Challenger Gamin Solutions,Inc. & the Accent Group, Inc. v. Karen Earp

Affirmed as Modified; Opinion Filed May 15, 2013.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-11-01366-CV
CHALLENGER GAMING SOLUTIONS, INC. AND
THE ACCENT GROUP, INC., Appellants
V.
KAREN EARP, Appellee
On Appeal from the 429th Judicial District Court
Collin County, Texas
Trial Court Cause No. 429-01797-2010
OPINION
Before Justices Moseley, Bridges and Lang
Opinion by Justice Lang
Challenger Gaming Solutions, Inc. and The Accent Group, Inc. (collectively,
“Challenger”) sued Karen Earp under the Uniform Fraudulent Transfer Act (“UFTA”) following
default by Earp’s ex-husband on a loan from Challenger and his transfer of certain funds to Earp.
See TEX. BUS. & COM. CODE ANN. §§ 24.001-24.013 (West 2009). Contending the transfer of
the funds to Earp constituted a fraudulent transfer under the UFTA, Challenger sought to set
aside the conveyance of funds and recover the $62,000 balance due on the loan.
After Earp’s ex-husband was nonsuited by Challenger because of its inability to secure
service, Earp moved to designate her ex-husband as a responsible third party pursuant to chapter
1
33 of the Texas Civil Practice and Remedies Code. See TEX. CIV. PRAC. & REM. CODE ANN. §
33.004 (West Supp. 2012). Over Challenger’s objection, the trial court granted the motion and
submitted a proportionate responsibility question to the jury. 1
The jury found in favor of Challenger, awarded $62,000 in damages, and apportioned
fifty percent of the responsibility for the damages to Earp and the other fifty percent to her ex-
husband. In accordance with the jury’s verdict, the trial court rendered judgment against Earp in
the amount of $31,000.
The question we must decide is whether the proportionate responsibility statute applies to
an UFTA claim. We conclude it does not. Accordingly, we modify the trial court’s judgment to
reflect judgment against Earp in the amount of $62,000. As modified, we affirm the judgment.
I. BACKGROUND
Only a partial reporter’s record was filed in this case, but the facts as recited by the
parties in their briefs and Challenger’s live pleading at trial are not disputed. See TEX. R. APP. P.
38.1(g). According to the parties, the loan from Challenger was obtained in 2007 while the
Earps were married. Shortly after the loan was obtained, and while still married, the Earps
settled a lawsuit they brought against a third party unrelated to this case. The case was settled
1
The jury question and answer read as follows:
QUESTION 3:
You should only assign percentages to those you found caused the damages. The percentages you find must total 100 percent. The
percentages must be expressed in whole numbers. The percentage of responsibility attributable is not necessarily measured by the number
of acts or omissions found.
For those found by you to have caused damages to The Accent Group, Inc. and/or Challenger Gaming Solutions, Inc., find the
percentage caused by:
a. Karen Earp 50%
b. Bobby Earp 50%
2
for approximately $1.1 million, with an initial payment made to the Earps in the amount of
$200,000 and the remainder to be paid to the Earps over a period of five years.
About six months after settlement of the lawsuit, the loan owed to Challenger went into
default, and the Earps divorced. Under the divorce decree, Earp’s ex-husband was ordered to
assume all the couple’s debts and Earp was awarded all the community assets, including the
settlement proceeds.
Challenger brought its claim against Earp approximately one year later, seeking to void
the transfer of the settlement proceeds to the extent necessary to recover the balance due on the
loan. Challenger initially included Earp’s ex-husband as a defendant in the suit, but nonsuited
him after service on him could not be obtained. Upon Earp’s motion and over Challenger’s
objection, Earp’s ex-husband’s was designated as a responsible third party.
At trial, the jury was charged as to questions about whether the transfer to Earp from her
ex-husband was a fraudulent transfer. See TEX. BUS. & COM. CODE ANN. §§ 24.005, 24.006.
Also, the jury was charged to determine if Earp held “money that, in equity and good conscience,
belong[ed] to [Challenger] for [its] damages.” The jury determined she did and specifically
found she held the $62,000 due on the loan. However, as indicated above, the jury apportioned
only fifty percent of the liability for the damages to Earp. The other fifty percent was
apportioned to her ex-husband. Judgment was rendered on the verdict and Earp’s liability was
adjudged to be $31,000.
II. APPLICABLE LAW
A. Proportionate Responsibility and Responsible Third Party
The proportionate responsibility statute, as set forth in chapter 33 of the civil practice and
remedies code, provides a framework for apportioning percentages of responsibility in the
3
calculation of damages in any case in which more than one person, including the plaintiff, is
alleged to have caused or contributed to cause the harm for which recovery of damages is sought.
See TEX. CIV. PRAC. & REM. CODE ANN. § 33.003 (West 2008); JCW Elec., Inc. v. Garza, 257
S.W.3d 701, 702 (Tex. 2008). It applies in “any cause of action based on tort,” including claims
for negligence, fraud, products liability, and “any other conduct that violates an applicable legal
standard.” TEX. CIV. PRAC. & REM. CODE ANN. § 33.002; Werner v. KPMG, LLP, 415 F. Supp.
2d 688, 703 (S.D. Tex. 2006); JCW Elec., 257 S.W.3d at 705. Consistent with the tenet of tort
law that a party’s liability arises from its own injury-causing conduct, its purpose is to hold each
party “responsible [only] for [the party’s] own conduct causing injury.” MCI Sales & Serv., Inc.
v. Hinton, 329 S.W.3d 475, 505 (Tex. 2010) (quoting F.F.P. Operating Partners, LP v. Duenez,
237 S.W.3d 680, 690 (Tex. 2007)). Accordingly, the statute requires the trier of fact to
determine the percentage of responsibility of each claimant, defendant, settling person, and
responsible third party who has been designated in accordance with the statute. 2 See TEX. CIV.
PRAC. & REM. CODE ANN. § 33.003.
Under section 33.011, a responsible third party is “any person who is alleged to have
caused or contributed to causing in any way the harm for which recovery of damages is sought,
whether by negligent act or omission, by any defective or unreasonably dangerous product, by
other conduct or activity that violates an applicable legal standard, or by any combination of
2
Section 33.003(a) reads as follows:
The trier of fact, as to each cause of action asserted, shall determine the percentage of responsibility, stated in whole numbers, for the
following persons with respect to each person’s causing or contributing to cause in any way the harm for which recovery of damages is
sought, whether by negligent act or omission, by any defective or unreasonably dangerous product, by other conduct or activity that
violates an applicable legal standard, or by any combination of these:
(1) each claimant;
(2) each defendant;
(3) each settling person; and
(4) each responsible third party who has been designated under section 33.004.
TEX. CIV. PRAC. & REM. CODE ANN. § 33.003(a).
4
these.” See id. § 33.011(6). A defendant may designate a responsible third party, and potentially
reduce the percentage of his own liability to the plaintiff, by filing a motion for leave with the
trial court. See id. § 33.004(a) (West Supp. 2012); J.M.K., Inc. v. Gregg & Gregg, P.C., 192
S.W.3d 189, 201 (Tex. App.—Houston [14th Dist.] 2006, no pet.). The trial court must grant
leave unless an objection is filed within fifteen days and the defendant has failed to plead
sufficient facts concerning the alleged responsibility of the third party. See TEX. CIV. PRAC. &
REM. CODE ANN. § 33.004(f), (g); Kimbrell v. Molinet, 288 S.W.3d 464, 469 (Tex. App.—San
Antonio 2008), aff’d, 356 S.W.3d 407 (Tex. 2011).
Although the proportionate responsibility statute by its terms applies to “any cause of
action based on tort,” it has been found not to apply to statutory tort claims where the statute
contains its own separate and conflicting legislative fault-allocation scheme. See Sw. Bank v.
Info. Support Concepts, Inc., 149 S.W.3d 104, 111 (Tex. 2004) (concluding proportionate
responsibility statute does not apply to conversion claims under article 3 of the Uniform
Commercial Code because article 3 has its own loss-allocation scheme). It has also been found
not to apply in vicarious liability cases, such as the theory of respondeat superior for an
employer/employee, where a person is held responsible for the wrongful conduct of another
based solely on the nature of their relationship. See Villarreal v. Wells Fargo Brokerage Servs.,
LLC, 315 S.W.3d 109, 125-26 (Tex. App.—Houston [1st Dist.] 2010, no pet.); Bedford v. Moore,
LLP, 166 S.W.3d 454, 460 (Tex. App.—Fort Worth 2005, no pet.) (citing Rosell v. Cent. W.
Motor Stages, Inc., 89 S.W.3d 643, 653 (Tex. App.—Dallas 2002, pet. denied)).
B. Uniform Fraudulent Transfer Act
The UFTA was enacted to establish uniformity among the states with respect to
fraudulent transfers. See TEX. BUS. & COM. CODE ANN. § 24.012. Its purpose is to prevent
5
debtors from defrauding creditors by placing assets beyond their reach. Yokogawa Corp. of Am.
v. Skye Int’l Holdings, Inc., 159 S.W.3d 266, 269 (Tex. App.—Dallas 2005, no pet.). Consistent
with this purpose, the UFTA provides a comprehensive statutory scheme through which a
creditor may seek recourse for a fraudulent transfer of assets or property. See TEX. BUS. & COM.
CODE ANN. §§ 24.008, 24.009; Tel. Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d
601, 607 (Tex. App.—Houston [1st Dist.] 2002, no pet.). As codified in chapter 24 of the Texas
Business and Commerce Code, the UFTA delineates what types of transfers and obligations are
fraudulent, enumerates the remedies available to a creditor, prescribes the measure of liability of
a transferee, and lists the defenses and protections afforded a transferee. See TEX. BUS. & COM.
CODE ANN. §§ 24.005-.006, 24.008-.009; UNIFORM FRAUDULENT TRANSFER ACT, prefatory note
& cmts. (“UFTA note”) at 3-5 & §§ 7-8 (1984).
Sections 24.005 and 24.006 delineate the types of transfers and obligations that are
fraudulent. See TEX. BUS. & COM. CODE ANN. §§ 24.005-.006. Except for a preferential
transfer 3 to an insider under section 24.006(b), which requires additional proof that the insider
had “reasonable cause to believe the debtor was insolvent,” a fraudulent transfer is established
either by showing the debtor intended to defraud the creditor or made the transfer without
receiving reasonably equivalent value. 4 See id.
3
A preferential transfer is “a transfer by an insolvent debtor for or on account of an antecedent debt.” See UFTA note § 5 cmt.(2).
4
Specifically, under section 24.005(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; 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.
6
The fundamental remedy for a creditor who establishes a fraudulent transfer is recovery
of the property from the person to whom it has been transferred. NAT’L CONFERENCE OF
COMM’RS ON UNIF. STATE LAWS, FRAUDULENT TRANSFER ACT SUMMARY (2013), available at
http://uniformlaws.org/ActSummary.aspx?title=Fraudulent%20Transfer%20Act. Under section
24.008, a defrauded creditor may be entitled to equitable relief in the form of:
(1) an avoidance of the transfer or obligation to the extent necessary to satisfy his
claim;
(2) an attachment or other provisional remedy against the asset transferred or other
property of the transferee; or
(3) subject to applicable principles of equity and in accordance with applicable rules of
civil procedure
(a) an injunction against further disposition by the debtor or a transferee, or both, of
the asset transferred or of other property;
(b) the appointment of a receiver to take charge of the asset transferred or other
property of the transferee; or
(c) any other relief the circumstances may require.
See id. § 24.008 (a). If the creditor has previously obtained a judgment against the debtor, the
creditor may also levy execution on the asset transferred or its proceeds. Id. § 24.008(b).
Additionally, under section 24.009(b), a creditor who obtains an avoidance of the transfer
pursuant to section 24.008 may recover a money judgment for the value of the asset transferred
or the amount necessary to satisfy the creditor’s claim, whichever is less. Id. § 24.009(b). The
TEX. BUS. & COM. CODE ANN. § 24.005(a).
Section 24.006 identifies two types of transfers that are fraudulent as to present creditors. It provides as follows:
(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made
or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent
value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a
result of the transfer or obligation.
(b) A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was
made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe
that the debtor was insolvent.
7
judgment may be rendered against the first transferee, the person for whose benefit the transfer
was made, or any subsequent transferee other than a good faith transferee who takes for value or
from any subsequent transferee. Id. Section 24.009 also delineates the defenses and protections
afforded a transferee. 5
5
Specifically, section 24.009 provides the following defenses and protections:
(a) A transfer or obligation is not voidable under Section 24.005(a)(1) of this code against a person who took in good
faith and for a reasonably equivalent value or against any subsequent transferee or obligee.
***
(c) (1) Except as provided by Subdivision (2) of this subsection, if the judgment under Subsection (b) of this section is
based upon the value of the asset transferred, the judgment must be for an amount equal to the value of the asset at
the time of the transfer, subject to adjustment as the equities may require.
(c) (2) The value of the asset transferred is not to be adjusted to include the value of improvements made by a good faith
transferee, including:
(A) physical additions or changes to the asset transferred;
(B) repairs to the asset;
(C) payment of any tax on the asset;
(D) payment of any debt secured by a lien on the asset that is superior or equal to the rights of a voiding creditor
under this chapter; and
(E) preservation of the asset.
(d) (1) Notwithstanding voidability of a transfer or an obligation under this chapter, a good faith transferee or obligee is
entitled, at the transferee’s or obligee’s election, to the extent of the value given the debtor for the transfer or
obligation, to:
(A) a lien, prior to the rights of a voiding creditor under this chapter, or a right to retain any interest in the asset
transferred;
(B) enforcement of any obligation incurred; or
(C) a reduction in the amount of the liability on the judgment.
(2) Notwithstanding voidability of a transfer under this chapter, to the extent of the value of any improvements made
by a good faith transferee, the good faith transferee is entitled to a lien on the asset transferred prior to the rights of a
voiding creditor under this chapter.
(e) A transfer is not voidable under Section 24.005(a)(2) or Section 24.006 of this code if the transfer results from:
(1) termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law;
or
(2) enforcement of a security interest in compliance with Chapter 9 of this Code [TEX. BUS. & COM. CODE ANN. §
9.101 et seq. (West 2011 & Supp. 2012)].
(f) A transfer is not voidable under Section 24.006(b) of the code:
8
A fraudulent transfer under the UFTA is a tort. In re Tex. Am. Express, Inc., 190 S.W.3d
720, 725 (Tex. App.—Dallas 2005, no pet.).
C. STANDARD OF REVIEW
Whether the proportionate responsibility statute applies in an UFTA suit is a question of
law, which an appellate court reviews de novo. MCI Sales and Serv., Inc. v. Hinton, 329 S.W.3d
475, 500 (Tex. 2010); Cressman Tubular Prods. Corp. v. Kurt Wiseman Oil & Gas Ltd., 322
S.W.3d 453, 459-60 (Tex. App.—Houston [14th Dist.] 2010, pet. denied). In construing a
statute, the court’s primary objective is to give effect to the legislature’s intent, considering the
purpose of the statute, its legislative history, and the consequences of a proposed construction.
See TEX. GOV’T CODE ANN. § 311.023(1), (3), (5) (West 2013); Galbraith Eng’g Consultants,
Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009). The plain meaning of the text is the best
expression of legislative intent unless a different meaning is apparent from the context or the
plain meaning leads to an absurd result. City of Rockwall v. Hughes, 246 S.W.3d 621, 625-26
(Tex. 2008); see also Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 866
(Tex. 1999). When two statutes conflict and cannot be reconciled, the specific statute controls
over the general one. See TEX. GOV’T CODE ANN. § 311.026(b); Lexington Ins. Co. v. Strayhorn,
209 S.W.3d 83, 86 (Tex. 2006).
(1) to the extent the insider gave new value to or for the benefit of the debtor after the transfer was made unless
the new value was secured by a valid lien;
(2) if made in the ordinary course of business or financial affairs of the debtor and the insider; or
(3) if made pursuant to a good-faith effort to rehabilitate the debtor and the transfer secured present value given
for that purpose as well as an antecedent debt of the debtor.
See TEX. BUS. & COM. CODE ANN. § 24.009.
9
III. APPLICATION OF LAW TO FACTS
The proportionate responsibility statute provides a means of apportioning responsibility
for damages in tort cases between parties alleged to have contributed to the harm for which
damages are sought. See TEX. CIV. PRAC. & REM. CODE ANN. §§ 33.002, 33.003. However, the
statute does not to apply to statutory tort claims where the statute contains its own separate and
conflicting legislative fault-allocation scheme. See Sw. Bank, 149 S.W.3d at 111. Challenger
contends the statutory scheme for redress of the UFTA, a tort, conflicts with the general fault-
allocation scheme in the proportionate responsibility statute. Specifically, Challenger notes the
UFTA authorizes both equitable relief and money damages and enumerates the defenses and
protections afforded transferees. According to Challenger, the equitable remedies allowed
cannot be apportioned, and the defenses and protections afforded transferees do not include a
provision allowing for the apportionment of responsibility based on fault. Challenger contends
these provisions underscore the UFTA’s “overriding” purpose of providing a complete remedy to
creditors and applying the proportionate responsibility statute would defeat this purpose. Earp,
on the other hand, contends without elaborating that because the UFTA’s statutory scheme does
not specifically contain a fault-allocation scheme, the proportionate responsibility statute applies.
Both parties rely on JCW Electronics, Inc. v. Garza, 257 S.W.3d 701 (Tex. 2008) and Southwest
Bank v. Information Support Concepts, Inc., 149 S.W.3d 104 (Tex. 2004). 6 In each of these
6
At oral argument, Challenger also cited Kerrville HRH, Inc. v. Kerrville, 803 S.W.2d 377 (Tex. App.—San Antonio 1990, writ denied),
Duperier v. Texas State Bank, 28 S.W.3d 740 (Tex. App.—Corpus Christi 2000, pet. dism’d), and GE Capital Commercial v. Worthington
National Bank, 2011 WL 5025153 (N.D. Tex. Oct. 20, 2011). In GE Capital, the court summarized Kerrville and Duperier as standing for the
proposition that proportional liability is inapplicable to fraud claims under the Texas Securities Act and the Fraud In Real Estate and Stock
Transactions provision of chapter 27 of the Texas Business and Commerce Code because it would (1) abrogate the effect of a statutory defense
and (2) negligence is not a defense to fraud. 2011 WL 5025153 at *6. The court concluded further that the doctrine of unclean hands applied in
an UFTA suit. Id. Because Kerrville and Duperier predate the supreme court decisions in Southwest Bank and JCW Electronics, and because the
issue at hand does not involve the doctrine of unclean hands, we focus our discussion on Southwest Bank and JCW Electronics.
Earp cites additionally to Villarreal v. Wells Fargo Brokerage Services, LLC, 315 S.W.3d 109 (Tex. App.—Houston [1st Dist.] 2010, no pet.).
The Villarreal court concluded that the proportionate responsibility statute applied to claims brought under the Texas Securities Act and the
Texas Trust Act because the appellant did not assert in his motion for summary judgment that the claims were not based in tort or the subject
10
cases, the courts considered the applicability of the proportionate responsibility statute to
statutory tort claims under the Texas Uniform Commerce Code (“UCC”).
Southwest Bank involved a conversion action under article 3 of the UCC. Sw. Bank, 149
S.W.3d at 104. Information Support Concepts (“ISC”) sued Southwest Bank for conversion after
Southwest Bank accepted for deposit into the personal account of an ISC employee several
checks that were payable to ISC, but did not bear an ISC endorsement or signature. Id. at 104-
05. Southwest Bank moved to join the employee as a responsible third party pursuant to the
proportionate responsibility statute, but the trial court denied the motion. Id. at 105. On appeal,
Southwest Bank argued that the employee shared responsibility for the conversion and should be
proportionately liable. Id. The court of appeals rejected Southwest Bank’s argument and
affirmed the trial court’s judgment. Affirming the court of appeals, the supreme court observed
that article 3 “contains a comprehensive and carefully considered allocation of responsibility
among parties to banking relationships,” including “its own comparative negligence provisions
that apply to some, but not all, conversion claims.” Id. at 107. As examples, it cited section
3.416, which allows a bank that mistakenly pays a thief who presents a stolen check to sue the
thief for breach of the transfer warranty, and section 3.405, which allows a payor to defend
against a conversion action, brought by a payee whose indorsement has been forged, by proving
the payee’s negligence contributed to the forgery. Id. (citing TEX. BUS. & COM. CODE ANN. §§
3.405, 3.416). The court concluded these comparative negligence provisions “evince a shift”
from the strict liability scheme that imposed the entire liability on a bank proven to have been
negligent to a scheme based on fault. Id. at 108 (quoting James J. White & Robert S. Summers,
statutes contained a separate and conflicting legislative fault section. 315 S.W.3d at 124-25. We conclude Villarreal is inapplicable because the
case was disposed of by summary judgment rather than a trial on the merits.
11
Uniform Commercial Code § 19-3(4th ed. 1995), “Under the old Code, proof that the bank was
negligent generally meant that the entire loss fell on the bank, not the depositor, regardless of the
depositor’s negligence. Now, the depositor will seldom be able to cast the entire loss on the
bank; the loss will be shared.”). Further, the supreme court noted that although not all UCC-
based conversion claims are subject to the contributory negligence provisions in article 3,
applying the proportionate responsibility statute to article 3 claims “could disrupt the UCC’s
carefully allocated liability scheme and would create a “unique” liability scheme for UCC-based
conversion claims in Texas, “thwarting” the UCC’s underlying purpose of “mak[ing] uniform
the law among the various jurisdictions.” Id. at 108-09, 110-11. The court concluded that
because the provisions of article 3 are more specific than the proportionate responsibility statute,
the proportionate responsibility statute did not apply. Id. at 111.
The statutory cause of action at issue in JCW Electronics was a claim for breach of
implied warranty under article 2 of the UCC. 257 S.W.3d at 702. Garza sued JCW and the City
of Port Isabel after her son was found in a Port Isabel jail cell dead, hanging from a cord of a
telephone provided by JCW. Id. Because Garza sought damages for the death of her son, her
son’s responsibility for his death was at issue under the proportionate responsibility statute which
includes the decedent within the definition of “claimant” in any suit involving death. See id. at
707 (citing TEX. CIV. PRAC. & REM. CODE ANN. 33.011(1)). A jury found generally in Garza’s
favor, but also found her deceased son sixty percent liable. Id. at 703. The question presented to
the supreme court was whether the proportionate responsibility statute should apply to Garza’s
implied warranty claim. See id. at 702. Comparing article 2 to article 3, the court noted that,
while article 2 allows for recovery of consequential damages for “injury to person or property
proximately resulting from any breach of warranty,” it does not contain a comprehensive fault
12
scheme apportioning liability like article 3. Id. at 706. The court further noted that, as a result, it
“and many other [courts] have historically included breach of implied warranty claims as part of
the mix when comparing fault in tort-based litigation.” Id. at 707. As examples, the court cited
Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (Tex. 1984), where the court allowed
“comparison of plaintiff’s conduct . . . with the conduct or product of a defendant, [regardless of]
whether the suit combined crashworthiness or other theories of strict products liability, breach of
warranty, or negligence,” and Signal Oil & Gas Co. v. Universal Oil Products, 572 S.W.2d 320
(Tex. 1978), where the court concluded that a buyer, whose negligence in conjunction with the
unsuitable product proximately caused the damage in an implied warranty claim, “could not
recover consequential damages to the extent that the buyer’s negligence or fault was a concurring
proximate cause of such damages.” Id. Based on article 2’s liability scheme and case law, the
court concluded that the proportionate responsibility statute applied to Garza’s implied warranty
claim. Id. at 706-07.
Southwest Bank and JCW Electronics are not dispositive of the issue before us. Both
involved statutory provisions specifically defining different parties’ conduct and liability, and
claims where it was alleged the conduct of at least two individuals proximately caused the
damages. As such, they lend themselves to a fault-allocation scheme. Although the court in
Southwest Bank declined to apply the separate proportionate responsibility provisions of chapter
33 of the civil practice and remedies code, it expressly noted the claim was subject to the fault
allocation scheme in article 3 of the UCC. Of course, the claim in JCW Electronics was found to
be a proper fit for chapter 33’s proportionate responsibility provisions.
In contrast to the UCC article 2 warranty claim in JCW Electronics and the UCC article 3
conversion claim in Southwest Bank, an UFTA claim does not lend itself to a fault-allocation
13
scheme. Rather, the focus of an UFTA claim is to ensure the satisfaction of a creditor’s claim
when the elements of a fraudulent transfer are proven. Specifically, the UFTA provides several
different forms of equitable relief designed to follow and reach assets. See, e.g., TEX. BUS. &
COM. CODE ANN. § 24.008(a)(2) (providing for attachment against the asset transferred or other
property of the transferee), § 24.008(a)(3) (providing for an injunction against further disposition
by the debtor, a transferee, or both, of the transferred asset or other property). Also, the UFTA
provides for a money judgment that does not exceed the value of the asset transferred or the
amount necessary to satisfy the creditor’s claim. See id. § 24.009(b). Further, the UFTA allows
recovery against the debtor, the transferee, or the person for whose benefit the transfer was made,
but does not distinguish the forms of relief based on culpability. See id. §§ 24.008, 24.009;
Mack v. Newton, 737 F.2d 1343, 1361 (5th Cir. 1984) (addressing UFTA’s predecessor, the
Uniform Fraudulent Conveyance Act). That is, “[i]t operates against the title of an ‘innocent’
transferee who has not paid value just a fully as against the title of a transferee who has
participated in a fraud.” 7 Mack, 737 F.2d at 1361. Although the UFTA addresses the debtor’s
actions in the five types of transfers it identifies as fraudulent 8 and the transferee’s actions in one
of the five types of transfers, 9 it contains no words such as “damages,” “liable,” or “actionable”
and does not itself prohibit any transfers or render the making or receiving of them illegal or
wrongful. See TEX. BUS. & COM. CODE ANN. §§ 24.001-.012; Mack, 737 F.2d at 1361.
Accordingly, the proportionate responsibility statute has no applicability in an UFTA claim. See
Galbraith Eng’g, 290 S.W.3d at 868 n.6 (“As one commentator has observed ‘[t]he thrust of the
7
Under section 24.006(b), a transfer is fraudulent as to a creditor whose claim arose before the transfer when, among other things, an “insider”
transferee “had reasonable cause to believe that the debtor was insolvent.” TEX. BUS. & COM. CODE ANN. § 24.006(b). Thus, this section identifies
culpability, to some extent, of a transferee. However, the statute does not shift or apportion liability based on such knowledge.
8
See id. §§ 24.005-.006.
9
See id. § 24.006(b).
14
2003 statute [chapter 33] is that the jury should allocate responsibility among all persons who are
responsible for the claimant’s injury.’”) (quoting 19 WILLIAM V. DORSEANO III, TEXAS
LITIGATION GUIDE § 291.03[2][b][i] at 291-24.1 (2009)).
Considering the plain meaning of the text and purpose of the UFTA, we conclude the
proportionate responsibility statute conflicts with the liability scheme in the UFTA and cannot be
reconciled. Accordingly, we conclude the proportionate responsibility statute does not apply to
an UFTA claim.
IV. CONCLUSION
Having concluded the proportionate responsibility statute does not apply to an UFTA
claim, we resolve Challenger’s sole issue in its favor and modify the trial court’s judgment to
reflect judgment against Earp in the amount of $62,000. As modified, we affirm the trial court’s
judgment.
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE
111366F.P05
15
S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
CHALLENGER GAMING SOLUTIONS, On Appeal from the 429th Judicial District
INC. AND THE ACCENT GROUP, INC., Court, Collin County, Texas
Appellants Trial Court Cause No. 429-01797-2010.
Opinion delivered by Justice Lang, Justices
No. 05-11-01366-CV V. Moseley and Bridges participating.
KAREN EARP, Appellee
In accordance with this Court’s opinion of this date, we MODIFY the trial court’s
judgment to reflect judgment against Karen Earp in the amount of $62,000.
We ORDER that, as modified, the judgment of the trial court is AFFIRMED.
We ORDER that appellants Challenger Gaming Solutions, Inc. and The Accent Group,
Inc. recover their costs of this appeal from appellee Karen Earp.
Judgment entered this 15th day of May, 2013.
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE
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