Austin v. Mitchell, No. 05-19-01359-CV, 2021 WL 2327870 (Tex. App.—Dallas June 8, 2021, no pet. h.).

Trusts

Property

Ex-wife claimed that ex-husband fraudulently transferred a portion of his limited partnership interest to a trust for the benefit of his children. Ex-husband successfully argued to both the trial and appellate courts that it was too late for ex-wife to complain under Business & Commerce Code § 24.010 which requires suit to be filed within four years of the transfer or within one year after discovery of the transfer if after the four year period.

The court explained that the restriction on bringing a fraudulent transfer action is a statute of repose rather than a statute of limitations. The purpose of the statute is “to provide absolute protection to certain parties from the burden of indefinite potential liability.” Id. at *3. The claim was brought more than four years after the transfer and thus ex-wife was required to show that she brought the action within one year after she discovered or reasonably could have discovered the transfer. The court then did a comprehensive review of the facts to conclude that she should have known about the transfer more than one year prior to her filing suit.

Moral:  A person attempting to claim that the funding of a trust was via a fraudulent transfer must file suit in a timely manner.

Trusts

Standing

Ex-husband created a trust for his children. Ex-wife filed suit against the trustee claiming standing as an interested person under Property Code § 111.004(7) because she has a claim against the trust. The trial and appellate court agreed that filing a claim against a trustee does not make a person an interested party. Because ex-wife was neither a beneficiary nor a trustee, she need to demonstrate to the court an interest sufficient to satisfy the court that she should be deemed an interested person under the statute’s language that a non-beneficiary, non-trustee’s ability to be an interested person that “may vary from time to time and must be determined according to the particular purposes of and matter involved in any proceeding.”

The courts agreed with ex-husband that ex-wife did not satisfy her burden of showing a sufficient interest to be deemed an interested person. The only possible interest she had was because of a claim that part of ex-husband’s funding of the trust was a fraudulent transfer. Because this claim was barred, she had no claim against the trust and thus was not an interested person.

Moral:  It is difficult for a non-beneficiary, non-trustee to demonstrate standing as an interested person.

 

 

 

 

 



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