Spencer & Assocs., P.C. v. Harper

Decision Date06 August 2019
Docket NumberNO. 01-18-00314-CV,01-18-00314-CV
Citation612 S.W.3d 338
Parties SPENCER & ASSOCIATES, P.C. d/b/a the Spencer Law Firm, Appellant v. Stephen HARPER, Vicki Harper and ZO Energy, Inc., Appellees
CourtTexas Court of Appeals

Panel consists of Justices Keyes, Higley, and Landau.

Evelyn V. Keyes, Justice

This case arises out of attempts by appellant Spencer & Associates, P.C. d/b/a the Spencer Law Firm (the Firm) to execute on a 1999 judgment rendered in its favor against appellee Stephen Harper. After the Firm propounded post-judgment discovery requests to Harper and appellees Vicki Harper and ZO Energy, Inc. (collectively, the Harper parties) and received interrogatory responses, the Firm sued the Harper parties for common-law fraud, fraud by nondisclosure, violation of the Texas Uniform Fraudulent Transfer Act (TUFTA), and conspiracy to commit fraud. The Harper parties moved for no-evidence summary judgment on all of the Firm's claims. The trial court granted summary judgment in favor of the Harper parties, rendering a take-nothing judgment against the Firm. On appeal, the Firm argues that the trial court erred in granting summary judgment because it raised a genuine issue of material fact on each element of its causes of action.

We reverse and remand.

Background

More than two decades ago, an entity related to Stephen Harper retained the Firm for legal representation. After the representation concluded, the Firm sued Harper for unpaid legal fees in the Harris County Civil Court at Law Number One. In 1999, the county court rendered judgment in favor of the Firm, awarding the Firm $33,237.28 in damages and $5,000 in attorney's fees, and it ruled that post-judgment interest would accrue on this amount at a rate of 10% per year. Harper did not appeal, and this judgment became final. In the twenty years since the county court rendered its judgment, Harper has resisted all attempts to execute on the judgment, and the Firm has been unable to obtain satisfaction of the judgment from Harper.1

As part of its efforts to collect upon the county court judgment awarded to it, the Firm engaged in extensive post-judgment discovery and litigation. The Firm sought information concerning the existence of Harper's nonexempt assets from Harper himself, his wife Vicki Harper, and ZO Energy, an oil and gas company for which Vicki owns 100% of the stock, among other entities that are not parties to the underlying proceeding or this appeal. During the course of this discovery, the Firm issued requests for production and interrogatories to all of the Harper parties, and it took the depositions of Harper and Vicki.

In December 2016, the Firm sued Harper, Vicki, and ZO Energy. The Firm asserted causes of action for common-law fraud, fraud by nondisclosure, negligent misrepresentation, violations of TUFTA, conspiracy to commit fraud, and aiding and abetting.2 The Firm alleged that Harper had "consistently and purposefully evaded collection efforts," serving as the president and director of ZO Energy but reporting that he "has no income or money and no non-exempt assets." The Firm also alleged that Vicki had conspired with Harper to thwart the Firm's efforts to collect its debt, claiming that she runs ZO Energy while, in actuality, Harper "has significant involvement in running ZO Energy but receives no compensation for his services" and "ZO Energy and/or Mrs. Harper pay for Mr. Harper's personal expenses and therefore can claim that Mr. Harper has no income."

The Firm alleged that the Harper parties "lied under oath [and] made misrepresentations and omissions of material fact in order to mislead Spencer and encumber its debt collection efforts." The Firm alleged that, when responding to post-judgment discovery requests, the Harper parties "had a duty to provide truthful, complete and accurate information" concerning Harper's financial situation, but instead the Harper parties failed to provide material information and purposefully misled the Firm. The Firm also alleged that the Harper parties violated TUFTA by making "several transfers ... between the parties, wherein Mr. Harper received little or no value for such transfer" in an effort to place Harper's assets beyond the reach of the Firm.

The Harper parties moved for no-evidence summary judgment, challenging each element of each cause of action asserted by the Firm. The Harper parties characterized the Firm's suit as "the next effort in a long line of harassing legal proceedings aimed at Mr. Harper and every entity or person with which he has any connection," and it noted that a receiver had been appointed in the county court case to assist in collection of the Firm's judgment against Harper. The Harper parties argued that, throughout the years, they had produced thousands of documents to the Firm, "including income tax returns, bank statements, corporate documents, and credit card statements," but the Firm had been unable to produce any evidence that Harper possesses assets to satisfy the judgment against him. The Harper parties pointed out that the Firm did not allege any specific misrepresentation or fraudulent transfer in its petition.

In response to the Harper parties' summary-judgment motion, the Firm identified several misrepresentations allegedly made by the Harper parties during the course of post-judgment discovery that served as the basis for the Firm's fraud claims. The Firm argued that, in sworn interrogatory answers dated May 24, 2013, Harper misrepresented that he had only one bank account with Broadway Bank that had a balance of less than $1.00. However, Harper also had an account with USAA Federal Savings Bank that "held non-exempt securities and cash with a value of over $12,000," but Harper never identified this account during post-judgment discovery or supplemented his interrogatory answers. As summary judgment evidence, the Firm attached Harper's interrogatory answers as well as bank statements from USAA Federal Savings Bank indicating that, as of September 30, 2013, an account in the name of "Steve J Harper and Vicki D Harper Com Prop" held "Small cap stocks/funds" and "Cash/money market funds" and had a portfolio value of $12,117.52. The bank statement included a graph depicting "Portfolio performance" that displayed activity starting in late 2011. The Firm also attached a bank statement indicating that, as of March 31, 2014, the value of the portfolio was $8,079.54, a withdrawal of $8,079.39 then occurred, and, thus, as of June 30, 2014, the value of the portfolio was $0.15.

The Firm pointed to Harper's interrogatory answer that he earned no income in 2012 or 2013 as an additional misrepresentation. According to the Firm, Harper received $7,355.68 in royalty income in 2012, and, in 2013, he reported income of $799,441 from a sole proprietorship and $130,943 in royalty income. As evidence, the Firm attached a Form 1099 issued by Forest Oil Corporation to Harper, reflecting the payment of $7,355.68 in royalties during the 2012 tax year. The Firm also attached the Harpers' 2013 tax return, in which they reported receiving $109,395 for "Rental real estate, royalties, partnerships, S corporations, trusts, etc." Their 2013 tax return also included a Schedule C for "Profit or Loss from Business (Sole Proprietorship)." This scheduled listed "Stephen J Harper" as the proprietor, listed "working interest" as the "Principal business or profession," and listed $799,441 for gross income. With respect to the question "Did you ‘materially participate’ in the operation of this business during 2013?" Harper checked the box for "Yes."

Finally, the Firm alleged that Vicki made misrepresentations during a March 2015 deposition. Specifically, she represented that Harper made no money, that he rarely consults with ZO Energy, and that he is not affiliated with ZO Energy. As evidence that these representations were false, the Firm pointed to documents relevant to Harper's income taxes, as well as evidence that Harper was the sole officer and director of ZO Energy in 2015, and testimony from Vicki's 2018 deposition that both she and Harper run ZO Energy and that Harper can withdraw money from ZO Energy at his discretion.

The Firm argued that each of these misrepresentations was material because Harper's financial status was "important and would be relied upon by a judgment creditor when deciding how to enforce and collect its judgment." The Firm argued that if this information about Harper's finances had been disclosed, it "could and would have attached Stephen Harper's hidden, nonexempt property to satisfy its judgment." It further argued that Harper "knew, or had reason to believe, that if he did not identify the existence and source of his assets—especially easy-to-hide assets like cash—that it would be virtually impossible for [the Firm] to locate and execute upon those assets." The Firm argued that Vicki Harper knew

that if she did not identify the existence and source of her husband's income—especially in light of her 2015 testimony that her husband "makes no money" and "is not affiliated with" her company ZO Energy—that it would be virtually impossible for [the Firm] to discover that Stephen Harper was in fact performing substantial amounts of work for ZO Energy, was diverting all of his income to his wife and ZO Energy, and was also earning money to the tune of half-a-million-dollars per year at times.

The Firm argued that it actually relied on these misrepresentations "by failing to act toward attaching Stephen Harper's nonexempt assets, by losing the opportunity to so act, and by losing the opportunity to obtain satisfaction of its judgment had the...

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