Caspian Oil Services, Inc. and James W. Reynolds v. SE Management, LLC ( 2013 )

Affirmed and Memorandum Opinion filed October 29, 2013.
In The
Fourteenth Court of Appeals
NO. 14-12-00535-CV
CASPIAN OIL SERVICES, INC. AND JAMES W. REYNOLDS, Appellants
V.
SE MANAGEMENT, LLC, Appellee
On Appeal from the 270th District Court
Harris County, Texas
Trial Court Cause No. 2010-16599
MEMORANDUM OPINION
In six issues, appellants Caspian Oil Services, Inc. (―COS 1‖) and James W.
Reynolds contend the trial court erred by rendering judgment in favor of appellee
SE Management, LLC (―SEM‖). We affirm.
I. BACKGROUND
COS 1 was a corporation located in Azerbaijan, a country bordering the
Caspian Sea. COS 1 leased a yard where oil and gas equipment could be stored
and provided certain services such as equipment repair. Reynolds was president
and founder of COS 1. SEM was an American company involved in the oil and
gas industry with offices in Houston and interested in expanding to Azerbaijan. In
2005 and early 2006, SEM personnel met with Reynolds in Houston to discuss the
possibility of SEM purchasing a portion of COS 1.
On May 3, 2006, SEM and COS 1 entered into a ―Letter of Intent,‖
commemorating their understanding that SEM was interested in purchasing 75% of
COS 1‘s shares. In the Letter of Intent, COS 1 agreed to refrain from entertaining
or negotiating the sale of its shares to another party for a period of 90 days from
May 3, 2006. The parties agreed SEM would conduct ―a due diligence review‖ of
COS 1‘s assets, financial statements, and other information. The Letter of Intent
was signed by Reynolds and Mark Sadykhov, president of SEM, but neither signed
in his individual capacity.
Pertinent to this litigation, the Letter of Intent included the following
provisions pertaining to SEM advancing money to COS 1:
Section 4 Advances to Seller Upon written request from [COS 1]
setting forth the specific amount of funds requested and the intended
use thereof, [SEM] may, in its discretion, advance all or portions of
the Purchase Price to [COS 1] in immediately available funds, as shall
be agreed between the parties in writing at the time of such advance
by executing documents to include a revolving secured promissory
note and a securities pledge agreement[.] Each such advance,
notwithstanding the amount thereof, shall be secured by a first priority
continuous lien on the Shares in favor of [SEM.] [COS 1] shall owe
interest to [SEM] over the aggregate amount of all advances made
pursuant to the preceding sentences[.] Such interest shall be
calculated as LIBOR + three percent (3%) per year consisting of
twelve (12) months and three hundred and sixty (360) days, and shall
be payable monthly in arrears until the earlier of (I) repayment of the
advances to [SEM], or (II) Closing[.] Upon Closing, and unless
otherwise agreed between the parties, all advances and all interest
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thereon shall be returned to [SEM.] Subject to applicable law, if the
provisions contained in the preceding sentences of this [section] are
found to be unenforceable for any reason whatsoever, [SEM] shall
have the option, at its discretion, to sell the Shares to any third party,
at a price determined in bona fide arms-length negotiations between
[SEM] and such third party, and retain such portion of the proceeds as
are sufficient to cover [COS 1‘s] obligation for repayment of the
principal and interest on the advances, and the remainder of such
proceeds shall be disbursed to [COS 1] promptly thereafter[.]
Section 5 Repayment of Advances All advances pursuant to Section
4, and all interest due thereon, shall be payable by [COS 1] to [SEM]
or its authorized representatives and assigns upon written demand[.]
If the parties do not effect Closing of the Proposed Transaction within
sixty (60) calendar days from the date of the Letter, and [COS 1] fails
to repay in full all advances made by [SEM] within fifteen (15)
calendar days of receiving a written demand for such repayment,
[SEM] shall become owner of the Shares, and shall be entitled to all
rights, title and interests appurtenant to such Shares, and [COS 1]
shall be obligated to take all necessary actions to institute [SEM] as
the record holder of the Shares for all corporate purposes[.]
[COS 1] shall be obligated to take any actions and to execute any
additional documents and instruments as may be required by [SEM] to
document the either or any of the (I) security interest in the Shares in
favor of [SEM], (II) the transfer of the Shares to [SEM], (III) the
Closing of the Proposed Transaction (if applicable)[.]
COS 1 requested cash advances from SEM. An SEM officer testified
Reynolds represented that COS 1 had many receivables due over the next few
months which would provide money to repay SEM. The officer also testified an
affiliated entity, Smith Eurasia, Ltd., advanced $110,000 to COS 1 on behalf of
SEM. Specifically, Smith Eurasia advanced $50,000 via a check signed May 10,
2006, $20,000 via a check signed July 13, 2006, and $40,000 via a check signed
August 3, 2006, for a total of $110,000. Smith Eurasia made the advances on
behalf of SEM because SEM lacked sufficient funds. It is undisputed COS 1 never
gave SEM or Smith Eurasia a promissory note or any security for the advances, nor
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did Reynolds personally guarantee the advances. SEM personnel testified
Reynolds stated COS 1 needed the advances to purchase equipment and for
business opportunities. Contrarily, Reynolds testified COS 1 used the advances to
pay bank debts.
After Smith Eurasia made the first advance, SEM began its due-diligence
review of COS 1. SEM officers testified that COS 1 was not entirely cooperative
in producing documents for review and answering questions. In July and early
August 2006, SEM employees visited the COS 1 facilities in Azerbaijan. Based on
their review, SEM decided not to purchase COS 1‘s shares. On August 16, 2006,
SEM‘s attorneys sent a letter to COS 1 demanding repayment of the $110,000
advances plus interest as agreed in the Letter of Intent. Reynolds testified that he
received this demand letter.
On September 3, 2006, Reynolds sent an email to Sergey Malygin, who was
CFO of both SEM and Smith Eurasia. In the email, Reynolds explained COS 1 did
not have funds to repay the advances and needed additional time to find investors
because SEM‘s decision not to invest in COS 1 hindered COS 1‘s ability to solicit
a sale. Reynolds also stated COS 1 had already begun talking with other potential
investors and, ―I am not trying to not pay you but just need the time and need to
protect my interest in [Azerbaijan.]‖
On February 17, 2007, Reynolds sent another email to Malygin in which he
proposed four options regarding the unpaid $110,000:
(1) the parties could treat the money as a purchase of 10% of COS 1‘s
stock until COS 1 was sold or otherwise had funds to buy back the
stock;
(2) the parties could renew the original proposal with some
modifications;
4
(3) the parties could continue treating the money as a loan but on
terms less burdensome to COS 1; or
(4) SEM could pursue legal remedies to force payment.
Reynolds warned against the fourth option, explaining he believed SEM engaged
in unethical actions during the due-diligence process. Reynolds also stated he was
―very diligently‖ trying to sell COS 1 and ―[SEM‘s] figure is included in the
purchasing agreement with whomever I discuss this with.‖
It is undisputed COS 1 never repaid the advances. SEM filed an initial suit
against COS 1 and Reynolds on July 8, 2007. However, around this time,
Reynolds set up a transfer of COS 1‘s assets to a new corporation, Caspian Oilfield
Services, Inc. (―COS 2‖). COS 2 was incorporated in the British Virgin Islands on
June 18, 2007 and registered in Azerbaijan on August 17, 2007.
Reynolds testified two of his employees from COS 1, Ilkin Agayev and
Babek Karimli, became the owners of COS 2. SEM presented a July 1, 2007
agreement between COS 1 and COS 2 which provided for the transfer of COS 1‘s
equipment to COS 2. According to Reynolds, he actually signed this agreement
later and someone back-dated it to July 1, 2007. SEM also presented an August
30, 2007 agreement in which COS 1 sold its assets to COS 2 for approximately
121,000 manta (Azerbaijan currency).
Reynolds testified that, despite these agreements, COS 1 did not actually
receive any consideration from COS 2 for COS 1‘s assets. Reynolds testified he
simply ―gave‖ the assets to COS 2 because COS 1 did not own any equipment but
was leasing equipment from another company. Reynolds also testified he
transferred the assets for no value because was tired of living in Azerbaijan and
wanted to return to the United States. Nevertheless, COS 1 and COS 2 signed tax
documents reflecting the asset sale. Additionally, when COS 1 was still active, it
5
applied for a valuable certification needed to perform certain equipment work. It
takes several years for the governing body to grant this certification. Eventually,
this certification was granted to COS 2.
On June 29, 2007, Reynolds sent SEM a letter in which he reiterated COS
1‘s inability to repay the advances. He also expressed that COS 1 ―acknowledges
the debt which you mentioned in you lawsuit‖ and made the following offer, ―[I]f
you care to prepare a formal judgment for the amount which is owed, [COS 1]
stands ready[,] willing, and able to sign such confession of Judgment for the
appropriate amount.‖ SEM did not agree to this offer.
In September and October 2007, Reynolds—despite not being an owner of
COS 2—discussed selling COS 2 with Independent Oil Tools-DOSCO B.V.
(―IOT‖).1 In 2008, IOT purchased a majority of COS 2‘s shares. Reynolds began
working for IOT as a vice-president of international business development,
although Reynolds testified he was always an independent contractor of IOT.
After SEM nonsuited its original suit, it refiled suit against Reynolds, COS
1, and COS 2.2 Following a bench trial, the trial court found the following:
COS 1 is liable for breach of the Letter of Intent contract;
COS 1, COS 2,3 and Reynolds conspired to fraudulently transfer the assets
of COS 1 to COS 2; and
1
Reynolds testified he had been discussing a potential sale of COS 1 with IOT for around
two years. When Reynolds resumed talks with IOT in the fall of 2007, he explained, ―I have
passed [COS 1] in [Azerbaijan] to my previous employees.‖
2
SEM also sued IOT. After SEM presented its case, the trial court granted IOT‘s motion
for a take-nothing judgment on SEM‘s claims. SEM does not appeal this ruling.
3
COS 2 appeared in the litigation but did not attend trial. The trial court granted SEM‘s
motion for post-answer default judgment against COS 2. COS 2 is not a party to this appeal.
6
These three defendants are jointly and severally liable for fraudulent
transfer.4
The trial court rendered judgment that SEM recover from COS 1, COS 2, and
Reynolds $110,000 in ―liquidated damages‖ plus $54,804.70 in prejudgment
interest, and recover from COS 1 $70,000 in attorney‘s fees.
II. STANDING
In their first issue, appellants contend SEM lacked standing to bring claims
because Smith Eurasia, not SEM, advanced the $110,000 to COS 1. Standing is a
prerequisite to subject matter jurisdiction. Bland I.S.D. v. Blue, 34 S.W.3d 547,
553–54 (Tex. 2000). Standing focuses on whether a party has a sufficient
relationship with a lawsuit to have a ―justiciable interest‖ in its outcome. Austin
Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). A plaintiff has
standing when it is personally aggrieved. Id. The standing doctrine requires that
there be a real controversy between the parties that actually will be determined by
the judicial declaration sought. Id. at 849. Standing is a question of law subject to
de novo review. Heckman v. Williamson Cnty., 369 S.W.3d 137, 150 (Tex. 2012).
Appellants refer to a check-history ledger for Smith Eurasia, showing Smith
Eurasia made the three payments to COS 1. Appellants also rely on the following
testimony of Glenda Jackson, office manager and bookkeeper for SEM:
(1) SEM and Smith Eurasia are affiliated but separate companies;
(2) Smith Eurasia made the advances on behalf of SEM because SEM
lacked sufficient funds to make the advances;
(3) COS 1 did not give a promissory note or security for the advances,
despite the Letter of Intent requiring COS 1 to provide such items if
an advance was made;
4
The trial court also found that these defendants were liable for ―breach of constructive
trust.‖ We need not address this finding to adjudicate this appeal.
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(4) SEM never repaid Smith Eurasia; and
(5) Jackson is not aware of whether there are documents reflecting
that Smith Eurasia had attempted to collect the debt from SEM.
Appellants argue the foregoing evidence conclusively establishes that Smith
Eurasia made the advances and never requested repayment from SEM. Appellants
contend no evidence connects the funds provided by Smith Eurasia to SEM or
supports a finding that COS 1 is liable to SEM for the funds. According to
appellants, SEM suffered no damages when COS 1 failed to repay the funds and
therefore lacks standing. In support of their argument, appellants cite cases in
which courts determined plaintiffs lacked standing to bring claims based on
injuries suffered by separate parties. See R2 Enters., Inc. v. Whipple, No. 02-07-
00257, 2008 WL 2553444, at *3–4 (Tex. App.—Fort Worth June 26, 2008, pet.
denied) (mem. op.) (holding general and limited partner did not have standing
because direct injury was to partnership which actually contracted with land seller
and was to profit from the contract); Boy Scouts of Am. v. Responsive Terminal
Sys., Inc., 790 S.W.2d 738, 746–47 (Tex. App.—Dallas 1990, writ denied)
(holding national group lacked standing to bring breach-of-contract claim against
company on behalf of affiliated local groups because the local groups and
company were the only parties in privity of contract).
Although SEM is separate from Smith Eurasia, they are affiliated entities,
and Jackson testified that Smith Eurasia made the advances on SEM‘s behalf.
Consistent with this arrangement, Jackson testified SEM‘s accounting records
showed the advances as cash out from Smith Eurasia, and they also reflected a
$110,000 receivable owed by SEM to Smith Eurasia. Accordingly, Smith Eurasia,
an affiliate of SEM, loaned SEM the money for the $110,000 and advanced this
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amount to COS 1 on SEM‘s behalf. Thus, the evidence shows that the advance
was made under the Letter of Intent by SEM to COS 1 by means of Smith Eurasia.5
Consequently, SEM made the advances under the Letter of Intent and had
standing to seek repayment from COS 1. We reject appellants‘ contention that the
parties‘ failure to comply with the promissory note and security provisions of the
Letter of Intent meant the advances were not made pursuant to the Letter of Intent.
SEM‘s failure to require COS 1 to provide security for the advances may have
made it more difficult for SEM to recover its debt but did not nullify the Letter of
Intent.
The fact that SEM would seek repayment of the funds even though SEM
advanced the funds by means of its affiliate Smith Eurasia was not lost on COS 1.
COS 1 understood Smith Eurasia was not gifting COS 1 $110,000—the money
was an advance made pursuant to the Letter of Intent between SEM and COS 1. In
response to SEM‘s demand for repayment of the advances, Reynolds
acknowledged the debt was incurred pursuant to the Letter of Intent (to which only
SEM and COS 1 were parties). Moreover, after SEM filed suit, Reynolds sent a
letter to SEM (not Smith Eurasia) in which he stated that COS 1 acknowledges the
debt ―mentioned in your lawsuit‖ and would sign a ―confession of Judgment for
the appropriate amount.‖ Accordingly, the parties understood that SEM was not a
stranger to the advances but was the party who made the advances and who had a
right to demand repayment. We overrule appellants‘ first issue.
5
We acknowledge the Letter of Intent contained a provision that SEM ―shall become the
owner‖ of 75% of COS 1‘s shares if COS 1 fails to repay advances within 15 days after written
demand. At trial, the parties did not argue SEM received these shares. In fact, as noted above,
Reynolds suggested in an email that SEM become holder of 10% (as opposed to 75%) of COS
1‘s shares. On appeal, none of the parties contend SEM owns any of COS 1‘s shares.
9
III. APPELLANTS’ COMPLAINTS ON THE MERITS
In their second through fifth issues, appellants argue the evidence is legally
and factually insufficient to support certain of the trial court‘s implicit findings
pertaining to damages, constructive trust, fraudulent transfer, and civil conspiracy.
A. Standard of Review
When the appellate record includes the reporter‘s record, the trial court‘s
findings may be challenged for legal and factual sufficiency of the evidence by the
same standards applied in reviewing the evidence supporting a jury‘s finding. See
Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). When a party challenges
legal sufficiency of the evidence relative to an adverse finding on which he did not
bear the burden of proof, we apply the ―no evidence‖ standard and may sustain the
challenge only when the record shows (a) a complete absence of evidence of a vital
fact, (b) the court is barred by rules of law or evidence from giving weight to the
only evidence offered to prove a vital fact, (c) the evidence offered to prove a vital
fact is no more than a mere scintilla, (d) the evidence establishes conclusively the
opposite of the vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex.
2005). When considering a legal-sufficiency challenge, we review the evidence in
the light most favorable to the challenged finding and indulge every reasonable
inference that would support it. Id. We credit favorable evidence if a reasonable
fact finder could and disregard contrary evidence unless a reasonable fact finder
could not. Id. at 827. The evidence is legally sufficient if it would enable a
reasonable and fair-minded person to reach the verdict under review. Id. The fact
finder is the sole judge of witness credibility and the weight to give their
testimony. Id. at 819.
A party challenging factual sufficiency of the evidence relative to an adverse
finding on which he did not bear the burden of proof must demonstrate the
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evidence supporting the finding is so weak or so contrary to the overwhelming
weight of the evidence that the finding is clearly wrong and unjust. Mar. Overseas
Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998); Cain v. Bain, 709 S.W.2d 175,
176 (Tex. 1986) (per curiam). When considering a factual-sufficiency challenge,
we consider and weigh all the evidence, both supporting and contradicting the
finding. See Ellis, 971 S.W.2d at 406–07. We may not substitute our own
judgment for that of the trier of fact or pass upon the credibility of the witnesses.
See id. at 407. The amount of evidence necessary to affirm a judgment is far less
than that necessary to reverse a judgment. GTE Mobilnet of S. Tex. L.P. v.
Pascouet, 61 S.W.3d 599, 616 (Tex. App.—Houston [14th Dist.] 2001, pet.
denied).
B. Analysis
1. Damages
In their second issue, appellants contend the evidence is legally and factually
insufficient to support the trial court‘s implicit finding that SEM incurred damages
as a result of its dealings with appellants because SEM did not advance the money
and, thus, suffered no damages when COS 1 failed to repay the advances. We
already have determined SEM has standing to seek repayment of the funds based
upon evidence that SEM advanced the money to COS 1 by means of its affiliate
Smith Eurasia. Under the applicable standards of review, we conclude that the
evidence is legally and factually sufficient to support a finding that SEM sustained
damages when COS 1 failed to repay the advances. Accordingly, we overrule
appellants‘ second issue.
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2. Uniform Fraudulent Transfer Act
In their fourth issue, appellants assert various arguments in support of the
contention that the evidence is legally and factually insufficient to support the trial
court‘s implicit findings relevant to SEM‘s claim under the Uniform Fraudulent
Transfer Act (―UFTA‖).
The UFTA is intended to prevent a debtor from defrauding its creditors by
moving assets out of reach. Citizens Nat. Bank of Tex. v. NXS Const., Inc., 387
S.W.3d 74, 79–80 (Tex. App.—Houston [14th Dist.] 2012, no pet.); see also Tex.
Bus. & Com. Code Ann. §§ 24.001–.013 (West 2009) (UFTA). Numerous types
of transactions are fraudulent for purposes of UFTA. See Tex. Bus. & Com. Code
Ann. §§ 24.005, .006. ―‗Creditor‘ means a person . . . who has a claim.‖ Id. §
24.002(4). ―‗Claim‘ means 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).
SEM pleaded, and the trial court impliedly found, that the transfer of assets
from COS 1 to COS 2 constituted a fraudulent transfer under subsections (a)(1)
and (a)(2) of section 24.005 of UFTA. See id. § 24.005 (West 2009) (stating that
―[a] transfer made or obligation incurred by a debtor is fraudulent as to a creditor .
. . if the debtor made the transfer or incurred the obligation: (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 . . . 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‖).
12
Under their fourth issue, appellants argue there is no evidence SEM
sustained damages because Smith Eurasia made the advances. For the reasons
stated above, we reject this argument.
Appellants also argue the evidence is legally and factually insufficient to
support recovery under SEM‘s UFTA claim because COS 1 was expressly
permitted under the Letter of Intent to negotiate its sale with other parties 90 days
after March 3, 2006. COS 1‘s assets were sold to COS 2 in 2007, more than 90
days after March 3, 2006. Furthermore, appellants contend that, in Reynolds‘s
September 2006 and February 2007 correspondences with SEM regarding the
demand for repayment, he advised that COS 1 was actively looking for new
investors, thus allegedly showing that SEM was aware appellants were trying to
sell COS 1.
However, evidence supporting the foregoing propositions would not
preclude findings in SEM‘s favor regarding the UFTA claim. Even if this transfer
is not prohibited by the Letter of Intent and even if SEM knew COS 1 was looking
for new investors and that the sale had occurred, the transfer could still constitute a
fraudulent transfer under section 24.005. See id. § 24.005. Additionally, when
Reynolds informed SEM that he was actively attempting to sell COS 1, he stated
he was taking SEM‘s $110,000 advances into account when negotiating a purchase
price. Nevertheless, Reynolds testified he ultimately transferred COS 1 to two of
his employees for no consideration, despite the fact that an August 30, 2007
agreement between COS 1 and COS 2 provided that COS 2 was paying
approximately 121,000 manta (Azerbaijan currency) for COS 1‘s assets. Two
SEM officers testified Reynolds never informed them he was transferring COS 1‘s
assets to COS 2. Moreover, shares of COS 2 stock were later sold to IOT for
13
approximately $100,000. Having concluded that all of appellants‘ arguments
under their fourth issue lack merit, we overrule that issue.6
3. Conspiracy
Under their fifth issue, appellants assert various arguments in support of the
contention that the evidence is legally and factually insufficient to support the trial
court‘s conspiracy finding.
Appellants first argue there is no evidence SEM sustained damages because
Smith Eurasia made the advances. For the reasons stated above, we reject this
argument.
Appellants also challenge the sufficiency of the evidence as to the remaining
elements of conspiracy. As applied in the context of SEM‘s conspiracy
allegations, these remaining elements are that Reynolds, COS 1, and COS 2 had a
meeting of the minds on the object of fraudulently transferring the assets from
COS 1 to COS 2 and that Reynolds engaged in one or more overt acts to this end.7
See PAS, Inc. v. Engel, 350 S.W.3d 602, 616 (Tex. App.—Houston [14th Dist.]
2011, no pet.).8
6
In a portion of the ―Summary of the Argument‖ section of their brief regarding SEM‘s
fraudulent-transfer claim, appellants state, ―No funds were advanced to [Reynolds] by anyone.‖
Presumably, appellants are arguing Reynolds could not have been trying to evade a creditor
because no one advanced funds to Reynolds in his individual capacity. However, we need not
address this issue because, as determined in the following section, appellants have not
established that the evidence is insufficient to support the trial court‘s conspiracy finding
involving COS 1, COS 2, and Reynolds in his individual capacity.
7
Because the judgment against COS 1 may be affirmed based upon claims previously
addressed in this opinion, we address the evidence of conspiracy only as to Reynolds.
8
Appellants contend there is no evidence Reynolds, individually, removed funds from
COS 1. However, such evidence is not necessary for there to be legally and factually sufficient
evidence of the foregoing elements. To support the conspiracy findings against Reynolds, there
need not be evidence that Reynolds personally absconded with COS 1‘s assets or the advanced
funds. Reynolds can be held liable for fraudulent transfer as a conspirator as long as there is
evidence showing he participated in a conspiracy to fraudulently transfer COS 1‘s assets to COS
14
Reynolds forwarded to Karimli his February 17, 2007 email in which he
suggested to SEM four resolutions of the repayment issue. Karimli later became
one of the owners of COS 2, to which COS 1‘s assets were transferred. COS 2
benefited by receiving COS 1‘s assets without having to pay consideration.
Moreover, Reynolds attempted to benefit individually from the transfer by gaining
an ownership interest in COS 2. Reynolds testified that, during the negotiations
with IOT for the purchase of COS 2, he wanted to receive an ownership interest in
COS 2 ―[b]ecause it was [his] company.‖ In fact, Karimli and Agayev offered
Reynolds 5% of COS 2‘s shares, but Reynolds ultimately declined because IOT
did not want outside investors.
We hold the foregoing evidence and inferences arising therefrom are legally
and factually sufficient to support the challenged elements of SEM‘s conspiracy
claim. First, at least two persons were involved—Reynolds and COS 2 through
Karimli‘s acts. Second, Reynolds and COS 2 had a meeting of the minds to
accomplish the transfer of COS 1‘s assets to defraud SEM because Reynolds
relayed to Karimli information regarding SEM‘s valid request for repayment but
Reynolds and Karimli nevertheless ignored the request and worked together to
transfer COS 1‘s assets to COS 2. Finally, Reynolds committed an unlawful, overt
act in furtherance of the conspiracy by transferring COS 1‘s assets to COS 2. See
Essex Crane Rental Corp. v. Carter, 371 S.W.3d 366, 378 (Tex. App.—Houston
[1st Dist.] 2012, pet. denied) (holding there was fact issue on whether defendants
conspired to commit fraudulent transfer). We overrule appellants‘ fifth issue.9
2. See Essex Crane Rental Corp. v. Carter, 371 S.W.3d 366, 378 (Tex. App.—Houston [1st
Dist.] 2012, pet. denied).
9
In their third issue, appellant assert the evidence is legally and factually insufficient to
support the trial court‘s finding that they were liable for ―breach of constructive trust.‖ Because
the trial court‘s judgment may be affirmed based upon the UFTA claim and conspiracy, we need
not and do not address issue three.
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IV. ATTORNEY’S FEES
Finally, in their sixth issue, appellants contend SEM may not recover
attorney‘s fees from COS 1 pursuant to section 38.001(8) of the Civil Practice and
Remedies Code because SEM did not suffer any damages. See Tex. Civ. Prac. &
Rem. Code Ann. § 38.001(8) (West 2008) (providing party may recover attorney‘s
fees, in addition to amount of valid claim, if claim is based on contract); Ashford
Partners, Ltd. v. ECO Res., Inc., 401 S.W.3d 35, 40–41 (Tex. 2012) ([T]o qualify
for fees under [section 38.001(8)], a litigant must prevail on a breach of contract
claim and recover damages.‖). However, we have affirmed the trial court‘s
breach-of-contract damages awarded against COS 1. Accordingly, we overrule
appellants‘ sixth issue.
We affirm the trial court‘s judgment.
/s/ John Donovan
Justice
Panel consists of Chief Justice Frost and Justices Boyce and Donovan.
16