Biliouris et al v. David et al

Filing 8

Memorandum Opinion and Order: Defendants' 4 Motion to Dismiss is GRANTED with prejudice on the fraudulent transfer of real property under § 24.005(a)(1). On the claims under § 24.005(a)(2)(B) and under § 24.006(a), the Motion to Dismiss is GRANTED without prejudice. Plaintiffs may plead, on or before 4/21/2017, that the exceptions to the statutory bar provided in § 24.010(a)(2) and § 24.010(b)(1) apply to any of the Plaintiffs. (Ordered by Chief Judge Barbara M.G. Lynn on 3/21/2017) (rekc)

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
TIMOTHY L. BILIOURIS, et al.,
Plaintiffs,
v.

Civil Action No. 3:16-cv-1461-M

DAVID CAINE PATMAN,
DAVID “PAT” PATMAN, AND
BEVERLY ANN PATMAN,
Defendants.

MEMORANDUM OPINION AND ORDER
Before the Court is Defendants’ Motion to Dismiss for Failure to State a Claim (ECF No.
4). For the reasons stated below, the Motion is GRANTED IN PART and DENIED IN PART.
I.

BACKGROUND

On May 31, 2016, Plaintiffs filed their Complaint alleging that Defendants violated the
Texas Uniform Fraudulent Transfer Act (“TUFTA”), to avoid paying a judgment against them
arising from a suit by these Plaintiffs for breach of contract, fraud, negligent misrepresentation,
unjust enrichment, civil conspiracy, aiding and abetting, and a violation of the Texas Securities
Act (“the underlying case”).1 On August 11, 2010, following a jury trial, another judge on this
Court entered an Amended Final Judgment2 in favor of the Plaintiffs against Defendant David
Pat Patman (“Pat”), for in excess of $8,000,000.3

1

Pls.’ First Am. Compl., Appl. for Prelim. Inj. & Appl. for Appointment of Receiver, Timothy L. Biliouris, et al. v.
Sundance Resources, Inc., et al., No. 3:07-CV-01591 (N.D. Tex. June 30, 2008).
2
Am. Final J., Timothy L. Biliouris, et al. v. Sundance Resources, Inc., et al., No. 3:07-CV-01591 (N.D. Tex. Aug.
11, 2010).
3
Id.

1

Plaintiffs claim that in 2008, Pat and Beverly Ann Patman, (“Beverly”) gave a gift of a
real estate parcel, valued at $400,000, to their son David Caine Patman (“David”), but that
Plaintiffs did not know about the transfer until they learned of it in Beverly’s post-judgment
deposition on August 26, 2015.4 Plaintiffs further claim that Pat made a gift of a 1956 Chevrolet
to David, in March 2009, two months before the jury trial began in the underlying case. Plaintiffs
contend they did not know about this gift until May 30, 2015. Plaintiffs also claim that in
Beverly’s post-judgment deposition, they discovered that in 2010, after the judgment in the
underlying case was entered, Pat and Beverly made additional gifts to David, including paying
for a portion of his wedding expenses and honeymoon trip.
Plaintiffs allege TUFTA §§ 24.005(a)(1), 24.005(a)(2)(B), and 24.006(a) were violated
when Pat and Beverly made the three transfers to David between 2008 and 2010. Section
24.005(a)(1) provides that a debtor’s transfer is “fraudulent as to the creditor,” if the debtor made
the transfer “with an actual intent to hinder, delay, or defraud any creditor of the debtor.”5
Section 24.005(a)(2)(B) provides that a transfer is fraudulent if the debtor did not receive a
“reasonably equivalent value in exchange for the transfer, and the debtor…intended to incur, or
believed or reasonably should have believed that the debtor would incur debts beyond the
debtor’s ability to pay as they became due.”6 Section 24.006(a) provides that a transfer by a
debtor is “fraudulent as to the creditor whose claim arose before the transfer was made” if the
debtor made the transfer “without receiving equivalent value in exchange for the transfer…and
the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer.”7

4
Plaintiffs’ Original Complaint was filed on May 31, 2016. The Complaint illogically alleges Beverly’s deposition
was on August 26, 2016. The Court reads this as a typographical error, and assumes that the deposition occurred on
August 26, 2015.
5
Tex. Bus. & Com. Code § 24.005(a)(1).
6
Tex. Bus. & Com. Code § 24.005(a)(2)(B).
7
Tex. Bus. & Com. Code § 24.006(a).

2

Defendants have moved to dismiss under Rule 12(b)(6), asserting that Plaintiffs’ claims have
been extinguished under TUFTA’s statute of repose, codified at § 24.010. Fed. R. Civ. P.
12(b)(6).
II.

LEGAL STANDARD

To survive a Rule 12(b)(6) motion to dismiss, a pleading must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The
pleading standard in Rule 8 does not require “detailed factual allegations,” but it does demand
more than an unadorned accusation devoid of factual support. Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face. Twombly, 550 U.S. at
570. A claim may also be dismissed if a successful affirmative defense appears clearly on the
face of the pleadings. Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th Cir. 1986).
III.

ANALYSIS

A. Transfers Under TUFTA § 24.005(a)(1)
Defendants assert that the statute of repose bars Plaintiffs’ claims as a matter of law. The
statute of repose extinguishes § 24.005(a)(1) claims unless they were brought within four years
of the date when the transfer was made or, if later, within one year after the transfer was or could
reasonably have been discovered by the Plaintiffs.8
1. Real Property
The real estate transfer of which the Plaintiffs complain occurred in 2008, but Plaintiffs
filed this suit in 2016. Plaintiffs claim they first learned on August 26, 2015, that Pat and Beverly
made the transfer. The only way the statute of repose does not bar Plaintiffs’ claim that the real

8

Tex. Bus. & Com. Code § 24.010(a)(1).

3

estate was fraudulently transferred is the discovery rule, but that rule “does not apply to claims
that could have been discovered through the exercise of reasonable diligence.” Kerlin v.
Sauceda, 263 S.W.3d 920, 925 (Tex. 2008). The Court takes judicial notice of the filing on
January 25, 2008, of the Warranty Deed from Pat and Beverly to David in the real estate records
maintained by the Johnson County Clerk. The deed was recorded on April 3, 2008. A certified
copy is attached to Defendants’ Motion to Dismiss.9 Under Texas law, “[a]n instrument that is
properly recorded in the proper county is 1) notice to all persons of the existence of the
instrument; and 2) subject to inspection by the public.”10 Further, the “filing of an instrument is
notice to all persons.” Alkas v. United Sav. Ass’n of Tex. Inc., 672 S.W.2d 852, 856 (Tex. App.—
Corpus Christi 1984, writ ref’d n.r.e.). Real property records have been held to constitute
constructive notice which creates an irrebuttable presumption of actual notice. HECI Exploration
Co. v. Neel, 982 S.W.2d 881, 887 (Tex. 1998); Cosgrove v. Cade, 468 S.W.3d 32, 38 (Tex.
2015). Plaintiffs had record notice of the transfer when the deed was properly recorded in 2008.
Plaintiffs cite Johnston v. Crook, 93 S.W.3d 263, 271–73 (Tex. App—Houston [14th
Dist.] 2002, pet. denied) for the proposition that a registered warranty deed does not necessarily
negate the discovery rule. However, the issue in Johnston was whether the warranty deed by
itself conclusively established when a fraudulent transfer should have been discovered. Here, the
issue is whether properly recording a deed in the proper county constitutes notice, and whether
such notice means Plaintiffs should have discovered the transfer and its allegedly fraudulent
nature with the exercise of reasonable diligence. See Janvey v. DSCC, 712 F.3d 185, 195 (5th
Cir. 2013). Texas Property Code § 13.002 and the Texas Supreme Court’s decisions in HECI

9

In deciding a Motion to Dismiss under Rule 12(b)(6), a district court may permissibly refer to matters of public
record. See Cinel v. Connick, 15 F.3d 1338, 1346 (5th Cir. 1994); see also Norris v. Hearst Trust, 500 F.3d 454, 461
n.9 (5th Cir. 2007).
10
Tex. Prop. Code § 13.002.

4

Exploration Co. v. Neel, 982 S.W.2d 881, 887 (Tex. 1998) and Cosgrove v. Cade, 468 S.W.3d
32, 38 (Tex. 2015) articulate that a properly recorded deed constitutes notice.11
The discovery rule does not excuse the Plaintiffs from exercising reasonable diligence by
checking the deed records to protect their interests. See WAMCO XXVIII, Ltd. v. Casa Grande
Cotton Fin. Co., 314 F. Supp. 2d 655, 657–58 (N.D. Tex. 2004). Plaintiffs did not exercise such
diligence in this case. Despite filing a complaint for breach of contract and fraud in 2007 and an
Amended Final Judgment in their favor in 2010, they apparently still did not check the deed
records for at least another five years.12 Although when a Plaintiff knew or should have known
of an injury is generally a question of fact, “the limitations period may be determined as a matter
of law” if “reasonable minds could not differ about the conclusion” based on the facts. Janvey v.
DSCC, 712 F.3d at 196. Even viewing the facts in the light most favorable to Plaintiffs, the Court
finds determination as a matter of law is appropriate. Plaintiffs claim that the real estate was
transferred in violation of § 24.005(a)(1) is thus barred by § 24.010(a)(1). Defendants’ Motion to
Dismiss Plaintiffs’ § 24.005(a)(1) claim regarding the real property is therefore GRANTED.
2. 1956 Chevrolet
The transfer of the 1956 Chevrolet was on March 3, 2009. Plaintiffs did not bring their
claim within four years after the transfer was made, so Defendants must satisfy the discovery
rule to overcome the statutory bar. The parties agree that the Plaintiffs first learned on May 30,
2015, that Pat gave the Chevrolet to David. Although Plaintiffs filed their Complaint on May 31,

11

Texas Property Code § 13.002 was amended after Johnston to include the second clause, “subject to inspection by
the public.” Unlike in Johnston, this Court finds the recording of the deed and notice under the Texas Property Code
conclusively establish when Plaintiffs should have known about the allegedly fraudulent transfer of real property.
12
Plaintiffs filed a complaint in Biliouris, et al. v. Sundance Resources, Inc., et al., No. 3:07-CV-01591 on
September 17, 2007. In 2010, an Amended Final Judgment was granted in their favor for over $8,000,000, but
Plaintiffs did not discover the real property transfer until 2015.

5

2016, the one year discovery rule did not run, because May 30, 2016, was a federal holiday.13
When Plaintiffs discovered or could reasonably have discovered a transfer is a question of fact,
which normally cannot be resolved on a Motion to Dismiss. Janvey, 712 F.3d at 196. Therefore,
Defendants’ Motion to Dismiss Plaintiffs’ § 24.005(a)(1) claim for the transfer of the 1956
Chevrolet is DENIED.
3. Wedding-Related Payments
Plaintiffs allege that after the judgment in the underlying case was entered in 2010, Pat
and Beverly made additional gifts to David, including paying for a portion of his wedding
expenses and his honeymoon trip. Plaintiffs brought this claim more than four years after these
gifts were made. The parties dispute whether or not Plaintiffs could reasonably have discovered
these payments before May 30, 2015, which is one year before Plaintiffs filed their Complaint.
Because this inquiry presents a question of fact, Defendants’ Motion to Dismiss Plaintiffs’
§ 24.005(a)(1) claim regarding the wedding-related expenses is DENIED.
B. The Transfers Under TUFTA § 24.005(a)(2)(B)
Plaintiffs claim the transfers by Pat and Beverly to David were fraudulent under
§ 24.005(a)(2)(B), because they were made “without receiving a reasonably equivalent value in
exchange for the transfer or obligation,” and the debtor “intended to incur, or believed or
reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to
pay as they became due.”14
In their Motion to Dismiss, Defendants assert that this claim is barred by the statute of
repose. Section 24.010(a)(2) extinguishes any cause of action under § 24.005(a)(2)(B) if it is not

13

But for the holiday, the original discovery rule would have expired on May 30, 2016. However, the holiday
extended the last day to file to May 31, 2016. See Fed. R. Civ. P. 6(a)(6)(A).
14
Tex. Bus. & Com. Code § 24.005(a)(2)(B).

6

brought within four years after the transfer was made.15 Section 24.010(b)(1) provides a
discovery rule exception for claims under § 24.005(a)(2)(B) only if the cause of action is brought
on behalf of a spouse, minor, or ward with respect to a fraudulent transfer.16 More than four
years has passed since the transfers and Plaintiffs have not pleaded that the exception under
§ 24.010(b)(1) applies here. Therefore, Defendants’ Motion to Dismiss Plaintiffs’
§ 24.005(a)(2)(B) claims is GRANTED.
C. Wedding-Related Payments under § 24.006(a)
Plaintiffs also claim the wedding-related payments by Pat and Beverly to David were
fraudulent under § 24.006(a), because the payments were made without Pat and Beverly
receiving a reasonably equivalent value in exchange for the transfers, and that Pat and Beverly
were insolvent. Compl. ¶ 45.
In their Motion to Dismiss, Defendants again assert that the claim is barred by the statute
of repose. Section 24.010(a)(2) extinguishes any cause of action under § 24.006(a) if it is not
brought within four years after the transfer was made.17 The discovery rule exception under
§ 24.010(b)(1) for claims under § 24.006(a) applies only if the cause of action is brought on
behalf of a spouse, minor, or ward with respect to a fraudulent transfer.18 More than four years
has passed since the payment of the wedding-related expenses and Plaintiffs have not pleaded
that the exception under § 24.010(b)(1) applies here. Therefore, Defendants’ Motion to Dismiss
Plaintiffs’ § 24.006(a) claim is GRANTED.

15

Tex. Bus. & Com. Code § 24.010(a)(2).
Tex. Bus. & Com. Code § 24.010(b)(1).
17
Tex. Bus. & Com. Code § 24.010(a)(2).
18
Tex. Bus. & Com. Code § 24.010(b)(1).
16

7

IV.

CONCLUSION

For the reasons stated above, Defendants’ Motion to Dismiss is GRANTED with
prejudice on the fraudulent transfer of real property under § 24.005(a)(1). On the claims under
§ 24.005(a)(2)(B) and under § 24.006(a), the Motion to Dismiss is GRANTED without
prejudice. Plaintiffs may plead, on or before April 21, 2017, if they can do so without violating
Fed. R. Civ. P. 11, that the exceptions to the statutory bar provided in § 24.010(a)(2) and
§ 24.010(b)(1) apply to any of the Plaintiffs. If such pleading is not filed by the due date,
Plaintiffs’ claims under § 24.005(a)(2)(B) and § 24.006(a) will be dismissed with prejudice.
SO ORDERED.
March 21, 2017.

_________________________________
BARBARA M. G. LYNN
CHIEF JUDGE

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