Hollins v. Rapid Transit Lines, Inc.

• Decision Date: 23 April 1969
• Docket Number: No. B--1046,B--1046
• Citation: 440 S.W.2d 57
• Parties: Dorothy HOLLINS et vir, Petitioners, v. RAPID TRANSIT LINES, INC., et al., Respondents.
• Court: Texas Supreme Court

Page 57

440 S.W.2d 57

Dorothy HOLLINS et vir, Petitioners, v. RAPID TRANSIT LINES, INC., et al., Respondents.

No. B--1046.

Supreme Court of Texas.

April 23, 1969.

Briscoe, Dally & Shaffer, Carl E. F. Dally, Houston, for petitioners.

Fulbright, Crooker, Freeman, Bates & Jaworski, Charles M. Haden and Harry L. Tindall, Houston, for respondents.

SMITH, Justice.

On September 26, 1967, this suit was filed by Dorothy Hollins and her husband, John Hollins, against Pioneer Bus Company, Houston City Lines, Inc., and Rapid Transit Lines, Inc., to recover damages allegedly sustained by Mrs. Hollins while riding as a passenger in a bus owned by Pioneer. It was alleged in the original petition that the accident occurred on August 8, 1967, when the bus in which Mrs. Hollins was riding was involved in a collision with another bus owned by Pioneer.

Thereafter, plaintiffs filed their First Amended Original Petition alleging, in addition to their cause of action for damages that after the accident, Pioneer fraudulently conveyed substantially all of its assets to the other defendants, Houston City Lines, Inc., and Rapid Transit Lines, Inc.

The cause of action against Pioneer for damages was severed and is pending in the District Court. Thereafter, the court sustained a motion for summary judgment and dismissed the alleged cause of action charging a fraudulent conveyance of assets of Pioneer. The summary judgment dismissing the cause was granted upon the theory that the plaintiffs, as holders of an unliquidated tort claim for damages, must reduce their claim by judgment to a liquidated amount before seeking to set aside the alleged fraudulent transfer. The motion for summary judgment was accompanied by the affidavit of Stanley H. Gates, Vice President and General Manager of Rapid Transit Lines, Inc. According to the summary judgment proof, the alleged fraudulent transfers of property and equipment occurred on September 15, 1967, pursuant to an agreement dated August 11, 1967. The action of the trial court in granting the motion for summary judgment and dismissing the cause was affirmed by the Court of Civil Appeals. 430 S.W.2d 57.

The question squarely presented here is whether or not the plaintiffs may seek to set aside the transfer from Pioneer to Rapid Transit Lines, Inc., as void under the law of fraudulent transfers and conveyances, before reducing their unliquidated tort claim against Pioneer to a liquidated amount. The respondents agree that since the transfer of property did not occur until September 15, 1967, the applicable law is Chapter 24, especially Section 24.02, Vernon's Annotated Texas Business and Commerce Code, effective September 1, 1967, 'revising and re-enacting' the prior law (Arts. 3996--3999, V.A.T.S.). Section 24.02 provides:

'Section 24.02. Transfer to Defraud is Void.

(a) A transfer of real or personal property, a suit, a decree, judgment, or execution, or a bond or other writing is void with respect to a creditor, purchaser, or other interested person if the transfer, suit, decree, judgment, execution or bond or other writing was intended to

(1) delay or hinder any creditor, purchaser, or other interested person from obtaining that to which he is, or may become, entitled; or

(2) defraud any creditor, purchaser, or other interested person of that to which he is, or may become, entitled.

(b) The title of a purchaser for value is not void under Subsection (a) of this section unless he purchased with notice of

(1) the intent of his transferor to delay, hinder or defraud; or

(2) the fraud that voided the title of his transferor.'

The plaintiffs contend that the respondents had notice when they purchased substantially all the assets of Pioneer that the plaintiffs were creditors of Pioneer in contemplation of the law of fraudulent transfers and conveyances; therefore, as to the plaintiffs, the transfer should be deemed void. The respondents contend, on the other hand, that the plaintiffs must reduce their claim to a liquidated amount before seeking to set aside the alleged fraudulent transfer. Moreover, the respondents contend that the law of fraudulent transfers and conveyances is not applicable because the transfer was made for an adequate consideration.

Although the Court of Civil Appeals, in affirming the judgment of the trial court, recognized that the plaintiffs were creditors, it then held: '(w)e believe the law is clear that the holders of an unliquidated claim for damages, though creditors eventually entitled to set aside a fraudulent transfer, must reduce their claim by judgment to a liquidated and definite amount before a cause of action exists. * * * Cole v. Terrell, 71 Tex. 549, 9 S.W. 668, 671, 672; Naumovich v. Reese, 247 S.W.2d 417, 420 (Tex.Civ.App.) no writ.' A careful examination reveals that the question presented here was not passed upon in either of these cases. Cole v. Terrell, a case decided in 1888, cannot be authority for the above stated proposition, in that the plaintiffs there brought suit to set aside a conveyance as fraudulent, but only After judgment had become final in a prior suit for damages against the transferor. The court stated in its summary holding: '(2) that the claimant for damages * * * the claim having been matured into judgment is protected as if a creditor by the statute of frauds.' This language certainly does not establish, without more, that had the claim not been matured into judgment there would be no protection for the claimant.

In Naumovich v. Reese, Supra, the Dallas Court of Civil Appeals held: '(a) temporary injunction will not issue, before final judgment, in favor of a creditor with only an unliquidated demand to restrain a conveyance which, were the debt liquidated, would be one in fraud of creditors.' p. 422. Naumovich was a separate suit filed in a different county from the damage suit. Obviously, a suit to enjoin...