Texas

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

Matteson v. El Paso County, Texas,
2001.TX.0005062 (Tex.App. Dist.8 08/10/2001)

COURT OF APPEALS EIGHTH DISTRICT OF TEXAS EL PASO, TEXAS

No. 08-00-00095-CV

2001.TX.0005062

August 10, 2001

SHELBA JEAN MATTESON, APPELLANT,

v.

EL PASO COUNTY, TEXAS, AND THE ESTATE OF CECILIA M. MATTESON, DECEASED, APPELLEES.

Appeal from 168th District Court of El Paso County, Texas (TC# 97-1636)

Before Panel No. 4 Barajas, C.J., Larsen, and McClure, JJ.

The opinion of the court was delivered by: Susan Larsen, Justice

OPINION

Shelba Jean Matteson appeals a summary judgment for the Estate of Cecilia M. Matteson and the County of El Paso, Texas. Matteson challenges the trial court's order setting aside inter vivos transfers made by Cecilia Matteson, her mother-in-law, and reverting the properties back to Cecilia's estate. We affirm in part and reverse and render in part.

FACTS

On October 22, 1986, Cecilia Matteson conveyed an interest in real property to the El Paso County Bail Bond Board, as collateral against which she wrote bail bonds. She executed a deed of trust to El Paso County which was duly recorded. *fn1

On May 17, 1993, Cecilia Matteson conveyed real properties and real estate promissory notes to her daughter-in-law, Shelba Matteson. Those properties included the collateral pledged to El Paso County. The conveyances also included Cecilia's homestead, reserving a life estate. *fn2

Cecilia Matteson died on December 25, 1995, leaving a will designating three of her sons as beneficiaries of her estate. The County filed an application to probate her estate, *fn3 seeking to collect on judgments for $200,000 in forfeited bonds secured by Cecilia Matteson's real property.

The County filed suit to set aside the transfers on May 13, 1997, claiming the real estate transfers were fraudulent conveyances under the Texas Uniform Fraudulent Transfers Act (TUFTA). *fn4 Shelba answered, and later filed a motion for summary judgment against the County based on a three-year statute of limitations. The Estate filed a cross-claim against Shelba, adopting the County's claims and stating that the transfers were fraudulent for lack of adequate consideration and merely created a constructive trust, and further seeking declaratory relief that the transfers were void and should be set aside. Subsequently, Shelba filed a motion for partial summary judgment against the Estate asserting that the Estate was not a necessary party to the County's fraudulent transfer claim, and thus had no lawful claim.

The County moved for partial summary judgment against Shelba and the Estate, asserting that the transfers were void under TUFTA. The Estate also moved for partial summary judgment, urging that the properties had been held in constructive trust and should revert back to Cecilia's estate.

The trial court entered judgment for the County under TUFTA. *fn5 The court further found that the Estate was entitled to a judgment as a matter of law, because Cecilia did not intend the deeds and assignments to be operative as conveyances, and ordered that all deeds and assignments revert back to the Estate. *fn6

Standard of Review

To prevail on a traditional motion for summary judgment under Tex. R. Civ. P. 166a(c), a movant must conclusively establish the absence of any genuine question of material fact and that he or she is entitled to judgment as a matter of law. *fn7 When reviewing a summary judgment, we take as true all evidence favorable to the non-movant and indulge every reasonable inference and resolve any doubts in favor of the non-movant. *fn8 Once the movant has established a right to summary judgment, the non-movant has the burden to respond to the motion for summary judgment and present to the trial court any issues that would preclude summary judgment. *fn9 When both sides move for summary judgment and the trial court grants one motion but denies the other, the reviewing court should review both sides' summary judgment evidence, determine all questions presented, and render the judgment that the trial court should have rendered. *fn10

The Texas Uniform Fraudulent Transfer Act

The Texas Uniform Fraudulent Transfer Act provides relief for creditors of persons who fraudulently transfer assets to avoid payment of their debts. *fn11 A transfer of assets is fraudulent as to a creditor whose claim arose before or within a reasonable time after the transfer was made if the debtor made the transfer:

(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or

(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

(A) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

(B) intended to incur, or believed or reasonably should have believed that the debtor would incur debts beyond the debtor's ability to pay as they became due. *fn12

A transfer of assets is also fraudulent as to a creditor whose claim arose before the transfer, if the debtor made the transfer without receiving a reasonably equivalent value in exchange for the transfer, and the debtor was insolvent at the time of or became insolvent as a result of the transfer of assets. *fn13 Insolvency means the sum of the debtor's debts is greater than all of the debtor's assets at a fair valuation. *fn14 A debtor who is generally not paying the debtor's debts as they become due is presumed to be insolvent. *fn15

In determining actual intent under TUFTA, consideration may be given to factors including, among others, whether:

(1) transfer was to an insider;

(2) the debtor retained possession or control of the property transferred after the transfer;

(3) before transfer was made, the debtor had been sued or threatened with suit;

(4) transfer was of substantially all of the debtor's assets;

(5) value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred;

(6) the debtor was insolvent or became insolvent shortly after transfer was made; and

(7) transfer occurred shortly before or shortly after a substantial debt was incurred. *fn16

The statutory definition of an "insider" includes a relative of the debtor. *fn17 "Reasonably equivalent value" means transfer within the range of values for which the transferor would have sold the assets in an arm's length transaction. *fn18 The question of insolvency is to be determined as of the time of transfer. *fn19 Lastly, a "creditor" is defined under TUFTA as a person with a claim, while a "claim" is a right to payment or property. *fn20

As a remedy, the creditor may obtain avoidance of the fraudulent transfer to the extent necessary to satisfy the creditor's claim. *fn21 Setting aside a fraudulent transfer is an equitable remedy. *fn22 The judgment of a trial court granting an equitable remedy should not be disturbed absent a showing that an inequity resulted. *fn23

A creditor's judgment subjecting property fraudulently conveyed by the debtor to the payment of the debt does not revest title in the fraudulent grantor. *fn24 Instead, the fraudulent conveyance statute invalidates the fraudulent transfer only to the extent necessary to remedy the injury. *fn25 As between the grantor and grantee, the grantee retains interest in the transferred property. *fn26

Summary Judgment Proof

Challenging the trial court's findings, Shelba contends there was no summary judgment evidence presented as to the value of the properties, the value of liens against the properties, that the amount owed to the County exceeded the value of the properties, that there was inadequate consideration given, that Matteson became insolvent at or shortly after the time she transferred the property, that the transfers were made with the actual intent to hinder, delay, or defraud the County, or that the transfers were not intended as conveyances.

Shelba Matteson relies on her affidavit testimony that Cecilia told her the properties had no real value because of the County's liens upon them. She stated that Cecilia's stated reason for transferring the properties to Shelba was because Cecilia knew that she would do her best to preserve them and to distribute them according to Cecilia's instructions. Thus, Shelba promised to distribute the properties to Cecilia's three sons, named as beneficiaries in the will, when she thought they were sufficiently responsible to own them. In her affidavit, she further stated that performing these promises, in addition to paying the $10 recited in each of the deeds and the assignments, constituted the consideration to support these conveyances. At the time of the conveyances, she believed all of Cecilia's debts were secured.

Intent to Defraud and Harm

We find the evidence conclusively established Cecilia Matteson transferred the properties in an attempt to hinder creditors. Cecilia expected to lose the collateral she pledged to the County, and her property transfers to Shelba involved all or nearly all of her estate. Shelba testified that Cecilia did not own any other properties, nor was she aware of Cecilia owning any stocks or interest in other companies. Shelba testified that she was the closest of all the daughters-in-law, and Cecilia trusted her to follow her instructions for distributing the properties among her three sons named as beneficiaries under the will.

As instructed, Shelba used the rental income generated from the properties to pay Guy's house payment. Cecilia continued to live at 9033 Cosmos, a property in which she had reserved a life estate, after the transfer. After Cecilia's death, her house was then rented, and Shelba used the income to pay the property taxes and maintenance on Cecilia's home. Cecilia used the income from the other properties for living expenses until her death.

Further, Shelba testified that she paid $10 for each of the transferred properties. The additional consideration alleged by Shelba consisted of her promises to Cecilia to distribute the properties to Cecilia's sons, but such promises have not been fulfilled. There is no evidence to establish the value of the properties, aside from a statement that the properties, when rented, generated monthly income of around $1,300 and one of the notes generated $344 per month. *fn27 Shelba managed the properties and set up bank accounts for rental monies. Although Shelba avers that she did not know of Cecilia's financial situation, she stated in her deposition that Cecilia did not have adequate resources to meet her living expenses without rental income from the properties. We find the trial court correctly granted summary judgment setting aside the transfers as to the extent necessary to satisfy debts owed to the County.

No Intent for Conveyance

Shelba next contends that the summary judgment evidence fails to establish that Cecilia did not intend the transfers to operate as conveyances, and therefore the trial court erred in granting summary judgment for the Estate. We agree.

It is well settled that in order to render a deed effective, it must be delivered into the control of the grantee with the intent of the grantor that it shall become operative as a conveyance. *fn28 The recording of the deed is prima facie evidence of delivery by the grantor as well as of acceptance by the grantee. *fn29 Generally, the recording of the deed establishes a rebuttable presumption of delivery and that the grantor intended to convey the property according to the deed terms. *fn30 The presumption that the transfer was made with the intent that it become operative as a conveyance may be overcome by showing: (1) that the deed was delivered or recorded for a different purpose; (2) that fraud, accident, or mistake accompanied the delivery or recording; or (3) that the grantor had no intention of divesting title. *fn31

Here, the warranty deeds were recorded with the county records, and purported to convey title to the properties to Shelba. The Estate fails to rebut the presumption that by these recorded deeds, Cecilia intended to convey the properties in accordance with the terms of the deeds to Shelba. Even though she received income from the properties and lived in the home in which she reserved a life estate, Cecilia conveyed title to Shelba. Accordingly, we find that the evidence did not support the trial court's granting summary judgment in favor of the Estate, and to that extent, we sustain Shelba's issue for review.

Limitations Defense

Shelba argues that the trial court erred in denying her motion for summary judgment against the Estate based on limitations. Actually, her motion for summary judgment against the County raised the defense of limitations, but her motion for partial summary judgment against the Estate did not raise that defense. Shelba raised the defense of limitations only in her response to the Estate's cross-claim, however, her pleadings are not competent summary judgment evidence. *fn32 In her response to the Estate's motion for partial summary judgment, she merely asserted that the Estate's claims were barred by limitations, without providing any summary judgment proof, and she fails to provide sufficient evidence to raise a fact issue concerning the affirmative defense. *fn33 Thus, the trial court did not err in failing to grant a summary judgment on these grounds.

In her summary judgment motion against the County, Shelba asserted that the County's claims were barred by the statute of limitations under Tex. Civ. Prac. & Rem. Code Ann. § 16.024. That section provides for a three-year limitations period on suits to recover real property held by another in adverse possession. *fn34 The County responded that Section 16.024 was inapplicable here. It argued that the appropriate statute is Tex. Bus. & Com. Code Ann. § 24.010, which prescribes a four-year limitations period. *fn35

We find that the County's cause of action arose under Sections 24.005 and 24.006 of the TUFTA, and the applicable limitations period is four years. The County filed its suit on May 13, 1997, and its claim is not barred by limitations. Accordingly, the trial court did not err in denying Shelba's motion for summary judgment based on limitations. We overrule this portion of the issue for review.

Reversion of the Properties Back to the Estate

Finally, Shelba urges the trial court erred in finding the transferred properties should revert back to the Estate. She argues that the Estate, as a matter of law, cannot be the beneficiary of the County's claim under TUFTA. We agree.

It is well settled that a decedent's estate has no standing to contest the validity of an inter vivos transaction by a decedent on the grounds that the decedent conveyed the property with the purpose of defrauding creditors. *fn36 The courts of this state will not encourage fraudulent transactions by allowing a grantor to regain property through his estate, which he fraudulently conveyed during his lifetime. *fn37 Thus, under TUFTA, the County was entitled to relief against the fraudulent transfers to have the transfers avoided, *fn38 but the Estate lacked standing to assert any fraudulent transaction allegations.

The Estate argues that it did not assert fraud, but a different theory of liability that sought the same result and relied upon the same facts as the County's claims. The Estate's amended petition asserted that the transfers were not intended to be operative as conveyances, and that the transferred property was merely held in a constructive trust. By its motion for partial summary judgment, the Estate sought a declaration that the transfers were therefore void as a matter of law.

We find this argument without merit. Having determined that the Estate lacked standing to bring a fraud claim, and that it failed to establish its claim that Cecilia did not intend to convey the properties to Shelba, we find that the Estate was not entitled to reversion of the property, and in so ordering, the trial court erred. Under TUFTA, the transfers may only be avoided to the extent necessary to satisfy the creditors' claims, in this case the County's judgments, and any excess is retained by the transferee. Further, it would be against public policy as well as established case law to allow the Estate to circumvent TUFTA under the guise of a different theory to recover property that did not belong to grantor when she died. *fn39

We sustain Shelba's issue for review to the extent it challenges the reversion of property to the Estate.

CONCLUSION

Having considered each aspect of Shelba's issue for review, we affirm that portion of the summary judgment granting relief to the County. We reverse and render that portion of the summary judgment reverting the transferred properties to the Estate. We remand to the trial court for further proceedings in accordance with this opinion.

Do Not Publish

Opinion Footnotes

*fn1 A deed of trust was executed for two tracts of land located at 1212 N. Copia and 1216 N. Copia, in El Paso, Texas, and was recorded with the County Clerk's office.

*fn2 Warranty deeds were executed for the tracts of land located at 1212 N. Copia, 1216 N. Copia, 7620 Gateway North, 3615 Hueco, and 9033 Cosmos (with life estate reserved), in El Paso, Texas. Assignments of a $33,000 note and a $7,000 real estate lien note were also executed. All instruments were recorded.

*fn3 On April 18, 1997, the County filed its application for probate. On May 13, 1997, the probate court appointed a Dependent Administrator and issued Letters of Administration.

*fn4 Tex. Bus. & Com. Code Ann. § 24.006(a) (Vernon 1987 & Supp. 2001).

*fn5 The trial court specifically found that: the transfers of property were made to an insider, without receiving a reasonably equivalent value; the debtor was not paying her debts as they became due; the transfers were made with actual intent to hinder, delay, or defraud the County's collection of its debt; the debtor retained possession or control of the property after transfer; the debtor had been sued or threatened with suit; and the debtor became insolvent concurrently with or shortly after the transfers were made.

*fn6 The judgment recites that the Dependent Administrator is authorized to file a certified copy of the trial court's order in the deed records as evidence of the court's determination of title.

*fn7 Tex. R. Civ. P. 166a(c).

*fn8 Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548-49 (Tex. 1985).

*fn9 City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex. 1979).

*fn10 FM Properties Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000).

*fn11 See Tex. Bus. & Com. Code Ann. §§ 24.001, 24.005, 24.006, 24.008 (Vernon 1987 & Supp. 2001); Harco Energy, Inc. v. Re-Entry People, Inc., 23 S.W.3d 389, 393 (Tex. App.--Amarillo 2000, no pet.).

*fn12 Tex. Bus. & Com. Code Ann. § 24.005(a) (Vernon Supp. 2001); Harco, 23 S.W.3d at 393.

*fn13 Tex. Bus. & Com. Code Ann. § 24.006(a) (Vernon 1987); Harco, 23 S.W.3d at 393-94.

*fn14 Tex. Bus. & Com. Code Ann. § 24.003(a) (Vernon 1987 & Supp. 2001).

*fn15 Tex. Bus. & Com. Code Ann. § 24.003(b) (Vernon 1987 & Supp. 2001).

*fn16 See Tex. Bus. & Com. Code Ann. § 24.005(b) (Vernon Supp. 2001).

*fn17 See Tex. Bus. & Com. Code Ann. § 24.002(7) (Vernon Supp. 2001); Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 25 (Tex. App.--Tyler 2000, pet. denied).

*fn18 See Tex. Bus. & Com. Code Ann. § 24.004(d) (Vernon Supp. 2001).

*fn19 Chappell, 37 S.W.3d at 25.

*fn20 See Tex. Bus. & Com. Code Ann. §§ 24.002(3), (4) (Vernon Supp. 2001).

*fn21 See Tex. Bus. & Com. Code Ann. § 24.008(a)(1) (Vernon 1987).

*fn22 Chappell, 37 S.W.3d at 26.

*fn23 Id. at 27.

*fn24 See Meletio Electrical Supply Co. v. Martin, 437 S.W.2d 927, 928 (Tex. Civ. App.--Waco 1969, no writ); Pacific Finance. Corp. v. Donald, 286 S.W.2d 260, 263 (Tex. Civ. App.--Beaumont 1955, no writ).

*fn25 See Tex. Bus. & Com. Code Ann. § 24.008(a)(1) (Vernon 1987).

*fn26 See Meletio, 437 S.W.2d at 928.

*fn27 Shelba testified in her deposition that Guy's house payment is $230. She also testified that she did not keep any of the rental income for herself, but used it for house payments, repairs, or property taxes on the transferred properties.

*fn28 Raymond v. Aquarius Condominium Owners Ass'n, Inc., 662 S.W.2d 82, 91 (Tex. App. --Corpus Christi 1983, no writ).

*fn29 Id.

*fn30 Stephens County Museum, Inc. v. Swenson, 517 S.W.2d 257, 261-62 (Tex. 1975); Raymond, 662 S.W.2d at 91.

*fn31 Swenson, 517 S.W.2d at 262.

*fn32 See Laidlaw Waste Systems (Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656, 660 (Tex. 1995).

*fn33 See Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984).

*fn34 Tex. Civ. Prac. & Rem. Code Ann. § 16.024 (Vernon 1986).

*fn35 Tex. Bus. & Com. Code Ann. § 24.010 (Vernon 1987 & Supp. 2001).

*fn36 See John Hancock Mut. Life Ins. v. Morse, 132 Tex. 534, 124 S.W.2d 330, 332 (1939); Harcrow v. Reed, 425 S.W.2d 59, 60 (Tex. Civ. App.--Waco 1968, writ ref'd n.r.e.).

*fn37 See In re Parker, 997 S.W.2d 833, 838 (Tex. App.--Texarkana 1999, pet. denied); Poe v. Hamlin Nat'l Bank, 921 S.W.2d 515, 517 (Tex. App.--Eastland 1996, writ denied).

*fn38 See Tex. Bus. & Com. Code Ann. § 24.008(a)(1) (Vernon 1987) (creditor may obtain avoidance of the transfer to the extent necessary to satisfy the creditor's claim).

*fn39 See Morse, 124 S.W.2d at 333; Parker, 997 S.W.2d at 838.

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