 750, 755 (Tex. App.—Fort Worth 2005, pet.

denied). Therefore, because “fraudulent

intent is only to be deduced from facts and circumstances which the law

considers as mere badges of fraud, and not fraud per se, these must be

submitted to the trier of fact, which draws the

inference as to the fairness or fraudulent character of the transaction.” Id. (quoting Coleman Cattle Co. v. Carpentier , 10 S.W.3d 430, 434 (Tex. App.—Beaumont

2000, no pet.)); see also Quinn v. Dupree , 303 S.W.2d 769, 774 (Tex. 1957). Thus, “[t]he question of whether a debtor

conveyed property with the intent to defraud creditors is ‘ordinarily a

question for the jury or the court passing on the fact.’” Flores , 161 S.W.3d at

755 (quoting Coleman Cattle Co. , 10

S.W.3d at 433 ); see also Equitable Trust Co. v. Roland , 644 S.W.2d 46,

51 (Tex. App.—San Antonio 1982, writ ref’d n.r.e .) ( pointing out that

trial court’s decision to grant instructed verdict on fraudulent conveyance

issues “was in contradiction of the general rule that the existence of a

fraudulent conveyance is a question for the trier of

the facts”). “Intent is a fact question

uniquely within the realm of the trier of fact

because it so depends upon the credibility of the witnesses and the weight to

be given to their testimony.” Flores ,

161 S.W.3d at 755 .

A transfer to an insider is one of the factors in proving

actual intent to defraud under TUFTA. See

Tex. Bus. & Com. Code Ann. § 24.005(b )( 1) . An “insider” includes, if the debtor is an

individual, a relative of the debtor, a general partner of the debtor, or a

partnership in which the debtor is a general partner. Id.

§ 24.002(7 )( A) (Vernon 2009). If the debtor is a corporation, an “insider”

includes, among others, an officer of the debtor, a person in control of the

debtor, or a relative of a general partner, director, officer, or person in

control of the debtor. Id. § 24.002(7 )( B). Insider status is not limited, however, to persons

in the capacities listed in section 24.002(7); rather, the lists in subsections

24.002(7 )( A) and (B) are provided “for purposes of

exemplification.” Hahn , 321 S.W.3d at 525 n.8;

Putman v. Stephenson , 805 S.W.2d 16, 18 (Tex.

App.—Dallas 1991, no writ).

In general, an “insider” is a person or “an entity whose close

relationship with the debtor subjects any transactions made between the debtor

and the insider to heavy scrutiny.” Tel. Equip. Network, Inc. v. TA/ Westchase

Place, Ltd. , 80 S.W.3d 601, 609 (Tex. App.—Houston [1st Dist.] 2002, no

pet.).

In

determining insider status, courts are to consider (1) the closeness of the

relationship between the transferee and the debtor and (2) whether the

transactions were at arm’s length. Id.

(citing In re Holloway , 955 F.2d 1008, 1010 (5th Cir. 1992)). However, it is not necessary to prove that a

transferee is an insider in order to prove the transferee’s knowledge of the

transferor’s fraudulent intent. See

Tex. Bus. & Com.

Code Ann. § 24.005(b); Hahn , 321 S.W.3d at 525 n.8 ; Flores ,

161 S.W.3d at 755 . If

“fraudulent intent is only to be deduced from facts and circumstances which the

law considers as mere badges of fraud and not fraud per se, these must be

submitted to the trier of fact, which draws the

inference as to the fairness or fraudulent character of the transaction.” Flores , 161 S.W.3d at 754 (quoting Coleman

Cattle Co. , 10 S.W.3d at 434 ).

B.

Conspiracy to Commit Fraudulent Transfer

Carter and Farley

contend that (1) there is no evidence that they either committed a fraudulent

transfer themselves or conspired to commit a fraudulent transfer and (2) their

actions were all undertaken in representation of their clients in litigation,

entitling them to immunity from suit for conspiracy to commit a fraudulent

transfer.

“Conspiracy

is a derivative tort requiring an unlawful means or purpose, which may include

an underlying tort.” Chu v. Hong , 249

S.W.3d 441, 444 (Tex. 2008); see also

Gary E. Patterson & Assocs. v. Holub , 264

S.W.3d 180, 204 (Tex. App.—Houston [1st Dist.] 2008, pet. denied). Thus, to negate summary judgment on a

conspiracy claim in a fraudulent transfer case, there must be some evidence of

the movant’s participation in a conspiracy to commit

a fraudulent transfer. See Chu , 249 S.W.3d at

444 .

An attorney

for an opposing party may not be held liable for breach of fiduciary duty or

fraud for merely for making representations to the opposing party in litigation

that further the best interests of his own clients. Id.

at 446 & n.19; McCamish , Martin, Brown, & Loeffler

v. F.E. Appling Interests , 991 S.W.2d 787, 794 (Tex. 1999); Alpert v. Crain, Caton

& James, P.C. , 178 S.W.3d 398, 406 (Tex. App.—Houston [1st Dist.] 2005,

pet. denied); see also Finserv Cas .

Corp. v. Settlement Funding, LLC ,

724 F. Supp. 2d 662, 671 (S.D. Tex. 2010). However, “[a]n attorney who personally . . .

tells lies on a client’s behalf may be liable for . . . fraud in some

cases.” Chu , 249 S.W.3d at 446 . Thus, an attorney may be held liable for

conspiracy to defraud by knowingly assisting a client in evading a judgment

through a fraudulent transfer. See id. at 446 & n.19; Estate of Stonecipher

v. Estate of Butts , 686 S.W.2d 101, 103 (Tex. 1985); Likover v . Sunflower Terrace II, Ltd ., 696 S.W.2d 468, 472 (Tex.

App.—Houston [1st Dist.] 1985, no writ) (holding that “[a]n attorney is liable

if he knowingly commits a fraudulent act that injures a third person, or if he

knowingly enters into a conspiracy to defraud a third person” in the course of

representing his client). In order to be

held liable for conspiracy to defraud by so assisting his client, however, the

attorney must have agreed to the injury to be accomplished, not merely the

conduct ultimately resulting in injury. Chu , 249 S.W.3d at

446–47 .

1. Evidence of Conspiracy to

Commit a Fraudulent Transfer

In their no-evidence motions for summary judgment, Carter and

Farley contend they could be liable for

conspiracy only if they agreed to the injury

to be accomplished, inferring an agreement as to the ultimate injury generally arises “from joint

participation in the transactions

and from enjoyment of the fruits of the transactions,” there is no evidence of an

agreement or meeting of the minds between themselves and any other party to

this suit to “fraudulently transfer, hide, secret or otherwise conceal assets

with the intent to avoid payment of the debt” to Essex, to its harm, and there is no

evidence that they enjoyed the fruits of the transaction or that their legal

fees depended upon keeping the assets from Essex.

Essex contends that the record reveals that both Carter and

Farley were intertwined in the transaction between HII and the McPherson

Entities and that genuine issues of material fact exist as to whether Carter

and Farley had a “meeting of the minds” with the McPherson Entities to assist

in the transfer and shelter of assets from possible seizure by the McPherson

Entities’ creditors, to their harm, making both no-evidence and traditional summary

judgment improper.

Specifically, Essex points to evidence that:

·

Carter and Farley represented the McPherson Entities in earlier proceedings

beginning in the late 1990s when Farley worked as an attorney for Carter’s law

firm;

·

Farley incorporated HII in March 2002;

·

Carter served as HII’s registered agent;

·

McPherson, Jr. was the owner and sole managing member of HII;

·

eight weeks after HII was incorporated, Carter and Farley negotiated

with the Fund and the Facility to acquire an assignment of their rights in the

Settlement Agreement for $275,000 for HII;

·

Carter and Farley drafted the assignment;

·

after the assignment, HII, represented by Farley, took final judgments

against McPherson, Sr. and the McPherson Entities for $3.5 million;

·

Carter represented McPherson, Sr. and the McPherson Entities in those

proceedings; and

·

Carter testified that the assignment was done as a form of “estate

planning,” specifically, to create a friendly creditor-debtor relationship

between McPherson, Jr.’s company and McPherson, Sr.’s

entities.

Essex further contends that it can be logically inferred that

Carter and his client discussed and were in agreement as to whether McPherson,

Sr. would agree to pay the $3.5 million judgment entered against him and his

companies by his son’s company, HII. Essex

also contends that when asked if Carter and McPherson, Sr. had agreed on this

course of action Carter deferred to McPherson, Sr., who asserted the

attorney-client privilege. According to Essex,

to the extent that it had been unable to produce an admission of this agreement

between Carter and McPherson, “it is only because of Defendant’s use of the

attorney-client privilege.” Essex

further contends that the fact that there was no legal basis for the Agreed Judgments

is further circumstantial evidence of conspiratorial intent.

We conclude that Essex has

produced evidence sufficient to raise a material fact issue on each of the

elements of fraudulent transfer, including several of the “badges of fraud”

that form the basis for a finding of intent to defraud under TUFTA. See

Tex. Bus. & Com. Code Ann. §§

24.005(a )( 1), (b); Flores , 161 S.W.3d at

755 . Specifically, it has produced

summary judgment evidence from which a jury could reasonably infer that Carter

and Farley, acting as attorneys for McPherson, Sr., McPherson, Jr., and the

McPherson Entities, and with the specific intent of protecting McPherson, Sr.’s

and the McPherson Entities’ assets from collection by Essex, negotiated and

executed the Assignment of the Fund’s and the Facility’s right to payment by

McPherson, Sr. and the McPherson Entities under the TWC Settlement Agreement to

an insider, HII, a newly formed corporation entirely owned and controlled by

McPherson, Jr. Also, HII’s documents of

incorporation were drawn up by Farley, and Carter served as registered

agent. McPherson, Jr. testified that HII

was created to separate its assets from his own and that he sought the

Assignment to HII “in order to protect [his] assets.”

Carter and Farley drafted an Assignment of the Fund’s and the

Facility’s rights under the TWC Settlement Agreement to HII. They drafted Agreed Judgments under which the

McPherson Entities and HII agreed that the McPherson Entities would pay the

entire original amount of the satisfied debt, in the amount of

$3,147,844, to HII. They then filed the Agreed Judgments they

had drafted with the Travis County district court without informing the court

that the Assignment was of a previously satisfied debt as to which the assignor

retained no right of payment and that the Assignment had been made to an

insider controlled by a relative of the debtor.

They promptly proceeded to execute the judgments against the McPherson

Entities, removing from Essex’s reach assets otherwise available to satisfy the

judgment lien it had placed on the transferred assets. McPherson, Sr. testified that HII took the

Agreed Judgments to help out the family.

He also testified that the plan was discussed with Carter.

Each of these facts and

circumstances constitutes a “badge of fraud.”

See Tex. Bus. & Com. Code Ann. § 24.005(b); Hahn ,

321 S.W.3d at 525 ; Flores , 161 S.W.3d at 755 . Because “fraudulent intent is only to be

deduced from facts and circumstances which the law considers badges of fraud,

these must be submitted to the trier of fact, which

draws the inference as to the fairness or fraudulent character of the

transaction.” Flores , 161 S.W.3d at 755 (quoting Coleman

Cattle Co. , 10 S.W.3d at 434 ); see also Quinn , 303 S.W.2d at 774 .

We conclude that Essex has raised a fact issue regarding

Carter’s and Farley’s participation in a conspiracy to hide their clients’

assets in order to effect injury upon Essex by drafting the legal documents and

taking the legal actions that effected the transfer of McPherson, Sr.’s and the

McPherson Entities’ assets to HII in order to place them beyond the reach of

Essex. We further conclude that Essex

has raised a fact issue as to whether Carter and Farley promoted the scheme to

earn a fee for themselves that they would not have earned had they not assisted

McPherson, Sr. in fraudulently transferring his assets to protect them from

creditors such as Essex.

Thus, we hold that Essex has raised material fact issues as

to Carter’s and Farley’s knowing participation in a conspiracy to defraud.

We sustain the first part of Essex’s third issue.

2. Attorney

Immunity

In their traditional motions for summary judgment, Carter and

Farley contend that, because their actions with respect to McPherson, Sr. and

the McPherson Entities at issue were undertaken in their capacity as counsel

for those clients to advance their best interests in the litigation context,

they are immune from liability for their actions. Carter and Farley rely on Chu to support their claim to immunity

from liability for conspiracy to violate TUFTA.

See 249 S.W.3d at 447 .

Because immunity is an affirmative defense, we review the

summary judgment in Carter and Farley’s favor on this issue under the standard

of review for traditional summary judgments to determine whether Carter and

Farley established their affirmative defense as a matter of law or whether Essex

has raised a material fact issue as to at least one element of the

defense. See Tex. R. Civ. P.

166a(c), ( i ) & 1997 cmt .);

see also Mendoza v. Fleming , 41 S.W.3d 781, 787 (Tex. App.—Corpus

Christi 2001, no pet.) (holding appellees

failed to establish affirmative defense

of attorney immunity as matter

of law because material fact issue existed concerning whether appellees ’ actions were within bounds of law); cf. Lackshin v. Spofford ,

No. 14-03-00977-CV, 2004 WL 1965636 , at *5 (Tex. App.—Houston [14th Dist.] Sept. 7, 2004, pet. denied ) ( mem . op.) ( holding trial

court did not err in granting traditional summary judgment in appellee’s favor because summary judgment evidence

conclusively proved that appellee’s allegedly

actionable conduct occurred during his legal representation of client and

appellant failed to allege sufficient facts to show that appellee’s

alleged conduct fell within an exception to this affirmative defense).

We hold that Carter and Farley’s reliance on Chu to support their immunity defense is

misplaced.

Chu did not

hold that attorneys are immune to suit for fraudulent acts undertaken in the

representation of a client; it indicated exactly the opposite. See

249 S.W.3d at 446 &

n.19. In Chu , the supreme court commented, “An

attorney who personally steals goods or tells lies on a client’s behalf may be

liable for conversion or fraud in some cases.”

Id. ; see also Poole v. Houston

& T.C. Ry. Co. , 58 Tex. 134 , 137–38 (1882) (holding that attorney who

fraudulently diverted goods to evade lawful seizure by creditor “will not be

heard to deny his liability to appellant for the loss sustained by reason of

his wrongful acts, under the privileges of an attorney at law, for such acts

are entirely foreign to the duties of an attorney; neither will he be

permitted, under such circumstances, to shield himself from liability on the

ground that he was the agent of [his client], for no one is justified on that

ground in knowingly committing willful and premeditated frauds for another”).

In Chu , the supreme court held that a buyer’s attorney could not be held liable for drawing up a

bill of sale of community property, a shop, at his client’s request when he

knew that the seller was selling the shop without his spouse’s consent. 249 S.W.3d at 446 . It reasoned that the buyer’s attorney had a

fiduciary duty to further the best interests of his client, the buyer, and

imposing on him a second duty to the sellers “would inevitably conflict with

the first.” Id. ; see also Finserv Cas . Corp. , 724 F. Supp. 2d at 671 , 674 (quoting Chu ’s statement that “[a]n attorney who personally steals goods or

tells lies on a client’s behalf may be liable for conversion or fraud in some

cases,” but concluding that facts of instant case were “not the type of

situation indicated in Chu ,” which

“all dealt with conspiracies to defraud,” and thus upholding attorney’s

immunity to claim of conversion by opposing party in litigation); Alpert , 178 S.W.3d at 405–06 (holding

that defendant attorney was immune from liability for actions in representation

of client sued upon, but stating that “[ i ]f a lawyer

participates in independently fraudulent activities, his action is ‘foreign to

the duties of an attorney’” and that “[a] lawyer thus cannot shield his own

willful and premeditated fraudulent actions from liability simply on the ground

that he is an agent of his client”) (quoting Poole , 58 Tex. at 137 ); Lackshin , 2004 WL 1965636 , at *3 (concluding, after review,

that complained of conduct was not fraudulent or malicious, but stating, “If

defendants prove as a matter of law that their allegedly actionable conduct was

undertaken in the representation of a third-party client, then they have shown

their entitlement to summary judgment on all claims, except for alleged torts based on fraudulent or malicious conduct .”

( emphasis added)); cf.

McCamish , Martin, Brown & Loeffler ,

991 S.W.3d at 794 (recognizing qualified attorney immunity for representations

made in adversarial context).

Here, Essex

has not sued Carter and Farley for their representations to them or for their

lawful actions within the scope of their professional duty to represent

McPherson, Sr. and the McPherson Entities in this litigation. It has sued them for their actions in allegedly

drafting and filing fraudulent legal documents for the purpose of conspiring to

hide their clients’ assets from judgment creditors in violation of TUFTA. Attorneys have no immunity from knowingly drafting

fraudulent documents to evade the lawful seizure of property by a judgment

creditor, and they may not deny their liability to the judgment creditor for

the loss sustained by reason of their own wrongful acts on the ground that they

are the agent of their clients, “for no one is justified on that ground in

knowingly committing willful and premeditated frauds for another.” Poole ,

58 Tex. at 137–38; see also Chu , 249

S.W.3d at 446, n.19 ; Alpert , 17

S.W.3d at 406; Likover ,

696 S.W.2d at 472 . We sustain the second

part of Essex’s third issue and hold that Carter and Farley are not immune from

their actions made the subject of this litigation.

We therefore hold that the trial court erred in entering

summary judgment in favor of Carter and Farley on their affirmative defense of

attorney immunity. [6]

We sustain Essex’s third issue.

SUMMARY JUDGMENTS IN FAVOR OF BEVERLY

Essex contends that the trial court

(1) improperly sustained Beverly’s objections to their summary judgment

evidence, (2) erroneously

rendered a no-evidence summary judgment in favor of Beverly , and (3) erroneously granted

Beverly’s motion to quiet title in the absence of any actual cloud on the title

arising from any actions by Essex. We

agree.

A.

Beverly’s

Objections to Essex’s Summary Judgment Evidence

In its first issue, Essex contends that the trial court improperly

sustained Beverly’s objections to the summary judgment evidence it filed in

response to Beverly’s no-evidence motion for summary judgment because the

objections were not filed until after the court had granted Beverly’s motion,

and they were, therefore, waived.

To preserve objections to summary judgment evidence for

appeal, a party asserting the objections must obtain a ruling at or before the

summary judgment hearing. “As a prerequisite to presenting a complaint for

appellate review, the record must show that . . . the complaint was made to the

trial court by a timely

request, objection ,

or motion. . . .” Tex. R. App. P. 33.1(a )( 1); s ee Tex. R. Civ. P. 166a(f) (stating, “Defects in the form

of affidavits or attachments will not be grounds for reversal unless

specifically pointed out by objection by an opposing party with opportunity,

but refusal, to amend”); Hogan v. J. Higgins Trucking, Inc. , 197 S.W.3d 879, 883 (Tex. App.—Dallas

2006, no pet.); see also McConnell v.

Southside Indep . Sch. Dist. , 858 S.W.2d 337 , 343

n.7 (Tex. 1993) (holding that all issues must be expressly presented to trial

court). Summary judgment evidence must

be presented in a form that would be admissible at trial. See, e.g. , Vice v. Kasprzak ,

318 S.W.3d 1, 11 ( Tex. App.—Houston [1st Dist.] 2009, pet. denied).

If a party has objections to defects in

the form of supporting attachments, those objections must be made in writing

and placed before the trial court, or the objections will be waived. See Tex.

R. Civ. P. 166a( f); Grand Prairie Indep . Sch. Dist. v. Vaughan , 792 S.W.2d 944, 945 (Tex.1990). A party’s failure to secure a ruling on an

objection also waives the issue on appeal. See, e.g. , Vice , 318 S.W.3d at 11 .

Here, the trial court granted Beverly’s no-evidence motion for

summary judgment by order entered on August 15, 2007, following a hearing on

August 13. On August 27, 2007, Essex

filed a motion to reconsider the summary judgments rendered in Carter’s and in

Beverly’s favor. On September 4, 2007,

Beverly filed his “Objections to Evidence Cited in Plaintiffs’ Response to

No-Evidence Motion for Summary Judgment.”

On September 24, the trial court denied Essex’s motion to reconsider. On September 26, the trial court signed an order

granting Beverly’s objections to Essex’s summary judgment evidence in their

entirety. Because Beverly’s objections

were untimely filed after summary

judgment had been entered on his claims and the trial court refused to

reconsider its ruling granting the summary judgment, the trial court’s order

granting Beverly’s untimely filed objections to the summary judgment evidence

was erroneous. See Tex. R. App. P .

33.1(a )( 1); Hogan ,

197 S.W.3d at 883 .

We sustain Essex’s first issue.

B.

Beverly’s

No-Evidence Motion for Summary Judgment

Essex also contends that the trial court erred in granting

Beverly’s no-evidence motion for summary judgment because (1) it produced more

than a scintilla of evidence supporting its conspiracy claim, (2) Beverly’s

motion was procedurally inadequate, and (3) Beverly’s legal arguments lacked

foundation.

Beverly filed a no-evidence motion for summary judgment in

which he alleged that there was no evidence that (a) McPherson, Sr. transferred

the Montgomery House in violation of TUFTA; (b) the Montgomery House was an

“asset” as defined by TUFTA; (c) Beverly’s acquisition of promissory notes and

liens securing the Montgomery House constituted a fraudulent transfer;

(d) Beverly’s purchase of the Montgomery House was through a collusive or

“sham” foreclosure, or was an illegal object of a conspiracy; (e) Beverly’s

purchase of the house at the foreclosure sale violated TUFTA; (f) Beverly’s

rental of the Montgomery House to McPherson was an illegal object of a

conspiracy; (g) McPherson’s payment of $150,000

to Beverly “the day before [the $150,000] lost its exempt status as homestead

proceeds” constituted fraudulent transfer of an asset; (h)–( i ),

and (k) Beverly conspired to violate TUFTA; (j) and (l) “Plaintiffs possessed a

final judgment or a valid lien as alleged . . . , an essential element of

conspiracy to interfere with collection of a debt” because “[w] ithout a valid lien, Plaintiffs were no more than general

creditors” and “[a] general creditor has no claim for conspiracy for fraudulent

transfer”; (m) Essex “had any interest in any claims or judgment against

[McPherson, Sr.] after Essex’s assignment on March 28, 2002 to Morano , Inc. [a related entity],” (n) Essex “ever had an

interest in any receivable, claim or judgment against Coastal Terminal

Operators, Inc.”; or (o) Essex “had any interest in any claims or judgment

against [McPherson, Sr.] at the time of the $150,000 payment to Beverly.” We construe Beverly’s motion as a hybrid

motion for summary judgment alleging essentially that there was no evidence of

an underlying wrongful act to support a claim against Beverly for conspiracy to

violate TUFTA and no evidence that Essex had standing to bring its claim.

1. Beverly’s

Participation in a Conspiracy to Violate TUFTA

Essentially, Beverly alleged, first, that Essex had failed to

raise a genuine issue of material fact as to the existence of a conspiracy to

violate TUFTA and as to his specific intent to conspire to violate TUFTA. The summary judgment evidence shows that, at

the time of the Essex Judgments, McPherson, Sr. owned the Montgomery

House. Essex obtained a lien on the

Montgomery House in McPherson, Sr.’s name through the filing of an abstract of

judgment relating to the Essex Judgments. Shortly afterwards, Beverly, who had been

McPherson Sr.’s accountant since 1989 or 1990 and who was also a long-time

friend, purchased a bank note and second lien on the Montgomery House without ever

seeing the property.

After McPherson, Sr. defaulted on his primary home loan on

the Montgomery House, Beverly, the second lien-holder, purchased the house at a

foreclosure sale. McPherson, Sr. was

living in the house and was never forced to move out. Instead, Beverly rented the Montgomery House

back to McPherson, Sr. and his family. McPherson,

Sr., either personally or through one of the McPherson Entities, paid monthly

rent on the home and reimbursed Beverly for taxes and homeowners insurance

costs, even though he no longer owned the property. Following the sale of his homestead in Harris

County, McPherson, Sr . attempted to use the proceeds

from that sale to buy back the Montgomery House and to designate the Montgomery

House as his homestead to protect it from seizure. However, Stewart Title declined to issue a

title policy for McPherson, Sr.’s repurchase because McPherson, Sr. was the

same person who had owned the property prior to foreclosure. On December 22, 2005, around the time that

the proceeds from the sale of McPherson, Sr.’s Harris County homestead property

were to lose their statutory exemption from execution, McPherson, Sr. wire-transferred

$150,000 to Beverly, claiming that the payment was intended for the repurchase

of the Montgomery House despite the fact that the wire transfer occurred after

the scheduled closing date for the sale of the Montgomery House. Because the resale did not occur, title to the

Montgomery House remains in Beverly’s name.

We hold that the evidence is sufficient to raise a material

fact issue as to whether Beverly, McPherson, Sr.’s accountant and long-time

friend, had the specific intent to conspire to defraud Essex by assisting McPherson, Sr. in

evading payment of the Essex Judgments through fraudulent transfers of

McPherson, Sr.’s assets. See Tex. Bus.

& Com. Code Ann. § 24.005(b) (listing as indicia of intent to defraud,

inter alia , whether debtor retained

possession or control of the property transferred after transfer, debtor was

sued or threatened with suit before the transfer was made, debtor removed or

concealed assets, value of consideration received by debtor was reasonably

equivalent to value of asset transferred, debtor was insolvent or became

insolvent shortly after transfer was made, transfer occurred shortly before or

after substantial debt was incurred, and debtor transferred essential assets of

business to lienor who transferred assets to an

insider of debtor). We further hold that the evidence is

sufficient to present a material fact issue as to whether Beverly agreed not

merely with the conduct that resulted in the injury—the transfer of assets

subject to Essex’s judgment lien—but with the injury to Essex to be

accomplished, evasion of payment of the judgment from assets subject to the

lien. See Chu , 249 S.W.3d at 446–47 &

n.19; Stonecipher ,

686 S.W.2d at 808 .

We hold

that Essex has raised a material fact issue on each of the elements of its

claim against Beverly for conspiracy to violate TUFTA. The trial court, therefore, erred in granting

Beverly’s no-evidence motion for summary judgment on this ground.

2. Essex’s Standing

Beverly also argues that Essex

produced no evidence that it is a judgment creditor of McPherson, Sr. and the

McPherson Entities. His only argument is

that Essex lacked a valid judgment lien against the Montgomery House, which he

claims is an essential element of a fraudulent transfer claim when the party

asserting the fraudulent transfer would otherwise be a mere general creditor of

the judgment debtor.

Beverly’s argument is incorrect. TUFTA defines a “creditor” for purposes of

the Act as “a person . . . who has a claim.” Tex.

Bus. & Com. Code Ann.

§ 24.002(4). A

“claim” is defined as “a right to payment or property, whether or not the right

is reduced to judgment, liquidated, unliquidated ,

fixed, contingent, matured, unmatured , disputed,

undisputed, legal, equitable, secured, or unsecured.” Id. § 24.002(3). The

existence of a valid judgment lien is, therefore, not an element of a claim for

conspiracy to violate TUFTA. Rather, to

show its standing to bring its fraudulent conspiracy claim against Beverly,

Essex had only to prove that it had a right to payment from McPherson that

existed at the time of the allegedly fraudulent transfer of McPherson’s

assets to place them beyond the reach of creditors or that arose within a

reasonable time thereafter. Id. § 24.005(a); see Flores , 161 S.W.3d at 757 (evidence

sufficient to raise fact issue as to whether plaintiffs were creditor of debtor

at time of alleged fraudulent transfer and whether debtor made transfer with

actual intent to hinder, delay, or defraud plaintiffs was sufficient to

preclude summary judgment against plaintiffs).

We hold that the summary judgment

evidence of the suits by Essex against McPherson is sufficient to raise a fact

issue as to Essex’s standing. The trial

court, therefore, erred in entering no-evidence summary judgment in Beverly’s

favor.

We sustain Essex’s second issue.

C.

Beverly’s

“Motion to Clear Beverly’s Title”

On July 23, 2007, Beverly filed a “Motion for Partial Summary

Judgment on Lien Element of Conspiracy to Commit Fraudulent Transfer” that also

included a “Motion to Quiet Title” to the Montgomery House. The trial court did not grant the motion for partial

summary judgment, but it granted Beverly’s motion to quiet title on September

24, 2007.

In its fourth issue on appeal, Essex contends that the trial

court erred in granting Beverly’s motion to quiet title because (1) the motion

was not properly pending before the court since Essex was never given notice of

a hearing on the motion, and (2) the motion for partial summary judgment predicated

the ruling lifting the cloud on Beverly’s title on a finding by the trial court

that Essex’s judgment lien on the Montgomery House was void—a finding that the

trial court never made.

A suit to clear title or quiet title—also known as a suit to

remove cloud from title—relies on the invalidity of the defendant’s claim to

the property. Longoria v. Lasater , 292 S.W.3d 156 , 165

n.7 (Tex. App.—San Antonio 2009, pet. denied).

It exists “to enable the holder of the feeblest equity to remove from

his way to legal title any unlawful hindrance having the appearance of better

right.” Bell v. Ott ,

606 S.W.2d 942, 952 (Tex. Civ. App.—Waco 1980, writ ref’d

n.r.e .) ( quoting Thomson v. Locke , 66 Tex. 383 , 1 S.W.

112, 115 (1886)); see also Hahn , 321

S.W.3d at 531 (quoting Bell , 606

S.W.2d at 952 ). “A cloud on title exists

when an outstanding claim or encumbrance is shown, which on its face, if valid,

would affect or impair the title of the owner of the property.” Hahn ,

321 S.W.3d at 531 .

The effect of a suit to quiet title is to declare invalid or ineffective

the defendant’s claim to title. See id. ; Bell , 606 S.W.2d at 952 (holding that quiet title enables holder of

feeblest equity to remove unlawful hindrance).

“[ T]he plaintiff has the burden of supplying the proof

necessary to establish his superior equity and right to relief.” Hahn , 321 S.W.3d at 531 ; see Bell , 606 S.W.2d at 952 . The plaintiff must prove, as a matter of law,

that he has a right of ownership and that the adverse claim is a cloud on the

title that equity will remove. Hahn , 321 S.W.3d at 531 .

Beverly moved for partial summary judgment on the ground that

“[t]o prove conspiracy to interfere with collection of a debt, Plaintiffs must

have had a valid lien,” and he contended that Essex did not have a valid lien

against the Montgomery House. The trial

court never made the finding on which Beverly’s suit to quiet title was

predicated, namely that Essex lacked a valid lien on the Montgomery House, and,

as stated above, the existence of a valid judgment lien is not an element of a

claim for conspiracy to violate TUFTA. See Tex.

Bus. & Com. Code Ann. § 24.002(3)–(4). Moreover, Beverly did not supply any of “the

proof necessary to

establish his superior equity and right to relief,” as required to support

judgment in the plaintiff’s favor in a suit to quiet title. Hahn , 321 S.W.3d at 531 ; see also Bell , 606 S.W.2d at 952 .

We hold that the trial court’s order quieting title to the

Montgomery House was arbitrary and unreasonable and thus was an abuse of

discretion. See Downer v. Aquamarine Operators, Inc. , 701 S.W.2d 238 , 241–42

(Tex. 1985) (stating, “The test for abuse of discretion is . . . whether the

court acted without reference to any guiding rules and principles” or was

“arbitrary and unreasonable”).

We hold

that the trial court erred in granting Beverly’s motion to quiet title, which

was predicated in Beverly’s summary judgment pleadings on proving his

entitlement to summary judgment on “the lien element of conspiracy to

commit fraudulent transfer.”

We sustain Essex’s fourth issue.

Conclusion

We reverse

the judgment of the trial court and remand the case for further proceedings

consistent with this opinion.

Evelyn

V. Keyes

Justice

Panel consists of Justices Keyes, Sharp, and

Massengale.

Justice Sharp, dissenting in part.

[1] Neither

Coastal Terminal Operators, Inc., James W. McPherson, Sr., nor any of the seven

other original defendants—Coastal Stevedoring Corporation, Jacintoport Corporation, Jacintoport Corporation, McPherson Interests, Ltd., James

W. McPherson Family Trust, James

W. McPherson, Jr. and Cara Hood—is a party to this appeal.

[2]

Carter filed four motions for summary judgment—two traditional motions

for summary judgment and two no-evidence motions for summary judgment. The

trial court’s order rendering summary judgment in Carter’s favor, however, does

not identify which of these motions it intended to grant. The order simply refers to “Carter’s Motion

for Summary Judgment as to Plaintiff’s claims of Fraud and Conspiracy.”

[3]

Because these two separate

orders eventually resulted in two different final judgments, this Court issued

an order assigning them two separate trial court cause numbers and separate

appellate cause numbers. Thus, all

claims between Essex and Carter were severed into trial court cause number

2002-62464-A and disposed of by the trial court on August 15, 2007, which

resulted in appeal number 01-08-00813-CV.

Regarding the claims between Beverly and Essex, the trial court issued further

orders following its August 15, 2007 severance and final judgment orders

pursuant to the parties’ post-judgment motions.

All claims between Beverly and Essex were finally disposed of on

September 24, 2007. Thus, we assigned

those severed claims the trial court cause number 2002-62464-B and appellate

cause number 01-11-00688-CV.

[4]

This Court issued an order

assigning this severed cause trial court cause number 2002-62464-C, which

resulted in appellate cause number 01-11-00689-CV.

[5]

Essex’ brief on appeal states, “As with Beverly, Essex and Morano allege only that Carter and Farley are liable for

conspiring with the McPherson Entities to fraudulently transfer assets, and not

that they are directly liable for violating TUFTA.”

[6] Essex also alleges, and Carter and Farley

deny, that Carter and Farley’s summary judgment motion regarding damages was

procedurally defective. Because we have

concluded that the summary judgment must be reversed, we do not reach this issue.