William Walter Pyle, Jr. v. First National Bank in Cameron ( 2000 )

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TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-98-00008-CV
William Walter Pyle, Jr., Appellant

v.

First National Bank in Cameron, Appellee

FROM THE DISTRICT COURT OF MILAM COUNTY, 20TH JUDICIAL DISTRICT
NO. 22,885, HONORABLE CHARLES E. LANCE, JUDGE PRESIDING

William Walter Pyle, Jr. appeals from the trial court judgment rendered against him in First National Bank's (the Bank) suit to set aside a transfer of land as fraudulent. We will modify and affirm the judgment.

Factual and Procedural History

This suit arises out of loans the Bank made to Pyle, which he did not repay when due. The Bank filed suit in cause number 22,428, First National Bank in Cameron v. Pyle, 20th Judicial District Court of Milam County. On September 18, 1991, the trial court rendered summary judgment against Pyle in that suit for $164,465.38, $163.00 in court costs, post-judgment interest, and attorneys' fees. Pyle did not appeal that judgment, which therefore became final October 18, 1991.⁽¹⁾

On September 17, 1991, Pyle transferred the disputed property to a partnership called Pyco Joint Venture. Pyco had four general partners: Karen Pyle, Lee Allen Pyle, William Walter Pyle III, and appellant Pyle. The three other partners are Pyle's children. The transfer to the partnership consisted of three tracts of land including Pyle's 64% undivided interest in 1,419 acres and fee simple interest in 272.71 acres, and also all of his non-exempt equipment and vehicles. Each child's undivided interest in the 1,419 acres was transferred to Pyco as well. The partnership agreement creating Pyco allowed the other partners to buy out Pyle's interest in the partnership for $100.00.

Shortly after the transfer, the Bank filed the current suit. The final judgment in this suit consists of several partial summary judgments and a jury verdict on attorneys' fees. All trial-court parties other than Pyle have settled and are no longer parties to this appeal. On appeal, Pyle presents six issues contending that the trial court erred in: granting a judgment for attorneys' fees when the party recovering those fees did not request or receive relief under the statute asserted as the basis for the fee recovery; granting summary judgment based on superseded pleadings; granting summary judgment when that judgment adjudicated issues of fact regarding intent, solvency of a debtor, and value of property; rendering a final judgment that granted two inconsistent forms of relief; striking pleadings without a written request to do so; and striking pleadings for alleged misconduct, unrelated to the merits of that party's claims, which had been separately punished. We begin with appellant's second issue.

Amended Pleadings
In his second issue, Pyle contends that the court erred in rendering a final judgment based in part upon a partial summary judgment because the pleadings upon which the partial summary judgment was based were superseded. Although the Bank amended its pleadings after the partial summary judgment disposing of the fraudulent transfer issue, the final judgment could rely on the partial summary judgment.

Pyle relies upon cases which present the issue of omission of claims or parties through amendment. For example, in Sosa v. Central Power & Light, 909 S.W.2d 893, 894 (Tex. 1995), the defendant moved for summary judgment based on facts in the plaintiff's pleadings that showed limitations barred the suit. Before the hearing on summary judgment, however, plaintiff amended his pleadings to delete those factual allegations. The trial court struck the second petition as untimely and granted summary judgment for defendant. See id. at 895. The supreme court held the amended pleadings had been timely. Therefore, the summary judgment based on the omitted judicial admissions was improper. See id.

In Radelow-Gittens Real Property Management v. Pamex Foods, 735 S.W.2d 558, 559 (Tex. App.--Dallas 1987, writ ref'd n.r.e.), the court dealt with the effect on the ability to appeal when a party was omitted from amended pleadings. The court granted a partial summary judgment in Pamex's favor. Radelow-Gittens then filed second and third amended petitions, neither of which contained any claim against Pamex. See id. After entry of final judgment, Radelow-Gittens attempted to appeal the partial summary judgment in favor of Pamex. The court held that Radelow-Gittens could not appeal because it had abandoned its claim against Pamex by the time of the final judgment. See id. at 560. The court noted that Radelow-Gittens could have appealed if it had not abandoned its claims against Pamex. See id.; see also Frias v. Atlantic Richfield Co., 999 S.W.2d 97, 102 (Tex. App.--Houston [14th Dist.] 1999, pet. filed) (second amended motion for summary judgment did not incorporate grounds in first amended motion for summary judgment; appeal could not review denial of first motion because those grounds not before it due to amendment).

In contrast, all grounds upon which the partial summary judgment was based remained before the court after the Bank amended its pleading, and the final judgment could rely on the partial summary judgment. We overrule issue two.

Fraudulent Transfer

In issue three, Pyle contends that the partial summary judgment in the Bank's favor voiding the transfer as fraudulent was improper because there were material disputed fact issues concerning his intentions, his financial condition at the time of the transfers, and the value received in exchange for the transfers. Pyle contends that any or all of these three issues are unlikely candidates for determination by summary judgment, citing Quinn v. Dupree, 303 S.W.2d 769, 774 (Tex. 1957) (intent to defraud creditors is ordinarily a question for the jury); In re Fairchild Aircraft Corporation, 6 F.3d 1119, 1125 n.5 (5th Cir. 1993) (reasonably equivalent value is inherently fact laden); and Sunbelt Savings, F.S.B v. Bank One Texas, N.A., 816 S.W.2d 106, 111 (Tex. App.--Dallas 1991) (summary judgment on insolvency improper), rev'd on other grounds, 824 S.W.2d 557 (Tex. 1992). That certain issues are not usually amenable to summary judgment, however, does not mean that summary judgment is always inappropriate.

Summary judgment is properly granted only when a movant establishes there are no genuine issues of material fact to be decided and that it is entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a(c); Memorial Med. Ctr. v. Howard, 975 S.W.2d 691, 692 (Tex. App.--Austin 1998, pet. denied). In reviewing the grant of summary judgment, we view the evidence in the light most favorable to the non-movant and make every reasonable inference and resolve all doubts in favor of the non-movant. See Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985); Howard, 975 S.W.2d at 693. When the trial court's order granting summary judgment does not specify the grounds relied upon, we will affirm the judgment if it is supported by any of the grounds put forth by the movant. See Bradley v. State ex rel. White, 990 S.W.2d 245, 247 (Tex. 1999); Howard, 957 S.W.2d at 693.

A transfer may be fraudulent if the debtor made the transfer without receiving a reasonably equivalent value in exchange and the debtor was insolvent or became insolvent because of the transaction. See Tex. Bus. & Com. Code Ann. § 24.006 (West 1987).⁽²⁾ Pyle estimated the value of the land at $900 per acre. He had a 64% undivided interest in 1419 acres; and sole ownership in 272 acres. The evidence concerning the value of Pyle's interest in Pyco, the transferee, was the $100.00 buyout provision in the joint venture agreement. The evidence presented shows a significant disparity between the valuation of the land per acre, that is, the asset transferred, and the price for which his share of the joint venture could be purchased, that is, the value received.⁽³⁾ In our opinion, the Bank has established this element of a fraudulent transfer as a matter of law.

The other element of a fraudulent transfer that the Bank needed to establish was Pyle's insolvency at the relevant time. Within ninety days of the transfer to Pyco, Pyle filed for bankruptcy.⁽⁴⁾ A bankrupt debtor is judicially estopped from refuting statements made in bankruptcy at a later time. See Stewart v. Hardie, 978 S.W.2d 203, 208 (Tex. App.--Fort Worth 1998, pet. denied). In general, pleadings in a particular case are regarded as formal judicial admissions. See Dowelanco v. Benitez, 4 S.W.3d 866, 871 (Tex. App.--Corpus Christi 1999, no pet.); Cameron County v. Velasquez, 668 S.W.2d 776, 782-83 (Tex. App.--Corpus Christi 1984, writ ref'd n.r.e.). Pleadings in another case that are inconsistent with a party's position in a present action are quasi-admissions. See Dowelanco, 4 S.W.3d at 871; Velasquez, 668 S.W.2d at 782-83. Quasi-admissions are treated as judicial admissions when it appears: (1) the declaration was made during the course of a judicial proceeding; (2) the statement is contrary to an essential fact embraced in the declarant's theory of recovery or defense; (3) the statement is clear, deliberate, and not a mistake; (4) giving conclusive effect to the admission will not be contrary to the public policy on which the rule is based; and (5) the statement is not destructive of the offering party's theory of recovery. See Mendoza v. Fidelity & Guar. Ins. Underwriters, Inc., 606 S.W.2d 692, 694 (Tex. 1980); Dowelanco, 4 S.W.3d at 871.

Any transfer of an interest in property that benefits a creditor may be avoided if the transfer is made within ninety days before the date of the filing of the bankruptcy petition. See 11 U.S.C. § 547(b) (1988). For purposes of such avoidance, the bankruptcy code presumes insolvency during that period. See id. at § 547(f). Pyle's bankruptcy filing stated that any claims, liens or abstracts of judgment held by the Bank that were based on the judgment on the note were voidable preferences. By asserting that the Bank's claims would be voidable, Pyle invoked the presumption that he was insolvent during this period, which was the period of the transfers to Pyco. Pyle's bankruptcy statement fits the test for a judicial admission: it was made during the course of a judicial proceeding; it is contrary to an essential fact in his theory of defense (the claim of solvency as a defense to fraudulent transfer); giving conclusive effect to the statement fits the policy behind the rule; and, the statement was clear and deliberate and does not destroy the Bank's theory of recovery. Accordingly, we hold that Pyle conclusively admitted insolvency based on his prior bankruptcy pleadings.

Additionally, one definition for insolvency under Texas law is "generally not being able to pay debts as they come due." Tex. Bus. & Com. Code Ann. § 24.003(b) (West Supp. 2000). Pyle, in response to a question during his deposition about whether he was paying debts, answered he was not because he "just ha[s]n't had the money." When asked about the land, he replied, "haven't got the land." Pyle asserted that he was solvent and that his assets and liabilities were "about the same." However, those assertions find no evidentiary support because his bankruptcy pleadings showed he was not paying his creditors.

Pyle asserts that intent is not amenable to summary judgment, but intent is not an element of fraudulent transfer under section 24.006. Compare Tex. Bus. & Com. Code Ann. § 24.006 with Tex. Bus. & Com. Code Ann. § 24.005(a) (actual intent to defraud or hinder creditor required). The Bank pleaded more than one fraudulent transfer theory, and has offered proof of a fraudulent transfer upon which the court could properly have granted summary judgment. We overrule the third issue presented.

"Double Recovery"

In his fourth issue, Pyle complains that the judgment is fatally inconsistent because it both voids the real estate transfer from Pyle to Pyco and awards the Bank monetary relief. He argues that setting aside the allegedly fraudulent transfer was one form of relief potentially available to the Bank under the fraudulent transfer statute. See Tex. Bus. & Com. Code Ann. § 24.008(a)(1) (West 1987). He contends that judgment against the transferee for the value of the asset transferred (or the amount of the Bank's claim, whichever is less) was a second form of relief potentially available to the Bank, but only as an alternative to voiding the transfer. See id. at § 24.009(b).⁽⁵⁾

Pyle is attempting to invoke the doctrine of election of remedies. The election of remedies doctrine bars relief only when (1) one has made an informed choice (2) between two or more remedies, rights, or states of facts (3) which are so inconsistent as to (4) constitute manifest injustice. See Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 851 (Tex. 1980). The purpose of the election of remedies doctrine is to prevent double recovery for a single wrong. See Green Oaks, Ltd. v. Cannan, 749 S.W.2d 128, 131 (Tex. App.--San Antonio 1987), writ denied per curiam, 758 S.W.2d 753 (Tex. 1988). A plaintiff is entitled to only one satisfaction for injuries sustained. See Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1992). The "one satisfaction" rule applies to prevent a plaintiff from obtaining more than one recovery for the same injury. See id. That a judgment awards more than one form of relief does not automatically mean a "double recovery" has occurred.

In Green Oaks, Ltd., the plaintiff sought to void an illegal foreclosure and to recover monetary damages caused as a result of the foreclosure. 749 S.W.2d at 129. The plaintiff was successful in having the foreclosure declared void. See id. The defendant contended that by voiding the sale the plaintiff had elected his remedy and was precluded from seeking money damages. See id. at 131. The court held that no election of remedies was required because there was no inconsistency between allowing a plaintiff to recover a title taken wrongfully and for the damages suffered while the property was wrongfully withheld. See id.

One problem with Pyle's argument is that he has misinterpreted the judgment. The judgment set aside the transfer with regard to the Bank's claim. It did not, however, attempt to award the land to the Bank; it simply returned the land to the status of an asset of Mr. Pyle. Merely setting aside the transfer did not satisfy the Bank's claim. The monetary relief awarded in this judgment was not an award of the value of the asset transferred. The Bank brought this suit to enforce an existing judgment. The judgment in this second suit basically "incorporated" that first judgment, added the accrued interest, and awarded that monetary relief to the Bank. Accordingly, the judgment in this cause does not award a double recovery. We overrule the fourth issue presented.

Attorneys' Fees

In his first issue presented, Pyle complains that no basis exists for the award of attorneys' fees. The Bank responds that attorneys' fees are authorized because this is a suit to collect a judgment. See Tex. Civ. Prac. & Rem. Code Ann. § 31.002 (West Supp. 2000) (the turnover statute). Although section 31.002(e) authorizes attorneys' fees, its scope is not broad enough to do so in this cause because this is not a proceeding under the turnover statute. See § 31.002 (e).⁽⁶⁾

Section 31.002, the "turnover" statute, is not a general authorization for attorneys' fees in any proceeding to collect a judgment. The turnover statute is a purely procedural statute whose purpose is to ascertain whether an asset is in either the judgment debtor's possession or subject to the debtor's control. See Beaumont Bank, N. A. v. Buller, 806 S.W.2d 223, 227 (Tex. 1991). It does not allow for a determination of the substantive rights of involved parties. See Cross, Kieschnick & Co. v. Johnston, 892 S.W.2d 435, 439 (Tex. App.--San Antonio 1994, no writ); Republic Ins. Co. v. Millard, 825 S.W.2d 780, 783 (Tex. App.--Houston [14th Dist.] 1992, orig. proceeding); Craven, Dargan & Co. v. Travers Co., Inc., 770 S.W.2d 573, 576 (Tex. App.--Houston [1st Dist.] 1989, writ denied) (turnover statute improper vehicle to determine whether debtor owned funds deposited with State Board of Insurance); see also RTC v. Smith, 53 F.3d 72, 77 (5th Cir. 1995) (applying Texas law). In order to obtain attorneys' fees under this section, the creditor must be successful in obtaining turnover relief. See Boudreax Civic Ass'n v. Cox, 882 S.W.2d 543, 550 (Tex. App.--Houston [1st Dist.] 1994, no writ); Daniels v. Pecan Valley Ranch, Inc., 831 S.W.2d 372, 386 (Tex. App.--San Antonio 1992, writ denied).

Although the Bank's pleadings asked for attorneys' fees in reliance on section 31.002, we cannot construe the judgment in this cause as awarding turnover relief to the Bank. As we have discussed, the judgment set aside the transfer of Pyle's assets to Pyco to the extent necessary to satisfy the Bank's judgment against Pyle.⁽⁷⁾ The substance of this action is a fraudulent transfer action, not a turnover action. Perhaps in theory, the setting aside of the transfer could be viewed as "otherwise applying the property to the satisfaction of the judgment" as provided for in section 31.002(2), but that theory runs afoul of the caselaw that prohibits a turnover action from being used to determine substantive property rights. Accordingly, as the Bank claims no other basis for an award of attorneys' fees and we find none, we sustain Pyle's first issue presented, and modify the judgment to eliminate the award of attorneys' fees in this cause.

Remaining Points
In issue five, Pyle contends that the trial court improperly struck his pleadings because there was no written request to strike the pleadings. In issue six, he claims that the trial court improperly struck his pleadings for alleged misconduct unrelated to the merits of his claim.

These events occurred after rendition of judgment in this cause and were based on Pyle's violation of an injunction against the transfer of certain assets. Because we will modify and affirm the trial court judgment based on the entire record of the case as it existed before the court struck Pyle's pleadings, we need not consider whether there was any error in post-judgment events. Accordingly, we overrule issues five and six without further discussion.

Conclusion

We have overruled all of Pyle's issues presented, except for the issue concerning attorneys' fees, which we have sustained. Accordingly, we modify the judgment to delete the award of $158,000 in attorneys' fees, and, as modified, affirm.

Mack Kidd, Justice

Before Chief Justice Aboussie, Justices Kidd and Smith

Modified and, as Modified, Affirmed

Filed: April 20, 2000

Do Not Publish
1. The trial court in the current cause took judicial notice of all of the papers and pleadings contained within cause number 22,428.
2. There is no dispute that the Bank was a creditor or that the claim arose before the transfer was made, other elements of this provision.
3. Pyle also transferred some farm equipment to the joint venture, which would increase the value transferred to Pyco.
4. Pyle's bankruptcy case terminated before the final judgment in this cause. During the pendency of this appeal, Pyco, while still a party to the appeal, filed bankruptcy, causing an abatement of this appeal. Pyco has since settled with the Bank.
5. However, this section concerns a judgment against a transferee. Mr. Pyle is not a transferee against whom relief has been awarded. Pyco, the transferee, has settled with the Bank and is not an appellant.
6. This issue concerns the award of $158,000 in attorneys' fees in trial court cause 22,885, the cause on appeal. It does not concern any award of attorneys' fees in cause 22,428, the suit to collect on the note.
7. Because all other parties have settled, we do not address any issues about the judgment's assessment of liability against Pyle and the others in their capacity as joint venturers in Pyco.

App.--San Antonio 1994, no writ); Republic Ins. Co. v. Millard, 825 S.W.2d 780, 783 (Tex. App.--Houston [14th Dist.] 1992, orig. proceeding); Craven, Dargan & Co. v. Travers Co., Inc., 770 S.W.2d 573, 576 (Tex. App.--Houston [1st Dist.] 1989, writ denied) (turnover statute improper vehicle to determine whether debtor owned funds deposited with State Board of Insurance); see also RTC v. Smith, 53 F.3d 72, 77 (5th Cir. 1995) (applying Texas law). In order to obtain attorneys' fees under this section, the creditor must be successful in obtaining turnover relief. See Boudreax Civic Ass'n v. Cox, 882 S.W.2d 543, 550 (Tex. App.--Houston [1st Dist.] 1994, no writ); Daniels v. Pecan Valley Ranch, Inc., 831 S.W.2d 372, 386 (Tex. App.--San Antonio 1992, writ denied).

Although the Bank's pleadings asked for attorneys' fees in reliance on section 31.002, we cannot construe the judgment in this cause as awarding turnover relief to the Bank. As we have discussed, the judgment set aside the transfer of Pyle's assets to Pyco to the extent necessary to satisfy the Bank's judgment against Pyle.⁽⁷⁾ The substance of this action is a fraudulent transfer action, not a turnover action. Perhaps in theory, the setting aside of the transfer could be viewed