Cohen v. Newbiss Prop., L.P

• Decision Date: 24 November 2020
• Docket Number: NO. 01-19-00397-CV,01-19-00397-CV
• Parties: JAY H. COHEN, INDIVIDUALLY AND AS TRUSTEE OF THE JHC TRUSTS I AND II, Appellant v. NEWBISS PROPERTY, L.P AND SANDCASTLE HOMES, INC., Appellees
• Court: Texas Court of Appeals

JAY H. COHEN, INDIVIDUALLY AND AS TRUSTEE OF THEJHC TRUSTS I AND II, Appellant v. NEWBISS PROPERTY, L.P AND SANDCASTLE HOMES, INC., Appellees

NO. 01-19-00397-CV

Court of Appeals For The First District of Texas

November 24, 2020

On Appeal from the 234th District Court Harris County, Texas

Trial Court Case No. 2010-20973-A

MEMORANDUM OPINION

This is a suit by the limited partner of a partnership against the transferees of two tracts of properties owned by the partnership for aiding and abetting the general partner's breach of fiduciary duties, conspiracy, fraudulent transfer by the general partner, and recission based on ultra vires acts of the general partner. Appellant, Jay Cohen, individually and as trustee of the JHC Trusts I & II (collectively, "Cohen") challenges the trial court's no-evidence and traditional summary judgments in favor of appellees, NewBiss Property, LP. And Sandcastle Homes, Inc. (collectively, "the purchasers"). We affirm.

BACKGROUND

This case has a long history and has been in this Court on two previous occasions, as well as in the Texas Supreme Court. The background facts, as taken from the Texas Supreme Court opinion are as follows:

Jay Cohen was trustee of JHC Trusts I & II (the Cohen Trusts). In this capacity, he transferred several properties belonging to the trust into different partnerships. One instance involved "the West Newcastle property," which Cohen transferred to Flat Stone II, Ltd., a limited partnership. In June 2006, Matthew Dilick, the controlling shareholder of Flat Stone II of Texas, Inc., Flat Stone II's general partner, gave Regions Bank a first-lien deed of trust on the West Newcastle Property as collateral for a personal loan. Dilick defaulted and entered into a foreclosure-forbearance agreement with the bank in April 2009. Two weeks later, Dilick created a limited partnership called West Newcastle, Ltd. He then conveyed a tract from the West Newcastle property (Tract I) to this new limited partnership. Cohen sued, alleging Dilick fraudulently transferred the property and acted outside his authority in all the transfers and subsequent transactions. Cohen filed notices of lis pendens on the various pieces of property involved in the suit.

One of the notices of lis pendens dealt specifically with the West Newcastle property and stated that the purpose of the underlying suit was to invalidate the transfer of property to West Newcastle Ltd. and to set aside and cancel any liens Flat Stone II granted, through Dilick, to Regions Bank. The trial court granted the defendants' emergency motions to expunge the notices of lis pendens. Cohen sought mandamus relief in the court of appeals and obtained a stay of the trialcourt's expungement order. But while the matter was pending at the court of appeals, Dilick conveyed Tract I to Sandcastle for $750,000.

The court of appeals conditionally granted Cohen mandamus relief, holding the trial court erred when it found Cohen's pleading did not articulate a real-property claim on its face. Back at the trial court, Cohen added Sandcastle as a defendant and sought to set aside its recent purchase of Tract I. After another hearing on the applications to expunge the lis pendens notice, the trial court again ordered the lis pendens expunged—finding that Cohen "failed to establish by a preponderance of the evidence the probable validity of a real property claim." Meanwhile, between the hearing and the trial court's entering of the expungement order, Dilick transferred the remainder of the West Newcastle property (Tract II) back to Flat Stone II. Cohen filed another mandamus petition and a motion to stay in the court of appeals, but the court denied his requests. Dilick subsequently sold Tract II to NewBiss for $1.8 million. Cohen added NewBiss as a defendant to the lawsuit, seeking to set aside this latest purchase.

Sandcastle and NewBiss claimed bona-fide-purchaser status, and each filed summary-judgment motions. Both claimed they lawfully relied on the trial court's expungement order, which voided any notice derived from the lis pendens. The trial court granted both motions and rendered separate final judgments.

Sommers for Alabama & Dunlavy, Ltd. v. Sandcastle Homes, Inc., 521 S.W.3d 749, 751-52 (Tex. 2017) (footnotes omitted).

The previous appellate proceedings

The Mandamus

As referenced in the quote above, the first proceeding in this Court was a mandamus brought by Cohen before seeking to stay the trial court's expungement of the lis pendens he had filed soon after suing Dilick. This Court conditionally granted Cohen's requested relief, holding that the trial court erred in expunging thelis pendens because Cohen's pleading articulated a real property claim. See In re Cohen, 340 S.W.3d 889, 900 (Tex. App.—Houston [1st Dist.] 2011, orig. proceeding); see also TEX. PROP. CODE § 12.0071(c)(1) (authorizing expunction of a notice of lis pendens when the pleading in underlying suit does not contain cognizable real-property claim).

The First Appeal in this Court

Cohen added both Sandcastle and NewBiss to his suit against Dilick, seeking to set aside the sales of Tracts I and II. The purchasers each filed summary-judgment motions, asserting bona-fide-purchaser defenses¹ because the lis pendens filed by Cohen had been expunged. After the trial court granted the purchasers' motions for summary judgment, Cohen appealed to this Court. We held that the purchasers were, in fact, bona fide purchasers, because expunction of the lis pendens extinguished actual and constructive notice of the underlying claims. Cohen v. Sandcastle, 469 S.W.3d 173, 185-86 (Tex. App.—Houston [1st Dist.] 2015, rev'd, Sommers v. Sandcastle Homes, Inc., 521 S.W.3d 749 (Tex. 2017).

Texas Supreme Court proceedings

On petition for discretionary review, the Texas Supreme Court reversed this Court's judgment, holding that an expunged lis pendens did not "eradicate notice arising independently of the recorded instrument expunged." Sommers, 521 S.W.3d at 756. Because of "an unresolved fact issue" regarding whether the purchasers "had actual, independent knowledge of the issues covered by the lis pendens notice," the court remanded the case to the trial court "for further proceedings consistent" with its opinion. Id. at 757.

Proceedings on Remand in the Trial Court

On remand to the trial court, Cohen filed his Fourteenth Amended Petition, in which he asserted the following claims against the purchasers: (1) aiding and abetting Dilick in his breach of fiduciary duties, (2) conspiring with Dilick to breach his fiduciary duties, (3) receiving property by fraudulently transferred by Dilick in violation of the Texas Uniform Fraudulent Transfer Act ["TUFTA"],² and (4) seeking recission of the sales based on the ultra vires actions of Dilick.

The purchasers filed a No-Evidence Motion for Summary Judgment, asserting that Cohen had failed to produce any evidence on the elements of their aiding-and-abetting, conspiracy, or TUFTA claims.

The purchasers also filed a Traditional Motion for Summary Judgment, supported by summary judgment evidence, contending that:

(1) Cohen lacked standing to bring "certain claims" as a matter of law,

(2) Cohen failed to join multiple necessary parties,

(3) Cohen's tort claims were barred as a matter of law for multiple reasons including:

(a) law of the case,

(b) the absence of a cause of action for aiding and abetting,

(c) failure to raise a fact issue on conspiracy,

(4) the partnership agreement disclaimed the existence of fiduciary duties by the general partner, Dilick,

(5) there is no private cause of action for ultra vires actions relating to limited partnerships, and

(6) the TUFTA claim necessarily fails because of the lack of an underlying "claim."

After Cohen responded to and presented evidence in opposition to the motions, the trial court granted both the no-evidence and traditional motions for summary judgment.

This, Cohen's second appeal to this Court, follows.

PROPRIETY OF SUMMARY JUDGMENTS

In a single issue with multiple sub-issues, Cohen contends that the trial court erred in granting the purchasers' no-evidence motions for summary judgment and traditional motions for summary judgment.

Standard of Review

We review grants of summary judgment de novo. Cantey Hanger, LLP v. Byrd, 467 S.W.3d 477, 481 (Tex. 2015). In our review, we take as true all evidence favorable to the non-movant, indulge every reasonable inference in favor of the non-movant, and resolve any doubts in the non-movant's favor. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).

When, as here, a party moves for both traditional and no-evidence summary judgments, we first consider the no-evidence motion. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004). If the non-movant fails to meet its burden under the no-evidence motion, there is no need to address the challenge to the traditional motion as it necessarily fails. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013). Thus, we first review each claim under the no-evidence standard. Any claims that survive the no-evidence review will then be reviewed under the traditional standard.

To defeat a no-evidence motion, the non-movant must produce evidence raising a genuine issue of material fact as to the challenged elements. See Ridgway,135 S.W.3d at 600. A genuine issue of material fact exists if the evidence "rises to a level that would enable reasonable and fair-minded people to differ in their conclusions." Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997) (quoting Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex. 1995)). The evidence does not create an issue of material fact if it is "so weak as to do no more than create a mere surmise or suspicion" that the fact exists. Kia Motors Corp. v. Ruiz, 432 S.W.3d 865, 875 (Tex. 2014) (quoting Ridgway, 135 S.W.3d at 601).

A party moving for traditional summary judgment meets its burden by proving that there is no genuine issue of material fact and...