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 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.
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
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 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.
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 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,
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 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, 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)).
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 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.
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
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:
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 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.
A fraudulent transfer under the UFTA is a tort. In re Tex. Am. Express,
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).
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).
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, 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 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 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 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
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.
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.
TEX. CIV. PRAC. REM.CODE ANN. § 33.003(a).
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:
See TEX. BUS. COM.CODE ANN. § 24.009.
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 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.