Fraudulent Transfers Series: Obtaining an Injunction To Stop Further Transfers During Litigation

The Texas Uniform Fraudulent Transfer Act allows injunctive relief to proceed against transferees in order to block the transferee from making further transfers of the assets. ^[1]Tanguy v. Laux, 259 S.W.3d 851, 859 (Tex. App. – Houston [1^st Dist.] 2008, no pet.) .  In particular, TUFTA states that . . . subject to applicable principles of equity and in accordance with applicable rules of civil procedure, TUFTA allows for the following remedies:

(A)      an injunction against further disposition by the debtor or a transferee or both of the asset transferred or of other property;

(B)       appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or

(C)       any other relief the circumstances may require. ^[2] See §24.008(a)(3)(A)-(C)

In Tanguy v. Laux, the First Court of Appeals made clear that one seeking an injunction did not have to have a lien on the real property against which the injunction was sought under TUFTA. ^[3]Id at 859. The Court’s holding shows that a creditor is not required to have lien on property, in order to pursue a claim against the property for having been fraudulently transferred pursuant to TUFTA. ^[4] See also Texas Kidney, Inc. v. ASD Specialty Healthcare, No. 14-13-00106-CV, 2014 WL3002425 (Tex. App – Houston [14^th Dist.] July 1, 2014, no pet.) (“Texas Kidney”) .

In Texas Kidney the Plaintiff was ASD Specialty Healthcare, (“ASD”) which sold medications to Texas Kidney, Inc. or “TKI”, a dialysis center.  TKI failed to pay for $405,909.73 in medications sold to TKI.  As a result, ASD sued TKI for the debt. ^[5] Id. at 1-2.

TKI sold the dialysis center for $3 million, but still did not pay ASD.  When ASD’s counsel (Cersonsky, Rosen & Garcia lawyers M.H. Cersonsky and Marianne G. Robak) learned of the sale and obtained evidence of the transferees who received TKI’s sales proceeds, the petition was amended to include the transferees of TKI who recieved over $1.3 million, e.g. (a) Ahmed Rabie and Sana Rabie approximately $800,000.000 used to buy a home which they declared to be their homestead; and (b) Ahmed and Sana Rabie $500,000.000 used to purchase a certificate of deposit. ^[6] Id. at 5-6.

After a two-day evidentiary hearing, the trial court issued an injunction against the transferees, Ahmed Rabie and Sana Rabie, enjoining them from selling, encumbering, or disposing of any interest in the real property in question and from withdrawing funds or otherwise disbursing the balance left in the certificate of deposit. ^[7] Id. at 2.  TKI and the Rabies appealed. However, the Court of Appeals affirmed the trial court’s injunction against the transferees because the evidence showed that fraudulently transferred funds were used to purchase the alleged homestead. ^[8]Id. at 5-6.  This clearly shows TUFTA reaches transferees and the assets transferred to them.

Obtaining an injunction is a powerful tool provided to creditors by way of TUFTA that is often not used in litigation. However, when an injunction is obtained in a TUFTA case, it can lead to a favorable outcome in collecting a debt.