In re Porras

• Decision Date: 26 May 2004
• Docket Number: Adversary No. 97-3061.,Bankruptcy No. 95-30583-LK
• Citation: 312 B.R. 81
• Parties: In re David PORRAS, Debtor. Randolph N. Osherow, Trustee, Plaintiff, v. David Porras and William Edmiston, Trustee of the Lucille Christie Blakley Trust and of the Lucille Christie Blakley Support Trust, Defendants.
• Court: U.S. Bankruptcy Court — Western District of Texas

312 B.R. 81

In re David PORRAS, Debtor Randolph N. Osherow, Trustee, Plaintiff, v. David Porras and William Edmiston, Trustee of the Lucille Christie Blakley Trust and of the Lucille Christie Blakley Support Trust, Defendants.

Bankruptcy No. 95-30583-LK, Adversary No. 97-3061.

United States Bankruptcy Court, W.D. Texas, El Paso Division.

May 26, 2004.

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Bernard R. Given, II, Beck & Given, PC, El Paso, TX, for Debtor.

Michael M. Parker, Fulbright & Jaworski L.L.P., San Antonio, TX, for Debtor, Trustee and Plaintiff.

Jack Minyard Partain, Jr., Fulbright & Jaworski, San Antonio, TX, for Trustee.

Randolph N. Osherow, San Antonio, TX, pro se.

Gregg D. Stevens, Louise P. Hytken, U.S. Dept. of Justice, Dallas, TX, for Plaintiff.

Ben L. Krage, Kasmir & Krage, Michael P. Gibson, Timothy A. Duffy, Burleson, Pate, Gibson, Bobby M. Rubarts, Craig W. Budner, Hughes & Luce, Dallas, TX, for Defendants.

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MEMORANDUM OPINION REGARING PLAINTIFFS' RENEWED SECOND JOINT MOTION FOR PARTIAL SUMMARY JUDGMENT AND THE MOTION OF DEFEDANT BLAKLEY TRUST AND OF LUCILLE CHRISTIE BLAKLEY FOR PARTIAL SUMMARY JUDMENT

LARRY E. KELLY, Chief Judge.

CONTENTS

                SUMMARY JUDGMENT STANDARDS..........................................................92
                PRELIMINARY ISSUE: WHETHER THE IRS HAS STANDING.....................................93
                THE PLAINTIFFS' FRAUDULENT TRANSFER CAUSES OF ACTION................................96
                Defensive Issue: Whether all of Plaintiffs' fraudulent transfer actions are
                barred by the statute of limitations of Section 24.010 of the Texas Uniform
                Fraudulent Transfer Act.............................................................96
                Fraudulent Transfer of the Oaklawn Property.........................................97
                "Preliminary Defensive" Issue: Whether the Oaklawn Property was
                the Debtor's homestead at the time of the transfer..................................98
                Plaintiffs' First Element: Whether the Debtor received reasonably
                equivalent value....................................................................100
                Plaintiffs' Second Element: Whether the Debtor made the transfer
                with actual intent to hinder delay or defraud creditors.............................103
                Fraudulent Transfer of the 100 Acres Remainder Interest.............................105
                Defensive Issue: Whether the actions are barred by the statute of
                limitations of Section 546(a).......................................................106
                Defensive Issue: Whether a contingent remainder can be the
                subject of a fraudulent transfer ...................................................108
                Defensive Issue: Whether, because of the contingent nature of the
                100 Acres Remainder Interest, the Plaintiffs' cause of action is not
                "ripe" for adjudication ............................................................112
                Plaintiffs' Elements: Whether the Debtor had an interest in
                property and whether he transferred that interest...................................112
                Plaintiffs' Element: Whether the Debtor received less than
                "reasonably equivalent value" in exchange for his 100 Acres
                Remainder Interest..................................................................114
                Defensive Issue: Whether the Plaintiffs' fraudulent transfer actions
                with respect to the 100 Acres Remainder Interest are prohibited
                by the Rooker-Feldman Doctrine .....................................................115
                The Christie Property Trust Interest ...............................................116
                Defensive Issue: Whether Blakley is a necessary party ..............................117
                Defensive Issue: Whether the Plaintiffs' fraudulent transfer actions
                with respect to the Christie Property Trust Interest are barred by
                the statute of limitations of Section 546(a) .......................................119
                Plaintiffs' Elements: Whether the Debtor had an interest in
                property and whether there was a transfer of that interest..........................119
                Plaintiffs' Element: Whether reasonably equivalent value was
                received............................................................................125
                Defensive Issue: Whether, because of the contingent nature of the
                Christie Property Remainder Interest, the Plaintiffs' cause of
                action is not "ripe" for adjudication...............................................127
                Defensive Issue: Whether the Plaintiffs' fraudulent transfer
                actions with respect to the Christie Property Trust Interest are
                prohibited by the Rooker-Feldman Doctrine...........................................127
                

                THE PLAINTIFFS' ACTIONS TO DECLARE THE TRUST'S PROPERTY TO&gt
                BE PROPERTY OF THE DEBTOR'S ESTATE...........................................128
                Defensive Issue: Whether Blakley is a necessary party........................128
                Plaintiffs' Cause of Action: Whether the Trust was Porras's self-settled
                spendthrift trust ...........................................................128
                Plaintiffs' Cause of Action: Whether the Trust should be declared null and
                void because under Porras's complete dominion and control....................135
                Plaintiffs' Cause of Action: Whether the Trust's assets should be declared
                property of the estate because it was a sham and/or Porras's alter
                ego/nominee..................................................................137
                SUMMARY AND CONCLUSION.......................................................139
                

This matter has a long, long history before this court. For a lengthy period of time, this adversary proceeding was abated while the IRS's claim against the Debtor was being adjudicated in this court (which allowed that claim in an amount in excess of $20 million—see Plaintiffs' Exh. 25), and while the criminal case against the Debtor for bankruptcy fraud and money laundering was adjudicated in the U.S. District Court in this District (which found him guilty—see Plaintiffs' Exh. 27). Now the Chapter 7 Trustee and the IRS request this court to enter partial summary judgment on several of their causes of action in this adversary proceeding.

Specifically, the Plaintiffs allege they are entitled to partial summary judgment avoiding, under one or more of a number of Texas fraudulent transfer statutes, the transfers of three property interests of the Debtor: a condominium located in Midland (the "Oaklawn Property"); the Debtor's remainder interest, after his mother's life estate, in 100 acres of land located in Collin County¹ (the "100 Acres Remainder Interest"); and the Debtor's claim to a l/7th residual interest in all property in the Christie Property Trust (the "Christie Property Trust Interest").

In the alternative, the Trustee and the IRS seek a declaration that the latter two interests were contributed to the Lucille Blakley Trust (the "Trust") as a partial self-settlement of that Trust by the Debtor, whom they assert is also a beneficiary of that Trust, so that the 100 Acres and the Christie Property Trust Interest are property of the estate subject to the Debtor's creditors' claims.

It may be helpful at this point to explain that there are several trusts that have been involved in this adversary and this bankruptcy case. The Trust that is a party to the motions for summary judgment addressed in this Opinion is the Lucille Christie Blakley Trust. The Lucille Christie Blakley Support Trust is also a defendant in this suit and was a party to previous motions for summary judgment, already ruled on by this court. Finally, the Christie Property Trust is not a party to this suit, although (as will be discussed below) the Plaintiffs herein do allege that the Debtor transferred certain property interests that the Christie Property Trust ultimately came to hold.

As yet another alternative, the Trustee and the IRS seek a determination that the Debtor's complete dominion and control over the Trust renders it null and void, and/or that the Trust is a sham or an alter ego/nominee of the Debtor so that, in either case, the property in the Trust should be declared property of the Debtor's estate.

Finally, the Trustee and the IRS state in one sentence in the "Background" section of their Amended Complaint that if HWD Corporation is a true corporation, then the Trustee "through this lawsuit seeks to pierce HWD's corporate veil." Amended Complaint, p. 4, para. 5. This "cause of action" (or remedy) is not elaborated on, or even mentioned again, in the Amended Complaint. The Trust and Lucille Christie Blakley ("Blakley"),² the named beneficiary of the Trust, oppose the Plaintiffs' Second Motion for Partial Summary Judgment on a number of grounds.³ In addition, Blakley and the Trust also contend, in their own Motion for Partial Summary Judgment, that they are entitled to judgment as a matter of law denying relief on the Trustee's and IRS's fraudulent transfer causes of action as to the 100 Acres Remainder Interest and the Christie Property Trust Interest. In particular, they advance four grounds for summary judgment in their favor: the causes of action are time barred by statutes of limitations; the Debtor did not have a property interest under state law that he could have fraudulently transferred; the causes of action are collateral attacks on a September, 1988, agreed judgment entered in state court; and the causes of action are not ripe for adjudication.

In this Memorandum Opinion, the court will address the causes of action that are the subjects of the Plaintiffs' Second Motion for Partial Summary Judgment, and the matters raised in the Trust's Motion for Partial Summary Judgment as they relate to those causes of action. For purposes of this Memorandum Opinion, the following are the "live" pleadings considered by the court:

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