Opinion issued February 21,=20
2008
&=
nbsp; <=
BR>
In=20
The
Court of=20
Appeals
For The
First =
District of=20
Texas
NO.=20
01-07-00010-CV
GENERAL ELECTRIC=20
CAPITAL CORPORATION, Appellant
V.
A. =
JOHN KNAPP,=20
JR., A/K/A A. JOHN KNAPP, Appellee
On =
Appeal from the=20
113th District Court
Harris =
County,=20
Texas
Trial =
Court Cause=20
No. 2005-59969
MEMORANDUM=20
OPINION
<=
/SPAN>Appellant,=20
General Electric Capital Corporation (=E2=80=9CGE=E2=80=9D), sued =
appellee, A. John Knapp,=20
Jr., a/k/a A. John Knapp (=E2=80=9CKnapp=E2=80=9D), under the =
Texas Uniform Fraudulent=20
Transfer Act (=E2=80=9CUFTA=E2=80=9D), ![3DFootnote](3D"")
to recover shares of stock that GE =
alleges were=20
fraudulently transferred from GE=E2=80=99s debtor, Timothy J. =
Gollin (=E2=80=9CGollin=E2=80=9D),=20
to Knapp. In one issue, GE contends that the trial court erred by=20
rendering a no-evidence summary judgment in favor of Knapp.=20
<=
/SPAN>We=20
affirm.
Facts =
and=20
Procedural History
<=
/SPAN>1. The=20
Agreement
<=
/SPAN>On=20
October 25, 2000, Knapp and a business associate, Timothy J. =
Gollin=20
(=E2=80=9CGollin=E2=80=9D),
entered into an agreement =
(=E2=80=9CAgreement=E2=80=9D) in which=20
Knapp agreed to invest on Gollin=E2=80=99s behalf certain funds in =
a business=20
venture known as Travis Street Partners, L.L.C. =
(=E2=80=9CTSP=E2=80=9D). In exchange,=20
Gollin agreed that until Knapp received a full return of his =
principal=20
investment plus interest, Knapp would receive =E2=80=9C100% of the =
distributions=20
made pro rata to the proportion of [Gollin=E2=80=99s] interest in =
the Series A=20
equity which [Knapp had] funded.=E2=80=9D Once Knapp was fully =
reimbursed, Knapp=20
was to receive 50 percent of Gollin=E2=80=99s distributions until =
Knapp received=20
four times his original investment. Thereafter, Knapp was to =
receive=20
one-third of the distributions made on Gollin=E2=80=99s interest. =
On December 26,=20
2000, the Agreement was made public through a filing with the =
Securities=20
and Exchange Commission.
<=
/SPAN>On=20
November 1, 2001, GE, a creditor of Gollin=E2=80=99s company, =
Gollin & Co.,=20
became a judgment creditor to Gollin & Co. on an old debt. In =
the=20
agreed judgment, GE was to recover from Gollin & Co. =
$389,102.00, plus=20
interest, dating back to August 19, 1999.
<=
/SPAN>2. Related=
=20
suit against Gollin & Co., Gollin, and =
Knapp
&nbs=
p;In=20
2003, Hoard Gainer Industry Co., Ltd. =
(=E2=80=9CHGI=E2=80=9D),
another creditor of Gollin & Co., =
sued Gollin=20
& Co. on a sworn account and sued Gollin, individually, for =
having=20
used the corporation as a sham to perpetrate a fraud. Gollin v. =
Hoard=20
Gainer Ind. Co., Ltd., No. 01-03-00435-CV, 2005 WL 1130374, at =
*1=20
(Tex. App.=E2=80=94Houston [1st Dist.] Jan. 20, 2005, pet. denied) =
(mem. op.). On=20
January 30, 2003, the trial court rendered judgment that HGI =
recover from=20
Gollin & Co. $889,037.34. A jury found that Gollin had =
used=20
Gollin & Co. to perpetrate a fraud on HGI and that Gollin was=20
personally liable on the debt. During the suit, HGI learned that =
Gollin=20
held a stock interest in TSP. See id. at *2. =
<=
/SPAN>In=20
early 2004, TSP=E2=80=99s members elected to dissolve TSP. On =
February 4, 2004, as=20
part of the winding-up of TSP, Gollin instructed TSP to distribute =
his=20
interest to Knapp, pursuant to the Agreement.
<=
/SPAN>In=20
September 2004, HGI sued to enforce its judgment against Gollin. =
HGI also=20
sued Knapp, under UFTA, to recover the shares Gollin had =
transferred to=20
Knapp under the Agreement. Gollin and Knapp moved for a =
no-evidence=20
summary judgment. On September 20, 2004, the trial court rendered =
judgment=20
that HGI was entitled to take an assignment of any of =
Gollin=E2=80=99s membership=20
interests in the amount of any unsatisfied judgment held by HGI, =
but that=20
=E2=80=9Csuch assignment [was] subordinate to the Knapp-Gollin =
assignment=20
[Agreement] granted on October 25, 2000.=E2=80=9D In addition, the =
trial court=20
held that HGI take nothing by way of its suit against Knapp under =
the=20
UFTA.
<=
/SPAN>In=20
January 2005, in Gollin=E2=80=99s appeal of the judgment against =
him rendered in=20
HGI=E2=80=99s 2003 suit, this court concluded that HGI failed to =
submit any=20
evidence in the trial court that Gollin personally benefitted from =
the=20
unpaid debt. Id. at *5. We reversed the trial =
court=E2=80=99s=20
judgment and rendered judgment that HGI take nothing from Gollin.=20
Id.
<=
/SPAN>In=20
September 2005, in HGI=E2=80=99s appeal of the take-nothing =
judgment rendered in=20
favor of Knapp as to HGI=E2=80=99s UFTA claim against Knapp, the =
Fourteenth Court=20
of Appeals held that because HGI=E2=80=99s
fraudulent transfer claim against Knapp =
was=20
asserted solely with regard to [HGI=E2=80=99s] claim and judgment =
against Gollin=20
in the prior case, and because the judgment has not only been =
reversed,=20
but a take nothing judgment rendered in its place, it follows =
logically=20
that that claim and judgment are no longer enforceable against =
Gollin=E2=80=99s=20
assets and that any transfer of Gollin=E2=80=99s assets cannot be =
fraudulent as to=20
that claim or judgment.
Hoard Gainer Ind. Co., Ltd., v. A. =
John=20
Knapp, No. 14-04-01032-CV, 2005 WL 2149727, at *1 (Tex. =
App.=E2=80=94Houston=20
[14th Dist.] 2005, pet. denied).
<=
/SPAN>3. The=20
instant suit
<=
/SPAN>On=20
September 14, 2005, GE sued Knapp, asserting that Gollin =
transferred his=20
stock in TSP to Knapp =E2=80=9Cwith actual intent to hinder, =
delay, or defraud=20
Gollin=E2=80=99s creditor, [HGI]=E2=80=9D and that Knapp did not =
take Gollin=E2=80=99s stock =E2=80=9Cfor=20
a reasonably equivalent value.=E2=80=9D GE sought to avoid the =
transfer to the=20
extent necessary to satisfy GE=E2=80=99s 2001 judgment against =
Gollin. Knapp moved=20
for a no-evidence summary judgment, the details of which are =
presented=20
below, which the trial court granted.
No-Evidence=20
Summary JudgmentGE contends that the trial court erred by =
granting=20
a =E2=80=9Cno evidence=E2=80=9D summary judgment in favor of Knapp =
because GE produced=20
more than a scintilla of evidence on each element of its claim. =
A. Standard=20
of Review
<=
/SPAN>After=20
an adequate time for discovery, the party without the burden of =
proof may=20
move for summary judgment, with or without presenting evidence, on =
the=20
basis that there is no evidence to support an essential element of =
the=20
non-moving party=E2=80=99s claim. Tex. R.=20
Civ. P. 166a(i); Johnson v. Brewer & Pritchard, =
P.C., 73=20
S.W.3d 193, 207 (Tex. 2002). First, the movant must specifically =
state the=20
element as to which there is no evidence. Tex. R. Civ. P. 166a(i). =
The=20
burden then shifts to the non-movant to produce evidence that =
raises a=20
fact issue on the challenged element. See Johnson, 73 =
S.W.3d at=20
207. If the non-movant brings forward more than a scintilla =
of=20
probative evidence to raise a genuine issue of material fact, then =
summary=20
judgment is not proper. Forbes, Inc. v. Granada Biosciences =
Inc.,=20
124 S.W.3d 167, 172 (Tex. 2003); Flameout Design & =
Fabrication,=20
Inc. v. Pennzoil Caspian Corp., 994 S.W.2d 830, 834 (Tex. =
App.=E2=80=94Houston=20
[1st Dist.] 1999, no pet.). When determining if more than a =
scintilla of=20
evidence has been produced, the evidence must be viewed in the =
light most=20
favorable to the non-movant. Ford Motor Co. v. Ridgway, 135 =
S.W.3d=20
598, 601 (Tex. 2004). More than a scintilla exists when the =
evidence =E2=80=9Crises to a level that would enable reasonable =
and fair-minded=20
people to differ in their conclusions.=E2=80=9D Id. =
=E2=80=9COn the other hand,=20
when the evidence offered to prove a vital fact is so weak as to =
do no=20
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=20
evidence.=E2=80=9D Id.
<=
/SPAN>When,=20
as here, a trial court does not state the basis for its decision =
in its=20
summary judgment order, we must uphold the order if any of the =
theories=20
advanced is meritorious. State Farm Fire & Cas. Co. v. =
S.S.,=20
858 S.W.2d 374, 380 (Tex. 1993).
B. Applicable=20
Law
<=
/SPAN>Chapter=20
24 of the Texas Business and Commerce Code, the Texas Uniform =
Fraudulent=20
Transfer Act (=E2=80=9CUFTA=E2=80=9D), provides a statutory cause =
of action through which=20
creditors may seek relief from debtors who fraudulently transfer =
assets or=20
property out of the reach of creditors. See =
Tex. Bus. & Com. Code =
Ann.=20
=C2=A7=C2=A7 24.001=E2=80=9324.013 (Vernon 2002 & Supp. =
2007); Tel.=20
Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d =
601, 607=20
(Tex. App.=E2=80=94Houston [1st Dist.] 2002, no pet.). As a remedy, the =
creditor=20
may obtain avoidance of the fraudulent transfer to the extent =
necessary to=20
satisfy the creditor=E2=80=99s claim. See Tex. Bus. & Com. Code =
Ann.=20
=C2=A7 24.008(a)(1) (Vernon 2002). The =
transferee=E2=80=99s awareness=20
of the fraudulent nature of the transfer is not required. =
Flores v.=20
Robinson Roofing & Constr. Co., 161 S.W.3d 750, 756 (Tex.=20
App.=E2=80=94Fort Worth 2005, pet. =
denied).
<=
/SPAN>Section=20
24.005, which governs whether a transfer is fraudulent, provides =
in=20
pertinent part, as follows:
<=
/SPAN>(a) A=20
transfer made or obligation incurred by a debtor is fraudulent as =
to a=20
creditor, whether the creditor=E2=80=99s claim arose before or =
within a reasonable=20
time after the transfer was made or the obligation was incurred, =
if the=20
debtor made the transfer or incurred the =
obligation:
&=
nbsp; (1) with=20
actual intent to hinder, delay, or defraud any creditor of the =
debtor;=20
or
&=
nbsp; (2) without=20
receiving a reasonably equivalent value in exchange for the =
transfer or=20
obligation . . . .
Tex. Bus. & Com. Code =
Ann. =C2=A7=C2=A7=20
24.005(a) (Vernon 2002).
C. Analysis<=
/SPAN>
<=
/SPAN>Here,=20
GE seeks to avoid Gollin=E2=80=99s transfer of TSP stock to Knapp. =
To recover the=20
shares from Knapp under UFTA, GE was required to produce more than =
a=20
scintilla of evidence that its claim arose before or a reasonable =
time=20
after Gollin=E2=80=99s transfer of stock to Knapp or the =
obligation to transfer=20
the stock was incurred and either (1) that Gollin, as =
GE=E2=80=99s debtor,=20
made the transfer or incurred the obligation to make the transfer =
with=20
actual intent to hinder, delay, or defraud =E2=80=9Cany =
creditor=E2=80=9D or (2)=20
that Gollin made a transfer or incurred an obligation without =
receiving a=20
reasonably equivalent value in exchange for the transfer or =
obligation.=20
See id. Knapp moved for summary judgment on the basis that =
GE=20
failed to produce evidence of any of these =
elements.
<=
/SPAN>In=20
its response to Knapp=E2=80=99s motion for summary judgment, GE =
focused on the=20
first element and did not address the alternative second element. =
We=20
conclude that the first element is dispositive in this case.
=
As=20
to the first element, GE was required to produce more than a =
scintilla of=20
evidence that Gollin made the transfer or incurred the =
obligation=20
to make the transfer with actual intent to hinder, delay, or =
defraud =E2=80=9Cany=20
creditor,=E2=80=9D here, HGI.=20
See id. =C2=A7 24.005(a)(1).
=
In=20
its response to the motion for summary judgment, GE acknowledges =
that UFTA=20
delineates 11 non-exhaustive =E2=80=9Cbadges of fraud=E2=80=9D to =
assist in determining=20
whether a debtor made a transfer with the requisite fraudulent =
intent.=20
Tex. Bus. & Com. Code =
Ann. =C2=A7 24.005(b)(1)=E2=80=93(11). However, GE does not =
address any of these=20
elements; rather, GE states only that =E2=80=9CGollin=E2=80=99s =
intent to hinder or delay=20
is properly inferred [from] the transfer being made while =
[HGI=E2=80=99s] lawsuit=20
was pending.=E2=80=9D
=
The=20
relationship between Gollin and HGI was examined by this court in=20
Gollin v. Hoard Gainer Ind. Co., Ltd., No. =
01-03-00435-CV,=20
2005 WL 1130374, at *1 (Tex. App.=E2=80=94Houston [1st Dist.] Jan. =
20, 2005, pet.=20
denied) (mem. op.). There, we held that =
Gollin was not=20
individually liable to the creditors of Gollin & Co., and we =
rendered=20
judgment that HGI take nothing by its claims against Gollin. =
Id. at=20
*5.
=
Subsequently,=20
the Fourteenth Court of Appeals applied our holding in its review =
of=20
HGI=E2=80=99s appeal of the take-nothing summary judgment =
rendered in favor=20
of Knapp as to HGI=E2=80=99s UFTA claim against Knapp based on =
Gollin=E2=80=99s conduct=20
with HGI. Hoard Gainer Ind. Co., Ltd., v. A. John Knapp, =
No.=20
14-04-01032-CV, 2005 WL 2149727, at *1 (Tex. App.=E2=80=94Houston =
[14th Dist.]=20
2005, pet. denied). There, the court held that because =
HGI=E2=80=99s
fraudulent transfer claim against Knapp =
was=20
asserted solely with regardto =
[HGI=E2=80=99s] claim and=20
judgment against Gollin in the prior case, and because the =
judgment has=20
not only been reversed, but a take nothing judgment rendered in =
its place,=20
it follows logically that that claim and judgment are no longer=20
enforceable against Gollin=E2=80=99s assets and that any transfer =
of Gollin=E2=80=99s=20
assets cannot be fraudulent as to that claim or judgment.=20
Id.
<=
/SPAN>Here,=20
as in HGI=E2=80=99s suit against Knapp, GE=E2=80=99s fraudulent =
transfer claim against=20
Knapp was asserted solely with regard to HGI=E2=80=99s claim =
against Gollin in the=20
prior case. HGI=E2=80=99s claim against Gollin has been examined, =
and it has been=20
held that any transfer of Gollin=E2=80=99s assets under that claim =
cannot be=20
fraudulent. Hence, this is not evidence.
=
Because=20
GE also did not offer any evidence in its response to the motion =
for=20
summary judgment as to the alternative second element, that of =
lack of=20
equivalent value in exchange, GE has not met its summary judgment =
burden=20
to show evidence of each of the elements of its claim.
=
GE=20
contends that the issue of intent is a fact question for the jury =
that is=20
not properly resolved by summary judgment. Ordinarily, =
whether the=20
conveyance was made with intent to defraud creditors is a fact =
question.=20
However, the court may resolve the issue of fraudulent intent as a =
matter=20
of law when, as here, the evidence indisputably shows that the =
conveyance=20
was not made with fraudulent intent and no evidence tends to =
connect the=20
transferree with any intent to defraud. C.M. Asfahl Agency v. =
Tensor,=20
Inc., 135 S.W.3d 768, 788 (Tex. App.=E2=80=94Houston [1st =
Dist.] 2004, no=20
pet.).
<=
/SPAN>Accordingly,=20
appellant=E2=80=99s sole issue is overruled.
Conclusion
<=
/SPAN>We=20
affirm the judgment of the trial court.
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Laura=20
Carter Higley
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Justice
Panel consists of Justices Nuchia, =
Hanks, and=20
Higley. |