Texas Real Estate Commission v. Charlotte A. Hansen and James Larry Hansen

NUMBER 13-12-00757-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
TEXAS REAL ESTATE COMMISSION, Appellant,
v.
CHARLOTTE A. HANSEN AND JAMES
LARRY HANSEN, Appellees.
On appeal from the County Court at Law No. 3
of Nueces County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Benavides and Longoria
Memorandum Opinion by Chief Justice Valdez
By one issue, appellant, the Texas Real Estate Commission (TREC), argues that
the trial court erred by ordering it to pay appellees, Charlotte A. Hansen and James Larry
Hansen, from the Texas Real Estate Recovery Trust Account (the Account). An applicant
is entitled to payment from the Account, in certain circumstances, if the applicant obtains
a judgment against a real estate license or certificate holder. TEX. OCC. CODE ANN. §
1101.601(a) (West, Westlaw through 2013 3d C.S.). TREC contends that funds were not
available from the Account because the trial court’s judgment in favor of the Hansens in
their Texas Fraudulent Transfers Act (TUFTA) claim against Mario and Melissa Gomez,
both Texas Real Estate License holders, was not based on the misconduct of the
Gomezes. We affirm.
I. BACKGROUND
The Hansens entered into an agreement with Michael Workman in which Workman
agreed to construct a home (the Northpointe property) for the Hansens, “the fair market
value of which would be $400,000.” Workman promised to complete construction within
an eight-month period. As partial consideration for the construction agreement, the
Hansens executed a warranty deed on February 11, 2003 conveying title to their existing
home (the Westpointe property) to Workman for $150,000 credit, provided to help cover
construction costs. The Hansens presented evidence that the Westpointe property had
been appraised at more than $400,000. The Hansens also alleged that Workman’s
brother, Hollie, “falsely represented that their existing property . . . would never be suitable
for [the Hansens] to reside in and that they should convey the property to Workman in
exchange for Workman . . . providing $150,000 of new construction cost.” The Hansens
alleged that Workman subsequently “drew more money than was justified against [the
Hansens’] interim construction loan . . . . He wholly failed to contribute” the $150,000
consideration he represented to [the Hansens] would be contributed to” construction
costs. Moreover, the Hansens alleged that Workman “wholly failed to complete
construction within the eight month period he promised.”
2
On February 11, 2003, Workman conveyed the Westpointe property to his son-in-
law, Mario Gomez. Gomez acquired an equity loan against the property in the amount of
$180,000. As a result, a first lien was placed on the property. Mario Gomez testified that
he purchased the property for $200,000 and entered into a loan agreement to cover the
remaining cost. He explained that Workman then leased the property back from Gomez.
In their pleadings, the Hansens claimed that Workman, not Gomez, made the monthly
payments on Gomez’s loan from the funds he allegedly overdrew from the Hansens’
interim construction loan, which were supposed to be drawn to cover construction costs.
The Hansens alleged that they discovered that Workman had been overdrawing
from the interim construction loan and filed the present lawsuit on Febraury 2, 2004.1
Subsequently, on February 26, 2004, the Hansens’ filed a lis pendens prohibiting the
Westpointe property from being further alienated pending the resolution of the lawsuit.
On September 3, 2004, the Schweizers loaned Gomez and his wife Melissa the money
necessary to pay off the first lien on the Westpointe property. On that date the Gomezes
executed a note and deed of trust granting a lien on the Westpointe property in favor of
the Schweizers. On September 20, 2004, Melissa Gomez executed an acknowledgment
that the Gomezes could not make payments on the loan from the Schweizers and agreed
that the Gomezes were in anticipatory breach of the note and deed of trust to the
Schweizers. On November 3, 2004, the Schweizers purchased the Westpointe property
at a trustee’s sale.
In their third original petition, which was amended to add claims of fraud committed
in connection with the transfer of the Westpointe property to the Schweizers, the Hansens
1 The Hansens originally included Hollie and Michael Workman in the lawsuit, but subsequently
nonsuited both parties.
3
alleged causes of action for civil conspiracy, fraud, fraudulent inducement, fraud in real
estate transactions, and fraudulent transfer under both sections 24.005 and 24.006 of
TUFTA. On March 7, 2012, following a bench trial, the trial court entered judgment in
which it made the following two findings:
1. The Court finds for Plaintiffs and against defendants Mario Gomez,
Melissa Gomez, Darrin Schweizer and Bobbiejeania Schweizer with
regard to Plaintiffs’ claims for violations of the Texas Uniform Fraudulent
Transfer Act, TEX. BUS. & COMM CODE §24.001, et. seq.
2. The Court finds that, pursuant to TEX. BUS. & COM. CODE §24.013,
Plaintiffs are entitled to recover their reasonable and necessary attorney
fees.
The trial court awarded the Hansens $40,000 in actual damages and ordered the
Gomezes to pay the Hansens $77,000 in attorney’s fees. The trial court declined to
assess attorney’s fees against the Schweizers. The judgment stated, “All relief not
expressly granted is denied.”
On August 21, 2012, the Hansens filed an application for payment from the
Account in which they argued that they were entitled to payment because they had
received a judgment against the Gomezes, who were duly licensed as real estate
salespersons, that was based on the Gomezes’ acts which violated Sections 652(a)(3)
and 653(1) of chapter 1101 of the Texas Occupations Code. TEX. OCC. CODE ANN. §
1101.652(a)(3) (West, Westlaw through 2013 3d C.S.); id. § 1101.653(a) (West, Westlaw
through 2013 3d C.S.). TREC filed a response in objection to the application. After a
hearing on the application, the trial court entered an order for payment from the Account.
TREC’s appeal of the order for payment from the Account followed.
4
II. STANDARD OF REVIEW
We review the granting of an application for payment from the account as we do a
non-jury trial. See Roberson v. Robinson, 768 S.W.2d 280, 281 (Tex. 1989). In order for
TREC to prevail on its no-evidence arguments, the record must reveal: (a) an absence
of evidence of an essential fact; (b) that rules of law or of evidence prohibit the court from
crediting the only evidence supporting a vital fact; (c) there is no more than a mere scintilla
of evidence to prove a crucial fact; or (d) the evidence conclusively establishes the
opposite of a critical fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005); Tex.
Real Estate Comm’n v. Asgari, 402 S.W.3d 814, 816 (Tex. App.—San Antonio 2013, no
pet.) (applying the City of Keller standard of review to a TREC challenge to a trial court’s
order for payment from the account). Reviewing courts must credit favorable evidence if
a reasonable fact finder could, and disregard contrary evidence unless a reasonable fact
finder could not. City of Keller, 168 S.W.3d at 827.
We review issues related to TREC’s statutory interpretation arguments under a de
novo standard of review. Tex. Dep’t of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex.
2002). In construing a statute, our primary objective is to determine and give effect to the
legislature's intent, which we do by looking to the plain and common meaning of the
statute’s words, unless such a construction leads to an absurd result. City of Rockwall v.
Hughes, 246 S.W.3d 621, 625–26 (Tex. 2008). Disputed provisions of a statute are to be
considered in context, not in isolation. Harris County. Hosp. Dist. v. Tomball Reg’l Hosp.,
283 S.W.3d 838, 842 (Tex. 2009).
III. APPLICABLE LAW
a. The Account
5
The statute allowing recovery from the Account states that the Account is
maintained “to reimburse aggrieved persons who suffer actual damages” at the hands of
a license holder, certificate holder, or an agent of a license or certificate holder. TEX. OCC.
CODE ANN. 1101.601(a). “Texas appellate courts agree [t]he purpose of the Account is to
guarantee the fidelity and honesty of the real estate salesman in his dealings with the
public and to insure and indemnify any member of the public against damages or injury
caused by” misconduct committed by a license or certificate holder. Asgari, 402 S.W.3d
814, 816–17 (citations omitted).
Under Texas Occupations Code section 1101.602, “an aggrieved person is entitled
to reimbursement from the trust account if a person described by Section 1101.601
engages in conduct described by Section § 1101.652(a)(3) or (b) or 1101.653(1), (2), (3),
or (4).” TEX. OCC. CODE ANN. § 1101.602 (West, Westlaw through 2013 3d C.S.). Section
601 includes license holders, certificate holders, and their agents. Id. § 1101.601.
Section 652(a)(3) stipulates that the commission may suspend or revoke a license if the
license holder “engages in misrepresentation, dishonesty, or fraud when selling buying,
trading, or leasing real property.” Id. § 1101.652(a)(3). Section 653(1) stipulates that the
commission may suspend or revoke a certificate if the certificate holder “engages in
dishonest dealing, fraud, unlawful discrimination or a deceptive act.” Id. §
1101.601.653(a) (West, Westlaw through 2013 3d C.S.). At the hearing on the application
for payment from the account, “the aggrieved person must show that the judgment is
based on facts allowing recovery” under the statute. Id. § 1101.607(1) (West, Westlaw
through 2013 3d C.S.). “The commission may relitigate in the hearing any material and
6
relevant issue that was determined in the action that resulted in the judgment in favor of
the aggrieved person.” Id. § 1101.608(c) (West, Westlaw through 2013 3d C.S.).
b. TUFTA
Under TUFTA,
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; 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.
TEX. BUS. & COM. CODE ANN. § 24.005 (West, Westlaw through 2013 3d C.S.).
A judgment under TUFTA may be taken against (1) the first transferor or (2) any
subsequent transferee other than a transferee that took in good faith for “value.” Id. §
24.009(b) (West, Westlaw through 2013 3d C.S.).
IV. DISCUSSION
At the hearing on the application for payment and on appeal, TREC has not
challenged the trial court’s finding that a TUFTA violation occurred. However, TREC
claims that the trial courts’ original judgment determined that that the Gomezes were
liable, as a subsequent transferee, for the fraudulent actions of Workman. See Id. TREC
7
argues that the Hansens are not entitled to payment from the Account because the
original judgment was not based on misconduct committed by the Gomezes, who were
the only real estate license holders involved in the transfers.
In their application and at the hearing on the application, the Hansens argued that
the judgment was based on the misconduct of the Gomezes in connection to both the
transfer of the property from Workman to the Gomezes and the transfer of the property
from the Gomezes to the Schweizers.2 Because the trial court did not issue findings of
fact, we must affirm if we find that there was evidence to support a holding that the
judgment was based on acts of the Gomezes entitling the Hansens to payment during
either transfer. See Dallas Cardiology Assocs., P.A. v. Mallick, 978 S.W.2d 209, 212
(Tex. App.—Texarkana 1998, pet. denied) (determining that when no findings of fact are
entered by the trial court, an appellate court must consider the evidence most favorable
to the judgment and disregard all contrary evidence and that the court must uphold the
trial court’s decision if there is sufficient evidence to support it on any legal theory
asserted).
TREC argues that the trial court abused its discretion by ordering payment from
the Account because (1) there was no evidence in the underlying case that the Gomezes
engaged in any interactions with the Hansens during the first transaction between
Workman and Gomez that amounted to misrepresentation, dishonesty, or fraud; (2) the
second transaction resulting in the transfer of the Westpointe property from the Gomezes
2 At the hearing on the application, the trial court indicated that, in its view, there were not two
separate transfers. Instead, it viewed the situation as “a continuing fraudulent transfer that starts with
Workman and ends with Schweizer.” We address the circumstances as two separate transfers in
accordance with parties’ briefs. In any event, we find that the number of transfers at issue does not affect
our analysis of the case.
8
to the Schweizers did not involve the buying, selling, trading, or leasing of real property
and was not a scheme intended to defraud the Hansens; and (3) in its judgment, the trial
court denied the Hansens’ fraud and conspiracy claims.3
1. The Second Transaction
In its pleadings, the Hansens alleged that they suffered damages as a result of the
security agreement between the Gomezes and Schwiezers, which culminated in the
purchase of the property by the Schweizers at a trustee’s sale. On appeal, TREC
challenges this basis for recovery from the Account on the grounds that (1) it was a credit
transaction that did not involve the buying, selling, or leasing of property as required by
section 652(a)(3); and (2) it was “an arms-length transaction that was not a sham to
defraud the Hansens.” However, in its response to the Hansens’ application, TREC
explicitly stated that it “does not contest that . . . the creation of a lien subject to an
immediate foreclosure could be a violation of TUFTA.” Moreover, at the hearing on the
application, in response to the trial court’s statement that it believed that there was
“dishonesty” involved in the second transaction, TREC’s attorney specifically stated, “I’m
not going to defend that transfer, let’s put it that way . . . but I would say that was a
financing transfer. That wasn’t selling, buying, leasing or trading real estate.” TREC
therefore conceded that the trial court was entitled to find that the transfer of the property
from the Gomezes involved misconduct as described by the statute, and cannot now
argue that it did not on appeal. Buck v. Rogers, 709 S.W.2d 283, 287 (Tex. App.—Corpus
3 Notably, TREC does not challenge its liability on the basis that the Gomezes were acting on their
own behalf and not as brokers. In fact, in its appellate brief, TREC expressly concedes that because, in its
view, the Gomezes were acting on their own behalf, “liability of the [the Account] to pay damages in this
case is limited to actions specifically delineated in Occupations Code Section 1101.652(a)(3), i.e.
misrepresentation, dishonesty or fraud when selling, buying, trading or leasing real property.”
(emphasis included in original).
9
Christi 1986, no writ) (“Counsel cannot now urge what was conceded at trial.”). Moreover,
even if TREC had not conceded this point, given the circumstances of the credit
agreement followed by the immediate notice of anticipatory breach, foreclosure, and
trustee’s sale, the trial court did not err by determining that the Gomezes’ actions
constituted dishonesty as contemplated by the statute.4 See TEX. OCC. CODE ANN. §
1101.601; Asgari, 402 S.W.3d at 816 (applying a no-evidence standard of review to a
challenge by TREC to a trial court’s order for payment from the account). Our review of
the trial court’s ruling on this basis therefore turns solely on whether it was error to order
recovery from the Account because the third transaction did not constitute conduct
involved with the buying, selling, leasing or trading of real property.5
As an initial matter, we find that the Hansens were not required to show that the
Gomezes’ conduct involved the selling buying, trading, or leasing of real property. The
Hansens alleged in their application that the judgment was based on the Gomezes’ acts
which violated sections 652(a)(3) and 653(1). See id. §§ 652(a)(3), 653(1). Section
652(a)(3) requires that the conduct be involved in the buying, trading or leasing of real
4 In addition, while it has not been explicitly challenged by TREC on appeal, there was evidence to
support a trial court determination that this transfer was fraudulent under TUFTA. See Tex. Real Estate
Comm’n v. Asgari, 402 S.W.3d 814, 816 (Tex. App.—San Antonio 2013, no pet.). Badges of fraud listed
in the TUFTA statute include the following circumstances: the transfer of property was made to an insider;
the transfer or obligation was concealed; and, before the transfer was made or obligation incurred, the
debtor had been sued. TEX. BUS. & COM. CODE ANN. § 24.005(b) (West, Westlaw through 2013 3d C.S.).
Here, the Gomezes transferred property that they obtained from Mario’s father-in-law for less than the
appraised value. And, after suit had been filed, they entered into a security agreement, which effectively
transferred the property in violation of a lis pendens, thereby concealing the transfer by disguising it as a
security agreement.
5 In the judgment, the trial court determined that the defendants were liable to the Hansens for
actual damages. Notably, TUFTA does not specifically allow for the remedy of actual damages. TEX. BUS.
& COM. CODE ANN. § 24.008 (West, Westlaw through 2013 3d C.S.). However, TUFTA does provide for
“any other relief the circumstances may require” as an equitable remedy. See id. Regardless, TREC has
not argued, to the trial court or on appeal, that an award of actual damages was not available for a TUFTA
violation in connection to either transfer.
10
property; section 653(1) does not. Id. TREC contends that, in this case, recovery cannot
be based on section 653(1) because the Gomezes were not certificate holders. Id. §
652(a)(1). Section 653(1) only provides for the suspension or revocation of a certificate
holder; however, the statute governing the Account specifically states that it applies if a
person described by Section 1101.601, which includes both license and certificate
holders, “engages in conduct described by Section 1101.652(a)(3) or (b) or 1101.653(1),
(2), (3), or (4).” TEX. OCC. CODE ANN. § 1101.601(a). Therefore, the plain language of
the statute indicates that an aggrieved person can recover if either a license holder or a
certificate holder engages in any of the conduct described in either section of the statute.
City of Rockwall v. Hughes, 246 S.W.3d 621, 625–26 (Tex. 2008) (explaining that
appellate courts rely on the plain meaning of the text, unless a different meaning is
supplied by legislative definition or is apparent from context, or unless such a construction
leads to absurd results). Accordingly, we conclude that the Hansens were entitled to
reimbursement from the Account for the Gomezes’ conduct in violation of section 653(1),
which was not required to involve the buying, selling, leasing, or trading of real property.
See TEX. OCC. CODE ANN. § 653(1).
Moreover, even if the Hansens were limited to payment for conduct described in
652(a)(3), we conclude that, under these circumstances, placing a lien on a property
eventually resulting in the sale of the property at a trustee’s sale involves the selling of
the property as contemplated by section 652(a)(3). See id. § 652(a)(3). Allowing recovery
from the Account for the trial courts’ finding that the Gomezes improperly transferred the
property to the Schweizers in violation of the lis pendens, which TREC expressly
conceded could have amounted to fraud, is entirely consistent with the purpose of the
11
creation of the Account “to reimburse aggrieved persons who suffer actual damages” at
the hands of a license holder, certificate holder, or an agent of a license or certificate
holder. TEX. OCC. CODE ANN. § 1101.601(a); see Asgari, 402 S.W.3d at 816–17.
For the foregoing reasons, we conclude that the trial court did not err by ordering
payment from the account based on the conduct of the Gomezes during second
transaction. Accordingly, we need not determine whether the trial court could have
ordered payment from the Account based solely on the Gomezes’ conduct in the first
transaction with Workman. See TEX. R. APP. P. 47.1.
1) Denial of the Hansens’ Fraud and Conspiracy Claims
TREC further contends that “the fact that the Judgment specifies that [the
Gomezes] only violated TUFTA establishes that the Trial Court denied relief based on
fraud, dishonesty or misrepresentation on the Gomezes’ part.” It points to the statement
in the judgment that “All relief not expressly granted herein is DENIED” as a ruling that
that the Hansens’ fraud and civil conspiracy claims were expressly denied. TREC argues
that therefore “logic dictates that the conclusion that the judgment was rendered against
the [Gomezes] merely as subsequent transferees of the property in question and not as
active conspirators in a scheme to deny the Hansens . . . .”
However, TREC does not argue or provide any authority indicating that the trial
court was estopped or in any way legally precluded from awarding the Hansens recovery
on their TUFTA claim on the basis of the Gomezes’ fraud by denying them relief on their
fraud and conspiracy claims. See TEX. R. APP. P. 38.1. In addition, even if the trial court
expressly determined that the Gomezes did not commit fraud or conspiracy by denying
these claims, it did not hold that they did not commit dishonesty or misrepresentation
12
under the statute.6 See TEX. OCC. CODE ANN. §§ 1101.601, 1101.652(a)(3), 1101.653(a).
We therefore conclude that the trial court’s denial of the Hansens’ fraud and civil
conspiracy claims did not prevent it from determining that the judgment was based on the
Gomezes’ misconduct as described in the statute. See id.
V. CONCLUSION
We affirm the trial court’s order.7
/s/ Rogelio Valdez
ROGELIO VALDEZ
Chief Justice
Delivered and filed the
19th day of December, 2014.
6 Notably the trial court ordered the Gomezes, but not the Schweizers, to pay the Hansens
attorney’s fees. See TEX. BUS. & COM. CODE ANN. § 24.013 (West, Westlaw through 2013 3d C.S.). (“In
any proceeding under this chapter, the court may award costs and reasonable attorney’s fees as are
equitable and just.”). This further indicates that the trial court based its finding of a TUFTA violation on the
Gomezes’ conduct.
7 On appeal, the Hansens argue that the trial court erred in finding that recovery was limited to one
transaction. They contend that the trial court should have ordered payment from the account in the amount
of $100,000 instead of $50,000. TEX. OCC. CODE ANN. § 1101.610 (West, Westlaw through 2013 3d C.S.)
(“Payments from the trust account for claims, including attorney's fees, interest, and court costs, arising out
of a single transaction may not exceed a total of $50,000, regardless of the number of claimants.”) The
Hansens, however, did not file a notice of appeal; therefore, we will not consider this issue. See TEX. R.
APP. P. 25.1.
13