Debtors.jpgIf you owe someone a debt and you attempt to avoid paying that debt by transferring your assets to a family member or another entity you control to try to keep it out of the reach of your creditors you may be violating the Texas Uniform Fraudulent Transfers Act (UFTA). UFTA is found in Chapter 24 of the Texas Business and Commerce Code.

Sec. 24.005 of UFTA covers transfers that are fraudulent as to present and future creditors. This section provides that a transfer made or obligation incurred by a debtor is fraudulent as to a creditor, regardless of whether the creditor’s claim arose before or within a reasonable time after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

For Sale.jpgDriving around town you might see signs posted at intersections advertising that a person buy’s houses or sells them to investors. These signs are typically posted by real estate scammers who have attended seminars that you see advertised on TV on how to become wealthy in real estate using other people’s money. If you are contacted by any of these individuals you should be very cautious in your dealings with them since the catch is that they become wealthy using other people’s money.

These type of transactions usually involve people who are underwater on their mortgage or who need a quick sale. The real estate scammer convinces the sellers that they should deed their property into a trust set up for them and the scammer will manage the property by finding a buyer or a renter until the property is sold. The scammer also provides disclosures to the seller advising that he or she will use their best efforts to sell the property but that it may never be sold. The scammer convinces the seller to provide them with mortgage information for the scammer to make the mortgage payments in connection with the management of the property. In the disclosures the seller acknowledges that he or she will continue to be obligated to pay the mortgage payment until the property is sold but there is no guarantee that the mortgage will ever be paid off. Lastly, the scammer will present the seller with a document that transfers the seller’s interest in the trust and in the property to a corporation or other entity owned or managed by the scammer.

The net result of the transaction is that the scammer obtains title to the property without making an actual purchase and the seller is still on the hook for the mortgage until the property is sold. But in the transaction the property is never sold because the scammer (who has title to the property) offers to owner finance to new buyers thereby making money off the difference between the new buyer’s payment and the cost of the original owner’s mortgage. Typically these new buyers are persons with bad credit who don’t qualify for conventional funding. Hence they have a high foreclosure rate and the scammer ends up foreclosing on the property and reselling to another high risk purchaser over and over. For most sellers who have been hooked into these transactions the only way out is to stop paying the mortgage and ruin their credit.

House fire.jpgSometimes when marriages go sour and spouses can no longer get along with one another, one spouse whose emotions have taken over them might do something out of anger to harm the other spouse, such as deliberately setting fire to their home. So what happens to you ability to bring an insurance claim if your spouse deliberately sets fire to your home.

In Kulubis v. Texas Farm Bureau Undw’rs Ins. Co., 706 S.W.2d 953 (Tex. 1986), the Texas Supreme Court first recognized what is known as the innocent spouse exception to otherwise non-covered insurance claims. The innocent spouse doctrine usually involves cases of arson or other intentional destruction of property by one spouse and a claim for insurance coverage by the other who was unaware and did not participate in the conduct. In applying the innocent spouse doctrine courts usually hold that if the house and contents are owned equally by the husband and wife, then the innocent spouse would be entitled to the insurance proceeds covering one-half the property while the other culpable spouse would be denied any recovery.

In Kulubis, the court reasoned that the innocent spouse had a reasonable expectation of coverage, based on the policy terms, that would be defeated if his or her spouse’s conduct deprived that spouse of coverage. The facts of Kulubis were the husband destroyed the couple’s mobile home after his wife served him with divorce papers. The wife was not only innocent, she was the intended victim of his actions. The court stated that adopting the innocent spouse doctrine will best protect the insurance company from fraud while assuring that the insurance company will not be unjustly enriched. It will also permit an innocent victim whose property has been destroyed to collect under an insurance policy for a loss reasonably expected to be covered.

Apprasial.jpgInsurance policies that provide coverage for loss of property, both personal and commercial, typically contain an appraisal provision. Appraisal, when the circumstances are appropriate, is an efficient method to determine the amount of loss under most property policies. However, an appraisal to determine the amount of the loss should not be invoked when causation, coverage, or liability under the policy are still in dispute.

For many years, Texas courts had been consistent in their interpretation of appraisal clauses in insurance policies. Appraisal was to be used to provide a simple, speedy, inexpensive, and fair method of determining the amount of loss. If the appraisal clause is properly invoked, carried out, and awarded, the determination of the amount of loss is binding on the insurer and insured. Because of the binding nature of appraisal, an appraisal award can only be set aside in three circumstances: (1) when the award was made without authority; (2) when the award was the result of fraud, accident or mistake; and (3) when the award was not made in substantial compliance with the terms of the insurance policy. An award is made without authority when the appraiser attempts to determine questions of causation, coverage, or liability.

The status of appraisal law appeared predictable and settled until the Texas Supreme Court’s decision in State Farm Lloyds v. Johnson, 290 S.W.3d. 886 (Tex. 2009). The Johnson case involved the determination of whether the meaning of the term “amount of loss” in an appraisal clause of a homeowner’s insurance policy includes the extent of loss and whether the insured can compel the insurer to appraisal when there is a dispute about the extent of loss. Johnson argued that the amount of loss includes a dispute over the extent of the damage. Whereas, State Farm argued that no appraisal can be compelled unless the parties agree on causation, coverage, and liability. Specifically, State Farm took the position that because it had only acknowledged coverage for hail damage to the ridgeline of the Johnson’s roof and the remainder of the roof was damaged due to wear and tear, which is excluded under the policy, the issue was in dispute was coverage and not the amount of loss. State Farm further argued that the amount of loss does not include the extent of loss, because determining the extent of loss, would necessarily include a determination of coverage, causation, and/or liability.

Supreme court.jpgA new case from the United States Supreme Court, U.S. Airways v. McCutchen, Docket No. 11-1285, decided April 16, 2013, represents a small glimmer of hope on the otherwise bleak landscape for injured plan participants trying to negotiate medical liens asserted by ERISA welfare benefit health plans. ERISA applies to claimants whose medical bills are covered by employer-sponsored medical plans.

Handling personal injury cases has been growing more increasingly complex in recent years and one reason for this has been the growing efforts of those who pay medical expenses for injured plaintiffs to recover their costs from third party tortfeasors. By attempting to recover these costs, the payers of claimants’ medical expenses end up competing with injured plaintiffs for the limited settlement funds.

Health insurers have long asserted subrogation interests and prudent counsel have often been successful in reducing and sometimes eliminating these claims. Two legal arguments that have been primarily used against health insurers have been the “common fund” doctrine and the “make-whole” doctrine. The “common fund” doctrine is based on the argument that if an insurer benefits from a fund created as a result of the efforts of the injured party to recover damages from a tortfeasor, the insurer should also share in the costs incurred in creating that fund, typically attorneys’ fees and expenses. The “make-whole” doctrine is based on the principle that the injured party should be made “whole,” that is, reimbursed for all losses, including pain and suffering and lost income, as well as costs, including attorney fees, before the insurer can recover for the costs of its medical insurance by way of subrogation.

Mechanic.jpgThe implied warranty of good and workmanlike performance of services generally applies to the repair and modification of existing tangible goods. It is a common law warranty that was first recognized by the Texas Supreme court in Melody Home Mfg. v. Barnes, 741 S.W. 2d. 349 (Tex. 1987).

To prove a cause of action for breach of the implied warranty of good and workmanlike services, the plaintiff must establish that the defendant sold repair or modification services to the plaintiff’s existing tangible goods or property. A “repair” is the restoration of something by replacing a part or fixing what is broken. A ‘modification” includes any change or alteration that introduces new elements into the details of the subject matter or cancels some of them, but leaves the general purpose and effect of the subject matter intact.

The implied warranty of good and workmanlike services does not apply to professional services, certain services relative to helicopter maintenance, the future development services of a real estate developer among others.

Eviciton.jpgIf you owe a debt and that you are unable to pay, your creditor may file suit and obtain a judgment against you and, with the aide of a sheriff or constable, may try to seize your personal property to satisfy the debt. However, under Texas law, certain personal property you own can be exempt from your creditor’s efforts to collect the judgment by seizing your property. The personal property exemption is contained in Chapter 42 of the Texas Property Code.

Section 42.001(a) of the Texas Property Code provides that the personal property described in Section 42.002 of the Texas Property Code, is exempt from garnishment, attachment, execution, or other seizure if: the property is provided for a family and has an aggregate fair market value of not more than $60,000, exclusive of the amount of any liens, security interests, or other charges encumbering the property; or the property is owned by a single adult, who is not a member of a family, and has an aggregate fair market value of not more than $30,000, exclusive of the amount of any liens, security interests, or other charges encumbering the property.

However, the following personal property is exempt from seizure and is not included in the aggregate monetary limitations set forth in Section 42.001(a): (i) current wages for personal services, except for the enforcement of court-ordered child support payments; (ii) professionally prescribed health aids of a debtor or a dependent of a debtor; (iii) alimony, support, or separate maintenance received or to be received by the debtor for the support of the debtor or a dependent of the debtor; and (iv) a religious bible or other book containing sacred writings of a religion.

Smoke stacks.jpgA private nuisance is a nontrespassory invasion of another person’s interest in the use and enjoyment of their land. A nuisance typically involves the invasion of the plaintiff’s property by light, sound, odor or a foreign substance. The plaintiff’s interest can be invaded by any type of conduct that can form the basis of tort liability, such as negligence or intentional conduct.

To prove a cause of action for private nuisance, the plaintiff must establish that it has property rights and privileges with respect to the use and enjoyment of the land affected. To establish such property rights the plaintiff can show that it owns or occupies the land or has an easement in connection with the land.

A defendant can be liable for a private nuisance, if the plaintiff establishes that the defendant interfered with or invaded the plaintiff’s interest through negligent conduct, intentional conduct or other conduct that is abnormal and out of place to its surroundings. To prove negligent invasion, the plaintiff must establish that the defendant knew or should have known that its conduct involved an unreasonable risk of interfering with or causing an invasion of the plaintiff’s interest in the land. A defendant can be found liable for intentional invasion if the defendant acts for the purpose of causing the invasion and knew or should have known that the invasion will result or is substantially certain to result from its conduct. An example of conduct that is out of place for its surroundings is a commercial enterprise that causes or permits to escape noxious things such as smoke, soot, or odor that substantially impairs the comfort and enjoyment of those occupying neighboring property.

News.jpgSometimes you may be involved in a dispute with another party where the amount in controversy does not justify paying a lawyer to assist you and you are forced to bring the action yourself. In order to bring a lawsuit against another party, you have to personally serve them with a citation for your suit. But what do you do if you can’t locate the defendant for personal service on them? Service by publication may be your only option in such instance.

Service by publication is authorized for use in actions against a defendant whose residence is unknown, against unknown heirs of a decedent, against stockholders of a defunct corporation, against unknown owners or claimants of interests in real property, or for delinquent ad valorem taxes. Also, a court may also authorize service by publication under Rule 106 of the Texas Rules of Civil Procedure if justified under the circumstances.

The party serving by publication must conduct a reasonable search for the defendant before resorting to service by publication. A diligent search requires that the party make such inquiries that someone who really wanted to find the person would make. Reasonable inquiry is measured by the quality of the search rather than the quantity of the search. A lack of diligence makes service by publication ineffective.

Assignment.jpgAn Assignment of a cause of action is useful where the cause of action is more valuable in the assignee’s hands. For example, a defendant who just lost a jury trial may lack the appetite or resources for a fight with the insurance company who wrongfully denied coverage to that defendant for the plaintiff’s claims. In this instance, the recovery from the insurance company may simply pass through to the plaintiff and the plaintiff’s only source of compensation may be the insurance company. Under this circumstance, an assignment of the defendant’s cause of action against the insurance company to the plaintiff in exchange for the plaintiff’s covenant not to execute the judgment against the defendant may increase both parties’ net economic position.

Assignments typically involve a contractual conveyance by the owner to another of 100% of a cause of action, including all associated rights such as the right to control litigation. Assignments are governed by contract and property law, as well as public policy. An assignment of a cause of action is a conveyance of personal property. Since a cause of action is property, a sale can be structured in the same manner as similar real property or business transactions. The general rule is that all of a cause of action is assignable. However, parties may agree the only parts of the cause of action will be assigned. Components of a cause of action include the right to the proceeds, the right to control the litigation, and the right to accept or reject settlement among others. Once a successful assignment is made, the assignor loses control of the rights assigned.

However, there are limits on assignments of causes of action. In State Farm Fire and Casualty Co. v. Gandy, 925 S.W.2d 696, 706 (Tex. 1996), the Texas Supreme Court voided an assignment in a settlement agreement by an insured defendant to a plaintiff against the insurance company on public policy grounds. The Court held that a defendant’s assignment of his claims against his insurer to a plaintiff is invalid if (1) it is made prior to an adjudication of plaintiff’s claim against the defendant in a fully adversarial trial, (2) the defendant’s insurer has tendered a defense, and (3) either (i) defendant’s insurer has accepted coverage, or (ii) defendant’s insurer has made a good faith effort to adjudicate coverage issues prior to the adjudication of plaintiff’s claim. But the Court made clear that, in no event, is a judgment for plaintiff against defendant, rendered without a fully adversarial trial binding on defendant’s insurer or admissible as evidence of damages in an action against defendant’s insurer by the defendant or the plaintiff as defendant’s assignee.