Flood v. Katz

• Citation: 294 S.W.3d 756
• Decision Date: 06 August 2009
• Docket Number: No. 05-07-01262-CV.,05-07-01262-CV.
• Parties: Katherine A. FLOOD, David Spiker, John Spiker, and William Peterson, Appellants, v. Irwin A. KATZ, Appellee, In re Katherine A. Flood, David Spiker, John Spiker, and William Peterson, Relators.
• Court: Court of Appeals of Texas

294 S.W.3d 756

Katherine A. FLOOD, David Spiker, John Spiker, and William Peterson, Appellants, v. Irwin A. KATZ, Appellee In re Katherine A. Flood, David Spiker, John Spiker, and William Peterson, Relators.

No. 05-07-01262-CV.

Court of Appeals of Texas, Dallas.

August 6, 2009.

Rehearing Overruled October 15, 2009.

John Emmett, John Emmett, P.C., Dallas, TX, for Appellant.

Baxter W. Banowsky, Banowsky Betz & Levine, P.C., Dallas, TX, for Appellee.

Before Justices BRIDGES, LANG, and LANG-MIERS.

OPINION

Opinion By Justice BRIDGES.

Appellants Katherine Flood, David Spiker, John Spiker, and William Peterson (collectively referred to as "Flood") appeal the summary judgment in favor of appellee Irwin Katz. In two issues, Flood challenges whether the trial court erred in granting: (1) summary judgment in favor of Katz and (2) Katz's objections to Flood's evidence. In a related original proceeding, appellants requested a stay of the trial court proceedings. We reverse the trial court's judgment and remand for further proceedings. We dismiss appellant's petition for writ of prohibition.

Background

Katz was a director of a company known as International Basic Resources, Inc. ("IBR"). Flood filed suit against the IBR directors, including Katz, in Idaho for violations of federal and state securities laws and consumer protection laws. As a part of the discovery process in Idaho, Katz produced some of his financial records and tax returns. The Idaho court later entered summary judgment in favor of Flood against the IBR directors in the amount of $1,158,943.08. Katz filed an appeal of the judgment in Idaho.

During the pendency of the Idaho appeal, Flood domesticated the judgment in Texas and commenced post-judgment discovery against Katz. Flood asserts that efforts at collection in Texas included scheduling the deposition of Katz to determine if the assets previously disclosed pursuant to the Idaho court's discovery order remained exempt from execution as asserted by Katz. In his brief, Katz admits that he "actively resist[ed] post-judgment discovery." Due to Flood's collection efforts in Texas, Katz threatened to file for bankruptcy protection. In February of 2003, Flood served a notice of intention to take Katz's deposition with subpoena duces tecum. Katz filed his motion to quash the deposition notice. No order on this motion appears in the record. In April of 2003, Flood served a first amended notice of intention to take Katz's deposition with subpoena duces tecum. In May of 2003, the parties entered into a rule 11 agreement to effectuate supplemental discovery in aid of collection of the judgment. Subsequently, Flood filed a motion to compel discovery responses, and the trial court entered an Agreed Order which stated Katz violated the rule 11 agreement and required him to sit for his deposition and produce financial documents.

The Agreed Order also stated that "the parties announce they are in discussions in an effort to schedule a mediation of this case...." A mediation was ultimately scheduled for July 2003 without the deposition of Katz being taken. Flood argues the discovery produced prior to the Idaho judgment and the representations of Katz and his attorneys led Flood to believe Katz lacked the assets to discharge the Idaho judgment. Flood states that there was an agreement to meet based on the representations of Katz and his attorneys regarding Katz's inadequate assets and, ultimately, Flood agreed to compromise the judgment for "substantially less than the judgment amount." A settlement agreement was executed between the parties following mediation. As a result of the settlement, the Texas action and the appeal of the Idaho judgment were dismissed with prejudice.

In March of 2005, Flood discovered that Katz had transferred certain assets into his wife's name prior to the mediated settlement. After the settlement with Flood, Katz asked his wife to return the transferred assets. His wife refused to return the assets, and Katz filed for divorce. In the divorce action, Katz and his wife filed affidavits which enumerated their discussions regarding the transfer of properties prior to and after the Idaho judgment was obtained against Katz. Flood alleges the transfers were fraudulent and made "in order to avoid payment of the likely judgment."

Flood intervened in the Texas divorce action¹ and alleged fraud and fraudulent inducement, fraudulent transfer to defraud creditors, conspiracy, and an action based upon unresolved compromised claims. Katz moved for a no-evidence summary judgment against Flood on the following grounds: (1) there was no evidence of Flood's claims of fraud and fraudulent inducement; (2) there was no evidence Flood has a "claim" of fraudulent transfer pursuant to TEX. BUS. & COM.CODE ANN. § 24.001, et seq.; (3) because Flood's fraud claim fails, there is no evidence of conspiracy; (4) because Flood's fraud claim fails, there is no evidence that Flood has any viable claims against Katz which have not been fully resolved by the settlement agreement; and (5) because Flood's fraud claim fails, there is no evidence Flood is entitled to punitive damages or attorneys' fees. Katz also moved for a traditional summary judgment pursuant to the following grounds: (1) Katz made no misrepresentations to Flood; (2) if such misrepresentations were made, Flood did not reasonably rely upon the misrepresentations; (3) the fraudulent transfer claim fails because Flood does not have a "claim" against Katz as defined in TEX. BUS. & COM.CODE ANN. § 24.001; (4) Flood's conspiracy claim fails because Flood failed to show the conspiracy was the proximate cause of damages to Flood; (5) Flood's "unresolved Compromised Claims" are barred by the applicable statute of limitations; (6) Flood's "unresolved Compromised Claims" are barred by res judicata; and (7) Flood is not able to recover on a claim that would entitle Flood to punitive damages and attorney's fees.

Flood submitted multiple affidavits as evidence in response to Katz's combined motion for summary judgment. We specifically discuss the evidence contained in six of the affidavits.

First, Flood submitted the affidavit of Jerry W. Biesel, one of the attorneys for Katz. Biesel's affidavit states, in pertinent part, as follows:

I was contacted by Ahron Katz to provide representation concerning a lawsuit against Ahron Katz and several other defendants. The lawsuit had something to do with a corporation in Idaho and a summary judgment had been entered against [Katz].... Early in the conversations about assets, he told me that he owned some securities in an account but that [Mrs. Katz] was his broker and that she had transferred them to her account .... I told him that I doubted that any transfer at this point would be effective but it might delay the judgment creditor long enough to allow the appellate court to hear the case. In addition to the securities, [Katz] told me about some real property that he owned and I told him that it would be quite easy for them to register their foreign judgment and trap that property. [Mrs. Katz] asked me if the property could be transferred to her and I told her that it could but that it probably would be vulnerable to an attack by the judgment creditor.... Eventually [Katz] decided to transfer some real estate to his wife ... to protect it from being executed upon and sold at an auction. During our conversations no one ever mentioned the word gift. The property was not a gift and I did not put the word "gift" in when I designated the consideration on the deeds.... The only reason for any transfer that I ever head [sic] discussed was the need to keep the property out of the hands of the judgment creditor until such time as the appeal was heard or some other arrangement made.

(emphasis added).

Next, the affidavit of Katherine Flood, a plaintiff in the Idaho lawsuit and subsequent intervenor in the Katz's divorce action, states:

...

4. During the Idaho case, I was advised about the representations made by Mr. Katz in his production of financial records as well as the representations of his attorneys. At that time I had no information to dispute the representations or to suggest collusion.

...

8. At the mediation, I thought I was aware of the correct financial limitations of all of the defendants. Based on that information, in essence I was confronted with a choice of proceeding to trial and collection of judgment against the debtors with no expectation of getting paid if I proceeded or finding an acceptable compromise. I accepted the representations by Mr. Katz's financial records and the word of his attorneys that he could not pay a big judgment.

...

10. If I had been advised that Mr. Katz had transferred all of his assets to his wife after the partial judgment, I would not have accepted Mr. Katz's proposal for compromise .... The compromise did not make me whole and I would have insisted as a minimum I be paid the amount of the partial judgment as a condition of settling the remaining claims.

11. I am offended to now learn Mr. and Mrs. Katz perpetrated a fraud on me by purposefully lying through their agents about their wealth when those agents had actually transferred the assets to Mrs. Katz solely to avoid my judgment. I was not given the information in good faith by Mr. Katz who did everything he possibly could to hide the true amount of his assets .... I relied to my detriment on the lies he imposed when I was persuaded there was no money left in the accounts of Mr. Katz to pay the partial judgment or the future judgment for violation of state laws.

(emphasis added).

In addition, the affidavit of Mrs. Katz provides:

Later in the marriage, [Katz] was involved in a lawsuit and had been sued, which ultimately ended up in a judgment being taken against him. [Katz] became very concerned that creditors would attach his assets which were substantial in nature. Therefore, in an attempt to avoid his creditors, he began...