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and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

Beijing Sansheng Development Corp.
v. Advertisement Technology Corp.,
2003.WTX.0000029 (W.D.Tex. 03/27/2003)

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION

CIVIL ACTION No. SA-01-CA-0522 NN

2003.WTX.0000029

March 27, 2003

BEIJING SANSHENG DEVELOPMENT CORP., AND BEIJING CROMALIN ADVERTISING MATERIALS CO., LTD., PLAINTIFFS,
v.
ADVERTISEMENT TECHNOLOGY CORPORATION; TRILLIONS, INC.; WEN FENG LIAW, INDIVIDUAL; STEVE MIN HSUN LIAW, INDIVIDUAL; AND TERESA YUN PING LIAW, INDIVIDUAL DEFENDANTS.

The opinion of the court was delivered by: Nancy Stein Nowak United States Magistrate Judge

ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

The matters before the Court are defendants Advertisement Technology Corporation (Ad-Tech), Steve Min Hsun Liaw and Teresa Yuri Ying Liaw's motion for summary judgment, and plaintiffs' response thereto (docket entries 57 and 58). This matter is before me pursuant to the parties' consent (docket entry 45).*fn1 The court has jurisdiction pursuant to 28 U.S.C. § 1332(a)(2).*fn2

By their motion defendants ask the court to dismiss plaintiffs' claims seeking to set aside conveyances made to them by defendant Trillions, Inc. in September 1999, as being fraudulent. Plaintiffs respond that disputed factual issues prevent disposition of this claim on summary judgment.

In my previous Orders in this case I have set out the essential facts concerning the underlying dispute between plaintiffs and Trillions. After the arbitration proceedings commenced in China to resolve that dispute, Trillions transferred three properties to defendant Ad-Tech. Defendant Teresa Liaw is an officer and shareholder of Ad-Tech.*fn3 Defendant Steve Liaw is an employee of Ad-Tech.*fn4 Both are children of Wen Feng Liaw, President of Trillions.*fn5

The motion before the Court is one seeking summary judgment. The applicable standard in deciding a motion for summary judgment is set forth in Federal Rule of Civil Procedure 56, which provides in pertinent part as follows:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.*fn6

Mere allegations of a factual dispute between the parties will not defeat an otherwise proper motion for summary judgment. Rule 56 requires that there be no genuine issue of material fact.*fn7 A fact is material if it might affect the outcome of the lawsuit under the governing law.*fn8 A dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.*fn9 Therefore, summary judgment is proper if, under governing laws, there is only one reasonable conclusion as to the verdict; if reasonable finders of fact could resolve a factual issue in favor of either party, summary judgment should not be granted.*fn10

The movant on a summary judgment motion bears the initial burden of providing the court with a legal basis for its motion and identifying those portions of the record which it alleges demonstrate the absence of a genuine issue of material fact.*fn11 The burden then shifts to the party opposing the motion to present affirmative evidence in order to defeat a properly supported motion for summary judgment.*fn12 All evidence and inferences drawn from that evidence must be viewed in the light most favorable to the party resisting the motion for summary judgment.*fn13 Significantly, when a motion for summary judgment is made and supported as provided in Rule 56, the nonmoving party may not rest upon the mere allegations or denials in his pleading.*fn14 Rather, the nonmoving party's response must set forth facts showing that there is a genuine issue for trial.*fn15 Accordingly, summary judgment motions permit the court to resolve lawsuits without the necessity of trials if there is no genuine dispute as to any material facts and the moving party is entitled to judgment as a matter of law.

Plaintiffs' fraudulent conveyance claims are based on Texas Business and Commerce Code §24.005, which provides:

(a) 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:

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

In assessing whether the transfer was made "with actual intent to ... defraud", section 24.005(b) continues:

(b) In determining actual intent under Subsection (a)(1) of this section, consideration may be given, among other factors, to whether:

(1) the transfer or obligation was to an insider;

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

(3) the transfer or obligation was concealed;

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

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

(6) the debtor absconded;

(7) the debtor removed or concealed assets;

(8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

(9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

(10) the transfer occurred shortly before or shortly after a substantial debt was incurred; and

(11) the debtor transferred the essential assets of the business to a lien or who transferred the assets to an insider of the debtor.

Accordingly, the key element of this cause of action is the intent of the transferee which is determined after considering a number of factors, none of which in and of themselves, are determinative of the issue of intent.

"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."*fn16 Nevertheless, "Texas law does not mandate that a case go to the jury merely because one of the elements of the claim is intent to defraud,"*fn17 and several cases have held that intent to defraud can be decided as a matter of law.*fn18 Generally, however, fraudulent intent must be determined by the trier of fact after evaluating the various facts and circumstances surrounding the challenged transfers.*fn19

Here, defendant contends that only one of the "badges of fraud" listed in section 24.005(b) - transfer to an insider - is arguably present to support an inference of fraudulent intent. Without additional evidence defendants argue summary judgment is appropriate. Plaintiffs respond that the transfer of property, for insufficient value, by the President of Trillions to a company run by his children, immediately after the commencement of the arbitration proceedings in China requires denial of the motion for summary judgment. Plaintiffs' evidence concerning the inadequacy of the consideration for the transfers consists of official records from the county tax assessor which reflect that the values of those properties in the year 2000 were between $13,400 and $27,000 more than the consideration actually paid for the properties just a year before.*fn20 The evidence before the court further reflects that Wen Feng Liaw, President of Trillions, made the transfers on behalf of Trillions to Ad-Tech,*fn21 and that Wen's daughter Teresa Liaw was an officer and shareholder of Ad-Tech and son Steve Liaw was employed by Ad-Tech.*fn22 Also, the evidence reflects that the arbitration proceedings concerning Trillions' failure to make the agreed investment into the Beijin Cromalin Adverstising Materials Co., Ltd. (hereinafter referred to as "JV") commenced on June 1, 1999, barely three months before Trillions transferred the properties to Ad-Tech.*fn23 This is significant in that a conveyance may be invalidated, if made with fraudulent intent, regardless of whether the underlying liability has matured into a judgment at the time of transfer.*fn24 The timing of these transfers is certainly suspicious, particularly in light of the amount of consideration paid for the properties and the familial relationship of the principals of transferor and transferee.

Plaintiffs suggest -- but fail to present any evidentiary support for their allegations - that Trillions may have concealed or removed assets from the jurisdiction, that the challenged transfer rendered Trillions insolvent, and that Trillions has absconded so as to avoid its obligation.

However, even in the absence of evidence to support these allegations, the evidence which is before me and summarized above is otherwise sufficient to deny the summary judgment request. It will be the job of the trier of fact to assess the evidence presented at trial and determine whether to draw an inference of fairness with respect to the September 1999 transfers ... or of fraud.

For the reasons stated above, it is ORDERED that defendants motion for summary judgment is DENIED.

SIGNED on March 27, 2003.

Opinion Footnotes

*fn1 28 U.S.C. §636(c).

*fn2 Defendants have not challenged the jurisdiction of this Court. While they deny the averment in the complaint that defendant Wen Feng Liaw is a citizen of Texas, they do not assert that he is a citizen of China, which would affect complete diversity. Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1557 (11th Cir. 1989) (stating that "the presence of at least one alien on both sides of an action destroys diversity"). Examining the propriety of jurisdiction sua sponte and based on the record before me, I find that diversity jurisdiction is present.

*fn3 Docket entry 57, Exh. J (Affidavit of Teresa Liaw).

*fn4 Docket entry 57, Exh. M and N (A-Tech Stock Holders Meeting Summary 1999 and 2000).

*fn5 Answer, Docket entry 13.

*fn6 FED.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

*fn7 Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 247 (1986).

*fn8 Anderson, 477 U.S. at 248; Thomas v. LTV Corn., 39 F.3d 611, 616 (5th Cir. 1994).

*fn9 Anderson, 477 U.S. at 248; Wise v. E.I. DuPont De Nemours & Co., 58 F.3d 193, 195 (5th Cir. 1995).

*fn10 Anderson, 477 U.S. at 249.

*fn11 Celotex Corp., 477 U.S. at 323.

*fn12 Anderson, 477 U.S. at 257.

*fn13 Hibernia Nat'l Bank v. Carner, 997 F.2d 94, 97 (5th Cir. 1993).

*fn14 Fed.R.Civ.P. 56(e); Anderson, 477 U.S. at 250; State of Texas v. Thompson, 70 F.3d 390, 393 (5th Cir. 1995).

*fn15 Celotex Corp., 477 U.S. at 324; Neff v. American Dairy Queen Corp., 58 F.3d at 1065; Engstrom v. First Nat'l Bank, 47 F.3d 1459, 1462 (5th Cir), cert. denied, 516 U.S. 818 (1995).

*fn16 Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986).

*fn17 BMG Music v. Martinez, 74 F.3d 87, 90 (5th Cir. 1996).

*fn18 E.g., Id. at 91 (summary judgment affirmed where no evidence submitted to overcome strong inference of fraud); and In re Hinsley, 201 F.3d 638 (5"' Cir. 2000) (summary judgment affirmed where self-serving and unsupported affidavit claiming no intent found insufficient to raise genuine issue of material fact).

*fn19 Coleman Cattle Co., Inc. v. Carpentier, 10 S.W.3d 430, 434-435 (Tex.Civ.App.-Beaumont 2000).

*fn20 Docket entry 58, Exh. A, B and C.

*fn21 Docket entry 57, Exh. A, B and C.

*fn22 Docket entry 58, Exh. J (Affidavit of Teresa Liaw) and Exh. M & N (A-Tech Stock Holder Meeting Summary 1999 and 2000).

*fn23 Docket entry 38, Exh. C-15 (Arbitration Award).

*fn24 Tex. Bus. & C. CODE § 24.002(3); U.S. v. Chapman, 756 F.2d 1237, 1241 (5th Cir. 1985).

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