Elbar Invs., Inc. v. Okedokun (In re Okedokun)
Elbar Invs., Inc. v. Okedokun (In re Okedokun)
Opinion of the Court
I. INTRODUCTION
The adversary proceeding pending before this Court was filed due to an unscrupulous attorney's theft of $2.4 million. This attorney has no moral compass whatsoever, and his perfidy has resulted in litigation among his former clients, friends, and various third parties who did not have the displeasure of knowing him. While he deservedly spends time behind bars-he has recently been sentenced to six years in prison for his illegal greed-the individuals and entities he deceived and cheated are left duking it out over who has a superior claim to the remaining proceeds that he stole but was prevented from spending.
This Court conducted a multi-day trial in this adversary proceeding, and then took the matter under advisement. The Court now issues this Memorandum Opinion explaining *483why it has decided to deny all relief requested by the plaintiff except for one of its claims against the dishonest attorney. Set forth below are this Court's Findings of Fact and Conclusions of Law, which this Court makes pursuant to Federal Bankruptcy Rule 7052. To the extent that any finding of fact is construed as a conclusion of law, it is adopted as such; and to the extent that any conclusion of law is construed as a finding of fact, it is adopted as such. The Court reserves the right to make additional findings and conclusions as it deems appropriate or as any of the parties may request.
II. FINDINGS OF FACT
A. The Parties
1. Elbar Investments, Inc.
Elbar Investments, Inc. ("Elbar"), the sole plaintiff in this adversary proceeding, is a privately-held company based in Houston, Texas, that buys properties at public foreclosure sales in Harris County, Texas and resells them for a profit. [See Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 53:9-11; TransWorld's Ex. JJ, Klaimy Dep. 5:20-6:5].
2. Oluyemisi Omokafe Okedokun
Oluyemisi Omokafe Okedokun is the debtor in the main Chapter 7 case (the "Debtor"). [See Main Case Doc. No. 1].
3. Felix Amos
Felix Amos ("Amos") is the Debtor's husband. [See Main Case Doc. No. 197 at 1-2 of 20, ¶ 2
4. United Sentry Mortgage Investment # 1, LLC
United Sentry Mortgage Investment # 1, LLC ("United Sentry") is a private lender based in Spring, Texas, that provided financing to an entity owned by the Debtor and Amos-namely, Triple Gate Investment LLC ("Triple Gate"). [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 44:21-22, 46:10-13, 47:2-8; Pl.'s Ex. 13].
5. Donald Anthony MacKenzie
Donald Anthony MacKenzie ("MacKenzie") is the president and owner of United Sentry. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 44:10-20].
6. TransWorld Leasing Corporation
Transworld Leasing Corporation ("Transworld") is a privately-held leasing company based in San Antonio, Texas. [Id. at 28:23-30:6].
7. Industry Drive Partners, Ltd.
Industry Drive Partners, Ltd. ("Industry Drive") is a privately-held entity headquartered in San Antonio, Texas. [Id. at 111:7-10, 112:6-14].
8. Todd A. Prins
Todd A. Prins ("Prins") is a San Antonio-based attorney-now no longer licensed to practice law and, instead, confined in a federal prison-who was the principal of the Prins Law Firm (the "Prins Law Firm"). [See Main Case Doc. No. 197 at 2 of 20, ¶ 3].
*4849. Eva S. Engelhart, Chapter 7 Trustee
Eva S. Engelhart is the Chapter 7 Trustee in the Debtor's main Chapter 7 case (the "Trustee").
B. Relevant Pre-Bankruptcy Events Concerning TransWorld and Prins
1. Transworld is a leasing company headquartered in San Antonio, Texas, that leases a myriad of items, including automobiles, medical equipment, airplanes, bulldozers, and even a brewery. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 28:23-29:8]. Lenny Cash ("Mr. Cash") founded TransWorld in 1979. [Id. at 28:25-29:10]. Mr. Cash and Peggy Cash ("Ms. Cash") (collectively, the "Cashes") were married in 1996; shortly thereafter, Ms. Cash became the 100% shareholder of TransWorld. [Id. at 29:11-30:3]. Ms. Cash is presently the president of TransWorld. [Id. at 30:7-9]. TransWorld currently has 12 full-time employees, [id. at 30:10-14]; at one point, TransWorld had as many as 30 employees, as well as an office in Dallas, Texas, [id. at 30:15-18].
2. Prins, who was licensed to practice law in 1991,
3. In 2005 or 2006, a tax issue arose with certain of TransWorld's taxes due to the misdeeds of a TransWorld employee. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 31:8-32:16]. Eventually, a tax suit was commenced by the Bexar County Tax Assessor-Collector in Bexar County, Texas (the "Tax Assessor") and a default judgment against TransWorld was entered on December 21, 2006, in the amount of $230,853.66. [TransWorld's Ex. K; TransWorld's Ex. HH, Prins Dep. 98:2-9]. On February 4, 2008, TransWorld wrote a check in the amount of $230,853.66 payable to the order of the IOLTA account of the Prins Law Firm (the "IOLTA")
4. In 2011, Mr. Cash was diagnosed with cancer. [Id. at 17:9-13].
5. Sometime around the beginning of January 2014, Ms. Cash was reviewing TransWorld's 2014 tax statement regarding its 2013 taxes when she learned that TransWorld owed delinquent taxes in the amount of $496,198.52.
*4866. At his deposition, Prins testified that in late 2015 or early 2016, he, as the attorney for TransWorld, was negotiating with the Tax Assessor over monies allegedly owed by TransWorld. [TransWorld's Ex. HH, Prins Dep. 77:2-7]. In addition to the amounts allegedly in dispute, Prins testified that the Tax Assessor stated that there were also monies due that were not in dispute. [Id. at 77:2-7]. Thus, in January 2016-without TransWorld's (i.e., the Cashes') knowledge or permission-Prins claims that he paid the Tax Assessor approximately $143,000.00 for TransWorld's alleged tax obligations that were not in dispute.
7. At or around this point in time (i.e., late 2015 to early 2016), Mr. Cash was suffering from terminal cancer. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 11:17-22, 17:9-13].
8. In January of 2016, Ms. Cash learned from a TransWorld customer that TransWorld was listed on a delinquent tax list for Bexar County, Texas, in a local newspaper article. [Id. at 17:23-18:2, 19:15-17, 38:7-17]. The Cashes contacted Prins about TransWorld's taxes being listed as delinquent, as the Cashes believed that TransWorld had paid all delinquencies and the matter had been settled back in 2008. [Id. at 19:18-20]. In response, Prins told the Cashes that the Tax Assessor had likely "misapplied" the $230,853.66 that TransWorld had paid to the IOLTA in 2008 (and that Prins was then to have paid to the Tax Assessor on TransWorld's behalf) and that the Tax Assessor needed to research the issue and straighten out its records. [Id. at 19:21-25, 37:14-25].
9. Even though Prins allegedly paid approximately $143,000.00 to the Tax Assessor in January 2016 (without the Cashes' knowledge or consent), in approximately April 2016, he told the Cashes that the Tax Assessor wanted TransWorld to deposit into his IOLTA a percentage of the taxes it owed as "good faith" money in the amount of $169,807.29 while he and the Tax Assessor worked out the disputed tax issues. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 19:21-20:1; TransWorld's Ex. HH, Prins Dep. 78:2-10, 78:19-25]. To convince TransWorld to place the $169,807.29 into his IOLTA, Prins created a false letter dated April 6, 2016, from Linebarger (using this law firm's letterhead), stating that TransWorld owed delinquent taxes in the amount of $169,807.29. [Pl.'s Ex. 46, Ex. A; TransWorld's Ex. A; TransWorld's Ex. HH, Prins Dep. 93:23-95:4, 114:3-13, 223:22-224:5]. Ms. Cash questioned Prins as to why she needed to put the disputed money into the IOLTA, as she did not believe that TransWorld owed any taxes. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 20:2-11]. Prins told Ms. Cash that it was "just a formality," and then Ms. Cash questioned whether she could obtain a bond, instead of placing the alleged disputed money into the IOLTA. [Id. at 20:3-6]. Prins told Ms. Cash that she could procure a bond, but that she would have to put down 125% of the money that was in dispute. [Id. at 20:7-8].
10. Based on the representations from Prins that TransWorld needed to deposit a percentage of the taxes in dispute as "good faith" money to be held in the IOLTA so *487that TransWorld's tax issues could be resolved-and not wanting to post a bond, as Ms. Cash did not want to put down 125% of the disputed amount-on May 17, 2016, TransWorld (i.e., Ms. Cash as its president) "reluctantly" delivered a check in the amount of $169,807.29 to Prins for deposit into the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 19:16-20:14; Pl.'s Ex. 12; TransWorld's Ex. G].
C. Relevant Pre-Bankruptcy Events Concerning United Sentry, MacKenzie, the Debtor, Amos, and Prins
11. On June 16, 2015, Triple Gate, in order to obtain financing from United Sentry, executed that one certain promissory note in the original principal amount of $1,537,500.00 (the "Note"). [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 46:10-47:4; Pl.'s Ex. 13]. Triple Gate (through its authorized representatives, the Debtor and Amos) executed the Note to obtain financing for its purchase of certain residential real property-namely, 5506 Holly Springs Drive, Houston, Texas 77056-which is located in the very toney west Houston neighborhood of Tanglewood (the "Property"). [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 46:10-13, 47:2-8; Pl.'s Ex. 13]. Twelve individual investors, including MacKenzie, plus United Sentry, contributed funds to United Sentry in order for this entity to finance the loan to Triple Gate. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 47:9-19, 49:13-16, 93:21-94:4, 219:12-220:6]. At the time of the filing of the Debtor's Chapter 7 petition, the Debtor and Amos, plus their children, were residing at the Property.
12. In addition to executing the Note, Triple Gate also executed a deed of trust on June 16, 2015, naming MacKenzie as the trustee on the Property (the "Deed of Trust"). [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 51:25-52:11; Pl.'s Ex. 14]. The Deed of Trust secures repayment of the Note and contains the following language:
Beneficiary's Rights
...
4. If Grantors default on the note, fails to perform any of Grantors' obligations, or fails on demand to reimburse Beneficiary for the sums advanced, and such failure or default continues after Beneficiary gives Grantors written notice of the failure or default and twenty (20) days to cure in the event of a monetary failure, or thirty (30) days to cure all other matters, the Beneficiary may:
...
b. Request Trustee to foreclose this lien, in which case Beneficiary or Beneficiary's agent shall give notice of foreclosure sale as provided by the Texas Property Code as then amended; and
...
Trustee's Duties
If requested by Beneficiary to foreclose this lien, Trustee shall:
1. Either personally or by agent give notice of the foreclosure sale as required by the Texas Property Code as then amended;
2. Sell and convey all or part of the Property to the highest bidder for cash with a general warranty binding Grantor, subject to prior liens and to other exceptions to conveyances and warranty; and
3. From the proceeds of the sale, pay, in this order:
*488a. expenses of foreclosure, including a normal hourly fee to the Trustee;
b. to Beneficiary, the full amount advanced, or the full amount of the principal, interest, attorney's fees, and other charges due and unpaid;
c. any amounts required by law to be paid before payment to Grantor; and to Grantor, any balance.
General Provisions
...
5. No sale under this Deed of Trust shall extinguish the lien created by this instrument.
[Pl.'s Ex. 14].
13. MacKenzie has known Prins since approximately 1998 or 1999, or for approximately 20 years. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 49:17-18; TransWorld's Ex. HH, Prins Dep. 204:19-22]. Prins has periodically done legal work for MacKenzie since 1999. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 49:22-24; TransWorld's Ex. HH, Prins Dep. 204:19-205:5].
14. United Sentry had to make several demands to Triple Gate for late payment of the Note. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 50:13-16]. MacKenzie made the decision on behalf of United Sentry for Prins to represent it for collection of the Note after Triple Gate fell into default. [Id. at 50:15-22]. Prins sent out several demand letters on behalf of United Sentry, demanding payment of the late payments. [Id. at 50:17-22]. Triple Gate failed to make payment.
15. On December 30, 2015-unbeknownst to United Sentry (as the holder of the lien on the Property)-the Debtor, in her capacity as the Manager of Triple Gate, executed a general warranty deed conveying the Property to herself and Amos in their individual capacities. [Pl.'s Ex. 16].
16. Because Triple Gate had defaulted under the Note, United Sentry, through the Prins Law Firm, posted the Property for a foreclosure sale to be held on October 4, 2016. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 50:3-5, 56:5-6, 57:13-15]. MacKenzie hired the Prins Law Firm to handle the foreclosure sale on the Property. [Id. at 56:5-6].
17. On October 3, 2016, MacKenzie, as manager for United Sentry, appointed Prins or Victoria Shum ("Shum"), an associate at the Prins Law Firm, as substitute trustee under the Deed of Trust. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 81:20-82:5; Pl.'s Ex. 17].
D. Relevant Pre-Bankruptcy Events Concerning Industry Drive and Prins
18. G5 Property Holdings, LLC ("G5") is a San Antonio family-owned business that sells liquor, wine, and beer on a wholesale and retail basis. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 112:6-10]. Industry Drive is the entity that owns G5's corporate office. [Id. at 111:7-10, 112:11-14]. Industry Drive collects rents from G5 and maintains the property on which G5's corporate office is located. [Id. at 112:15-24].
19. Inez Cindy Gabriel ("Gabriel") is one of the general partners for Industry Drive. [Id. at 110:15-20]. Gabriel and each her siblings, to some degree, help manage and run the family business-i.e., G5.
*489at 111:9-15, 158:14-19]. James Pfirrmann ("Pfirrmann") is married to one of Gabriel's sisters, Eleanor Gabriel ("Eleanor"). [Id. at 111:23-112:2]. In October of 2015, Pfirrmann was a co-managing partner of Industry Drive; Gabriel was the other managing partner. [Id. at 114:13-16]. Both Gabriel and Pfirrmann had signature authority on Industry Drive's bank account. [Id. at 123:16-22]. Disputes arose between Pfirrmann and the Gabriel Family regarding the family's businesses. [Id. at 113:11-114:3].
20. Prins was Pfirrmann's personal attorney. [Id. at 115:14-15]. Neither Industry Drive nor G5 were clients of Prins, nor was there any business conducted between Industry Drive and Prins. [Id. at 115:10-18].
21. On October 7, 2015, Pfirrmann withdrew $200,000.00 from Industry Drive's bank account and tendered it to Prins to deposit into the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 114:13-115:3; Industry Drive's Ex. 4; Pl.'s Ex. 47 at Ex. A]. On October 16, 2015, Pfirrmann withdrew $100,000.00 from Industry Drive's bank account and again tendered it to Prins for deposit into the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 114:13-115:3; Pl.'s Ex. 47 at Ex. B; Industry Drive's Ex. 4]. Prins did, in fact, deposit into the IOLTA the entire $300,000.00 given to him by Pfirrmann. [Industry Drive's Ex. 4].
22. Once Gabriel became aware that Pfirrmann had withdrawn the above-referenced $300,000.00 from Industry Drive's account, she made demands on Pfirrmann and Eleanor that the funds be returned. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 123:23-124:3, 159:16-160:13; TransWorld's Ex. HH, Prins Dep. 29:18-23].
23. On December 16, 2015, the Gabriel Family and Industry Drive filed a lawsuit against Pfirrmann in Bexar County, Texas, seeking return, among other things, of the $300,000.00 Pfirrmann took from the Industry Drive account, and bringing claims for judicial dissolution of Industry Drive under the Texas Business Organization Code, breach of fiduciary duty, conversion, and breach of partnership agreement (the "Pfirrmann Lawsuit").
24. On or around October 4, 2016, the Gabriel Family, Eleanor, Pfirrmann, and Prins held a meeting in an effort to resolve the Pfirrmann Lawsuit. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 118:3-19, 119:9-11; TransWorld's Ex. HH, Prins Dep. 31:20-24]. There is conflicting testimony regarding whether the issue of Prins personally filing for bankruptcy arose at this meeting on October 4, 2016: Gabriel testified that Prins filing for personal bankruptcy was not raised at the meeting, while Prins testified that the issue did arise. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 119:16-22; TransWorld's Ex. HH, Prins Dep. 31:18-24]. Because-as discussed more in depth infra in the Credibility of Witnesses Section-the Court finds Gabriel to be a very credible witness and Prins not to be a credible witness, the Court finds that the issue of Prins' personal bankruptcy was not mentioned or discussed at the meeting on October 4, 2016. As a result of the settlement meeting, the Gabriel Family, Eleanor, and Pfirrmann negotiated an agreement in which the Gabriel Family agreed to buy out Eleanor *490and Pfirrmann's interest in Industry Drive. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 120:4-9]. The agreement, however, due to the need to obtain financing for the purchase of Eleanor and Pfirrmann's interests, was not completely finalized until approximately September 2017. [Id. at 120:12-121:16]. At the settlement meeting, Prins never gave any indication to Pfirrmann or Gabriel that the $300,000.00 was at risk. [TransWorld's Ex. HH, Prins Dep. 33:7-12].
E. Additional Relevant Pre-Bankruptcy Events Concerning Prins
25. In addition to the IOLTA, the Prins Law Firm also had an operating account at BBVA (the "BBVA Operating Account")
26. On or around September 29, 2016, Prins and Ms. Prins personally filed a Chapter 7 petition in the United States Bankruptcy Court for the Western District of Texas, San Antonio Division (the "Prins' Bankruptcy"). [TransWorld's Ex. HH, Prins Dep. 71:6-7; Pl.'s Ex. 42]. The Prins' Bankruptcy was assigned to Bankruptcy Judge Craig A. Gargotta ("Judge Gargotta"). [See Todd A. Prins and Paula R. Prins , Case No. 16-52187-cag, Bankr. W.D. Tex.].
27. On October 1, 2016, the balance of the IOLTA was $2,041.17. [Pl.'s Ex. 2].
F. The Debtor's Filing for Bankruptcy and Relevant Post-Bankruptcy Events
1. The Filing of the Debtor's Petition
28. On October 4, 2016 (the "Petition Date"), the Debtor filed a Chapter 7 petition that initiated the Main Chapter 7 case. [Main Case Doc. No. 1]. The Debtor's petition was filed at approximately 8:20 a.m. [Main Case Doc. No. 197 at 1 of 20, ¶ 1].
29. At approximately 8:59 a.m. on October 4, 2016, the Debtor's original bankruptcy counsel, Kyle Payne ("Payne"), faxed a notice of the Debtor's Chapter 7 petition to Prins. [Main Case Doc. No. 197 at 2 of 20, ¶ 4; TransWorld's Ex. HH, Prins Dep. 145:21-25; Pl.'s Ex. 33]. Despite being on notice of the Debtor's bankruptcy case, Prins made the unilateral decision to proceed with the foreclosure sale because he believed that the Property was owned by Triple Gate and, therefore, was not property of the Debtor's Chapter 7 bankruptcy estate that was protected by the automatic stay. [Main Case Doc. No. 197 at 2 of 20, ¶ 4]. Prins and the Prins Law Firm undertook no efforts to determine whether the Property was owned by the Debtor or Triple Gate as of October 4, 2016. [Id. ].
2. The Details of the Foreclosure Sale
30. At Prins' direction, Shum conducted the foreclosure sale, which resulted in a purchase price of $2.4 million. [Id. at 2 of 20, ¶ 5]. The purchasers of the Property were Elbar, Vincent Bustamante ("Bustamante"), Osama Abdullatif ("Abdullatif"), and Jean Jabbour ("Jabbour") (collectively, the "Purchasers").
31. Abdullatif is an individual who participates with Elbar in buying properties at foreclosure sales. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 165:13-16; TransWorld's Ex. II, Bustamante Dep. 105:23-106:1]. Abdullatif, however, has no formal role or title at Elbar. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 166:5-9, 168:13-19]. Likewise, Jabbour is an individual who participates with Elbar in buying properties at foreclosure sales, but he also has no formal role at Elbar. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 170:15-23; TransWorld's Ex. II, Bustamante Dep. 105:23-106:1, 137:17-21].
32. Jerel Twyman ("Twyman") is an attorney and a vice president of Elbar. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 57:11; TransWorld's Ex. II, Bustamante Dep. 10:25-11:5]. Twyman attended the foreclosure sale on behalf of Elbar. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 114:1-7; TransWorld's Ex. II, Bustamante Dep. 10:25-11:5]. The purchase price for the Property was paid at the foreclosure sale with eleven cashier's checks from Abdullatif, Jabbour, and Bustamante.
33. Bustamante, Abdullatif, and Jabbour each put up $800,000.00 to purchase the Property, thus giving them each a one-third ownership interest in the Property. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 166:5-9, 170:20-171:1; TransWorld's Ex. II, Bustamante Dep. 110:3-10, 110:25-111:4]. Bustamante testified, however, that he has an agreement with Elbar in which he advances the purchase money and Elbar has a 25% percent cut of Bustamante's portion; Elbar then pays Bustamante back later. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 82:13-23]. Here, Elbar paid Bustamante $200,000.00 for 25% of Bustamante's 1/3 portion of the Property, thus making Elbar's stake in the Property $200,000.00. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 82:24-83:12, 93:24-94:3; TransWorld's Ex. II, Bustamante Dep. 143:8-12; TransWorld's Ex. JJ, Klaimy Dep. 9:12-19, 10:1-3, 10:21-22]. Bustmanate does not know on what date Elbar paid him the $200,000.00 for Elbar's 25% share of Bustamante's one-third interest in the Property.
34. Bustamante testified that he hoped for a 20% return on the investment on the Property after all costs were paid, or a $480,000.00 aggregate total return for all parties.
35. After the foreclosure sale, Shum returned from Houston (where the foreclosure sale was held) to San Antonio (where the Prins Law Firm was located) with the cashier's checks; however, Prins testified that his bank, BBVA, would not negotiate the cashier's checks. [Main Case Doc. No. 197 at 2 of 20, ¶ 5]. Shum therefore called Twyman to inform him that the cashier's checks would not suffice as payment. [See Pl.'s Ex. 21]. In response, at 5:43 p.m. on October 4, 2016, Twyman, on behalf of Elbar, emailed Shum, stating that he would be happy to pay the funds for the Property with either one check or by a wire transfer. [Id. ]. On October 5, 2016, at 9:03 a.m., Shum replied to Twyman's email, providing wiring instructions for the IOLTA. [Pl.'s Ex. 22].
3. Giving Notice to Prins and Elbar of the Debtor's Bankruptcy and Her Claim to the Property
36. On October 5, 2016, at 10:15 a.m., Payne sent to Prins the following: (a) a copy of the recorded deed from December 30, 2015, evidencing the transfer of the Property from Triple Gate to the Debtor and Amos; and (b) records from the Harris County Appraisal District showing that the Debtor and Amos claimed the Property as their homestead. [Main Case Doc. No. 197 at 3 of 20, ¶ 6]. As of the morning of October 5, 2016, Prins admitted to having knowledge that the Property had been transferred to the Debtor. [Id. at 3 of 20, ¶ 6]. Thus, at the moment in time when Prins admittedly was aware that the Property was claimed as property of the bankruptcy estate, he had not received any good funds from Elbar.
*49437. On October 5, 2016, at 2:35 p.m., Shum emailed Twyman, copy to Prins, informing him that the Prins Law Firm had received notice that one of the representatives from Triple Gate had declared personal bankruptcy and was asserting that the Property was deeded in the name of the individual who declared bankruptcy, not Triple Gate. [Pl.'s Ex. 26; TransWorld Ex.'s HH, Prins Dep. 154:5-17]. Shum also stated that Prins and she believed the warranty deed from Triple Gate to Amos and the Debtor was a fraudulent transfer. [Pl.'s Ex. 26]. At 2:53 p.m. that same afternoon, Twyman replied to Shum, copy to Prins, thanking her for the information and stating that he would pass along the information to his client-i.e., to Elbar. [Pl.'s Ex. 27; TransWorld's Ex. HH, Prins Dep. 154:18-25]. Thus-at the latest-as of 2:53 p.m. on October 5, 2016, Elbar was aware (through Twyman, its vice president and attorney) that an individual who claimed to own the Property had filed for bankruptcy. [See Pl.'s Ex. 27]. Bustamante did not remember taking any steps-except to perhaps check PACER
4. Elbar's Violation of the Automatic Stay
38. At some point after learning that the Debtor was claiming that she owned the Property and thus the automatic stay was in effect, Bustamante, on behalf of Elbar and the Purchasers, decided to go forward with the purchase of the Property and to send a wire of $2.4 million to the substitute trustee-i.e., to the Prins Law Firm. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 87:12-88:8; Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 165:8-9, 166:21-167:4, 167:8-15, 170:15-18, 173:19-22].
39. On October 6, 2016, at 11:53 a.m., Bustamante emailed Abdullatif, requesting that the wire of the $2.4 million (the "Proceeds") show Elbar Investments, Inc. as the sending party. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 63:12-16; Pl.'s Ex. 31]. At 12:53 p.m., Twyman emailed Shum, copy to Prins, requesting that Shum send a copy of the notice confirming the bankruptcy filing. [Pl.'s Ex. 29]. At 12:58 p.m., Prins sent an email to Twyman, stating that he had received notice from the Debtor's bankruptcy attorney that the Debtor, not Triple Gate, had filed for personal bankruptcy; that subsequent to the foreclosure *495sale, the Debtor's bankruptcy attorney sent a deed that was executed six months after the execution of the Note and the Deed of Trust whereby the Debtor and Amos had transferred the Property from Triple Gate to themselves personally;
40. Despite learning that the Property had been deeded to the Debtor personally and that the Debtor had filed for bankruptcy-and, thus, that the automatic stay was in effect-on October 6, 2016, at approximately 1:13 p.m., at Bustamante's direction,
41. According to Bustamante, Elbar has previously paid a purchase price at a foreclosure sale knowing of a bankruptcy approximately ten (10) times out of thousands of foreclosure sales-in other words, to pay the purchase price after learning about a bankruptcy is "unusual."
5. Post-Foreclosure Events
42. Upon receipt of the $2.4 million that Elbar wired to the IOLTA, Prins did not provide Elbar with title to the Property. [Main Case Doc. No. 197 at 3 of 20, ¶ 8].
43. On October 11, 2016, Prins filed a motion for relief from stay on behalf of United Sentry in order to "allow movant to complete foreclosure of the Property" ("Motion for Relief"). [Main Case Doc. No. 7]. The Motion for Relief was set for hearing on November 8, 2016. Shum, the lawyer who actually conducted the foreclosure sale, drafted the Motion for Relief, but it was signed by Prins. [Main Case Doc. No. 197 at 3-4 of 20, ¶ 10].
44. On October 13, 2016, Prins, on behalf of United Sentry, filed an amended motion for relief from stay (the "Amended Motion for Relief"). [Main Case Doc. No. 9]. The Amended Motion for Relief contains additional legal authorities compared to the Motion for Relief, but essentially requests the same relief as the Motion for Relief.
45. As of October 17, 2016, the closing balance of the Wells Fargo Operating Account was $13,414.57. [Pl.'s Ex. 7].
46. On October 18, 2016, Prins transferred $2.0 million from the IOLTA to the Wells Fargo Operating Account. [Main Case Doc. No. 197 at 4 of 20, ¶ 11; Pl.'s Exs. 2, 7; TransWorld's Ex. HH, Prins Dep. 18:10-15]. Prins was the only person who was authorized to make withdrawals from and charges to the Wells Fargo Operating Account. [Main Case Doc. No. 121, Jan. 9, 2017, Hrg. 28:11-29:5]. Prins did not advise United Sentry, or anyone else, of the $2.0 million transfer. [Main Case Doc. No. 197 at 4 of 20, ¶ 11; Main Case Doc. No. 121, Jan. 9, 2017, Hrg. 38:11-19].
47. Between October 19, 2016, and December 12, 2016,
A. On October 20, 2016, Prins purchased four plane tickets on United Airlines, each in the amount of $1,868.90. [Pl.'s Ex. 7; Main Case Doc. No. 197 at 4 of 20, ¶ 12]. Prins' testimony regarding the timing of his decision to take a trip overseas has been contradictory. Prins testified that when he transferred the $2.0 million into the Wells Fargo Operating Account on October 18, 2016, he did not yet have the intention to leave for an overseas vacation. [TransWorld's Ex. HH, Prins Dep. 20:11-19]. Prins later testified that as of October 19, 2016, he was contemplating the trip overseas. [Id. at 23:14-22, 24:21-25]. Later still, Prins testified that as of October 21, 2016, he had not made the decision to travel overseas but had made the decision to "shut down the practice and leave."29 [Id. at 40:1-4].
*497B. On October 21, 2016, Prins cut a number of severance checks from the Wells Fargo Operating Account to the employees of the Prins Law Firm because Prins had decided to shut down his law firm. [Pl.'s Ex. 7; TransWorld's Ex. HH, Prins Dep. 39:13-25].
C. On or around October 25, 2016, Prins charged over $5,000 at hotels.com. [Pl.'s Ex. 7; Main Case Doc. No. 197 at 4 of 20, ¶ 14].
D. On October 26, 2016, an automatic payment to the IRS in the amount of $18,411.19 cleared the Wells Fargo Operating Account related to the payroll taxes for the severance checks Prins had paid his employees on October 21, 2016. [Pl.'s Ex. 7; TransWorld's Ex. HH, Prins Dep. 41:3-11].
E. On October 27, 2016, Prins made a charge to the Wells Fargo Operating Account in London, England. [Pl.'s Ex. 7; Main Case Doc. No. 197 at 4 of 20, ¶ 15]. In subsequent weeks, Prins continued to charge tens of thousands of dollars to the Wells Fargo Operating Account for recreational purchases in (i) London, England, (ii) Edinburgh, Scotland, and (iii) Copenhagen, Denmark, with the last of the international charges occurring on November 28, 2016. [Pl.'s Exs. 7-8; Main Case Doc. No. 197 at 4 of 20, ¶ 15]. Upon returning from his month-long trip to Europe, Prins immediately traveled to Portland, Oregon, based on further recreational charges on the Wells Fargo Operating Account in Portland between November 29, 2016, and December 5, 2016. [Pl.'s Exs. 8-9; Main Case Doc. No. 197 at 4 of 20, ¶ 15].
F. On November 17, 2016, Prins paid Martin Seidler ("Seidler")-the attorney representing Prins in the Prins' Bankruptcy-$10,000.00 from the Wells Fargo Operating Account for Seilder's representation of Prins. [Pl.'s Ex. 8; TransWorld's Ex. HH, Prins Dep. 43:1-22]. At Prins' deposition (taken approximately one year later on November 15, 2017), he testified that this $10,000.00 was "Elbar's money." [TransWorld's, Ex. HH, Prins Dep. 44:4-6].
G. On November 21, 2016, Prins paid Hilley & Solis-the law firm representing Prins in his criminal matters30 -$10,000.00, which represented a portion of the retainer Prins was to pay Hilley & Solis, from the Wells Fargo Operating Account. [Pl.'s Ex. 8; TransWorld's Ex. HH, Prins Dep. 44:10-16].
H. On November 23, 2016, a check cleared the Wells Fargo Operating Account to Carlos Pumarejo in the amount of $66,000.00. [TransWorld's *498Ex. HH, Prins Dep. 46:15-21; see Pl.'s Ex. 8]. Pumarejo was a client of Prins and had previously given $66,000.00 to Prins to hold, [TransWorld's Ex. HH, Prins Dep. 46:15-25], but Prins spent these funds and therefore used a portion of the Proceeds to return the funds to this client that the client had previously given Prins to hold.
I. On November 30, 2016, Prins paid Hilley & Solis another $5,000.00 from the Wells Fargo Operating Account, representing the remainder of the retainer Prins was required to pay Hilley & Solis for that law firm to represent him in the criminal prosecution that was inevitably going to be brought against him. [Pl.'s Ex. 8; TransWorld's Ex. HH, Prins Dep. 49:21-50:3].
J. In addition to the large expenditures of funds Prins made from the Wells Fargo Operating Account detailed above, Prins also made a number of smaller purchases, the funds of which are all directly traceable to the Proceeds: (1) multiple purchases from the iTunes store; (2) parking fees, Uber rides, and charges for executive car service; (3) charges to efile TX.gov, which are ostensibly related to the Prins Law Firm; (4) purchases from Office Depot, Brookstone, Central Market grocery store, and Gamestop; (5) Humana insurance payments related to the Prins Law Firm; and (6) payments to AT & T, CPS Energy, Time Warner Cable, and Godaddy.com. [See Pl's Exs. 7-9].
48. On October 19, 2016, Prins made four wire transfers out of the IOLTA totaling $82,373.28 to the Internal Revenue Service to pay his own personal taxes. [Pl.'s Ex. 2; TransWorld's Ex. HH, Prins Dep. 17:3-5, 23:8-17].
49. Mr. Cash was keen to resolve all outstanding disputes regarding TransWorld-including the tax issue with the Tax Assessor-because of his extremely poor health. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 20:22-21:13; TransWorld's Ex. HH, Prins Dep. 238:24-239:1]. Mr. Cash did not want to leave Ms. Cash saddled with a major tax problem for TransWorld upon his death. Hence, between May 2016 and October 2016, Mr. Cash followed up with Prins regarding the tax issue. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 20:15-21:14].
50. On October 20, 2016-due to increasing pressure from Mr. Cash and because of a sense of duty to "do right" by the Cashes
*499[Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 22:2-12; Pl.'s Ex. 46]. Prins, however, lied to the Cashes about the $5,000.00 settlement with the Tax Assessor: he did not, in fact, negotiate any $5,000.00 settlement with the Tax Assessor. [TransWorld's Ex. HH, Prins Dep. 79:19-80:3, 99:20-25, 109:24-25].
51. On or around October 24, 2016, MacKenzie, on behalf of United Sentry, requested proof of funds in the IOLTA and Prins therefore sent MacKenzie a screenshot of the IOLTA, showing a balance of $3,787,183.01. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 239:20-240:20; United Sentry's Ex. 9; TransWorld's Ex. HH, Prins Dep. 184:15-185:6]. The screenshot Prins sent to MackKenzie was not an accurate screenshot of the funds in the IOLTA on October 24, 2016; instead, Prins used editing software on his computer to create a screenshot that would appear to show that the IOLTA still held all of the Proceeds. [TransWorld's Ex. HH, Prins Dep. 184:15-185:6, 173:20-23].
52. On October 28, 2016, this Court held an emergency status conference in the Main Chapter 7 case at the request of the Chapter 7 Trustee regarding the Debtor's failure to timely file schedules and a statement of financial affairs. The Court entered its Order Requiring Debtor to Personally Appear and Show Cause Why She Should not be Sanctioned for Failing to Timely File Schedules of Assets and Liability and Statement of Financial Affairs ("Debtor Show Cause Order"). [Main Case Doc. No. 22]. The Debtor Show Cause Order was set for hearing at the same time as the Amended Motion for Relief-i.e., for November 8, 2016.
53. Also on October 28, 2016, the Estate of Jose Oleszcovski Wasserteil (the "Wasserteil Estate") filed a motion for relief from stay pursuant to
54. As of October 31, 2016, the balance of the IOLTA was $295,167.89. [Pl.'s Ex. 2]. Thus, from October 6, 2016, when the IOLTA's balance was $2,402,041.17, the balance had declined by $2,106,873.28. [See
55. As of November 3, 2016, the closing balance of the BBVA Operating Account was $30.34. [Pl.'s Ex. 5]. Thus, as of this date, this particular account had virtually no funds on hand.
56. On or about November 4, 2016, William and Karen Ozer (the "Ozers"), former clients of Prins, filed an original complaint to determine dischargeability objection to discharge in the Prins' Bankruptcy. [Pl.'s Ex. 38]. In their complaint, the Ozers alleged that when Prins was representing them in a lawsuit, Prins repeatedly lied to them about and misrepresented the status of their lawsuit. [Id. ]. The Ozers also alleged that Prins forged judges' orders on court documents and fabricated numerous communications from various elected and appointed officials. [Id. ].
57. On November 4, 2016, Gabriel learned from one of the partners at the law firm utilized by the family's businesses-Pulman, *500Cappuccio, Pullen, Benson & Jones (the "Pulman Law Firm")-that Prins had "an issue." [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 126:2-4, 126:13-25]. Once Gabriel learned about Prins' "issue,"
58. On November 8, 2016, at approximately 10:20 a.m., the Court held a hearing on the Motion for Relief and the Debtor Show Cause Order. Prins did not personally appear at the hearing. An associate attorney from the Prins Law Firm named Travis Parks ("Parks") made a telephonic appearance on behalf of United Sentry. [Main Case Doc. No. 197 at 5 of 20, ¶ 18]. Parks stated that United Sentry desired to move forward on the Motion for Relief. [Id. at 5 of 20, ¶ 19]. However, Prins had sent an email to the Court's case manager in the early hours of November 8, 2016, stating:
Along with the Show Cause Hearing and the Continued Status Conference, I have filed and sent an Amended Motion for Relief from Stay on behalf of United Sentry Mortgage that is set on the Docket for 9:30 a.m. I have fallen very ill and cannot make the trip into Houston, so I would respectfully request that my hearing be dropped at this time so that I may appear in person at a later date.
[Id. ].
Parks had not spoken with Prins about the hearing and believed that Prins was out of the country at the time, likely in Germany. [Id. at 5-6 of 20, ¶ 20]. Parks further stated that Prins had left the country on October 22, 2016, and had told his associates that he would be retiring. [Id. ]. Parks also alluded to the firm undergoing a "unique set of circumstances" and said that he was doing his "best to keep the wheels from falling off." [Id. ]. However, at this time, Parks disclosed no specifics about Prins' recent frequent use of the *501Proceeds.
59. On November 8, 2016, when Prins told this Court that he was in San Antonio and too ill to appear at the hearing, the Wells Fargo Operating Account showed several charges that Prins was making on this same date in London, England. [Pl.'s Ex. 8; Main Case Doc. No. 197 at 6 of 20, ¶ 24]. Thus, Prins' response that he was too ill to appear at the hearing and was in San Antonio was another blatant lie-as he actually was in London freely spending some of the Proceeds that he had transferred from the IOLTA to the Wells Fargo Operating Account. Indeed, the balance in the Wells Fargo Operating Account on November 8, 2016, was $1,757,348.78. [Pl.'s Ex. 8; Main Case Doc. No. 197 at 6 of 20, ¶ 24].
60. On November 8, 2016, at 3:03 p.m., (i.e., after the hearing on the Motion for Relief and the Debtor Show Cause) Richard Battaglia ("Battaglia"), counsel for Elbar, emailed Prins and requested-for the first time-that the Proceeds be returned to Elbar. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 101:8-16, 118:1-4; Pl.'s Ex. 40; TransWorld's Ex. HH, Prins Dep. 106:10-19]. Between the dates of October 6, 2016, and November 8, 2016, Elbar did not ask for the deed to the Property because, as stated by Bustamante, "there was a bankruptcy estate, we're [i.e., Elbar] not entitled to a deed." [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 101:17-23].
61. Also on November 8, 2016, an article was published in the San Antonio Express-News stating that Prins was being accused by former clients (the Ozers) of fabricating court documents. [Pl.'s Ex. 39].
62. At least by November 8, 2016, MacKenzie, on behalf of United Sentry, requested that Prins return the $2.4 million to Elbar. [Main Case Doc. No. 197 at 6 of 20, ¶ 25].
63. Sometime after the November 8, 2016, hearing, the Chapter 7 Trustee's counsel became aware that (i) Prins had filed a personal Chapter 7 bankruptcy case in the United States Bankruptcy Court for the Western District of Texas on September 29, 2016, and (ii) there was an adversary *502proceeding filed against Prins on November 4, 2016, alleging that Prins had misappropriated funds from his IOLTA and that he had perpetuated a fraud on former clients by forging court orders. [Main Case Doc. No. 197 at 6-7 of 20, ¶ 26; see Main Case Doc. No. 34].
64. On November 9, 2016, at 11:46 a.m., Prins emailed Battaglia, inquiring whether or not Elbar still wanted to buy the Note.
65. Also on November 9, 2016, MacKenzie emailed Prins at 3:44 p.m., asking that Prins move the Proceeds to another account and referenced the article that appeared in the San Antonio Express-News. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 233:1-8, 233:24-234:13, 235:19-236:1; United Sentry's Ex. 7].
66. On November 10, 2016, MacKenzie emailed Prins, requesting a screenshot of the funds in the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 233:9-11; United Sentry's Ex. 7]. MacKenzie wanted Prins to send him a screenshot showing the amount of the funds in the IOLTA "to see that the funds were available and that ... they were available for everybody involved, security." [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 233:12-15]. In response, Prins sent a falsified screenshot of the IOLTA balance to MacKenzie, showing a balance of $3.3 million in the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 241:4-15; TransWorld's Ex. HH, Prins Dep. 186:25-187:18]. Subsequently, at his deposition (taken on November 15, 2017), Prins admitted that the IOLTA did not have $3.3 million in it at that time and that he had manufactured the screenshot. [TransWorld's Ex. HH, Prins Dep. 186:25-187:18].
67. On November 10, 2016, at 5:56 p.m., Battaglia emailed Seidler and stated that he "literally found out about Mr. Prin's BK within the last 30 minutes and am extremely concerned as to the safekeeping of those funds." [Industry Drive's Ex. 7].
68. On November 11, 2016, Twyman emailed Prins and requested that Prins wire the Proceeds from his account (i.e., the IOLTA) to Abdullatif's account. [United Sentry's Exs. 4, 6]. Prins responded, stating that he would try to wire the funds the next day.
*50369. On November 18, 2016, MacKenzie once again emailed Prins and requested a screenshot of the funds in the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 241:16-22; United Sentry's Ex. 8]. Prins-continuing his deceit-once again sent MacKenzie a falsified screenshot of the IOLTA, showing a balance of $3,144,000.00. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 241:23-242:10; United Sentry's Ex. 11].
70. Also on November 21, 2016, Twyman emailed Prins and stated that Elbar would not execute any release prior to receiving funds, as this was Elbar's standard procedure. [United Sentry's Ex. 4]. Twyman asked Prins whether he would be willing to wire the funds into this Court's registry in Houston. [Id. ]. Prins replied to Twyman on November 22, 2016, stating that he would be willing to consider interpleading the funds.
71. On November 27, 2016, MacKenzie again asked Prins to send him a screenshot of the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 242:11-20; United Sentry's Ex. 12; TransWorld's Ex. HH, Prins Dep. 189:20-190:8]. In his email, MacKenzie wrote the following to Prins: "I must admit I am very Concerned about this matter another case you have against you With a estate matter of roughly 360,000 has popped up people Are losing there patience and trust Do not let me down Todd. I have Used your services since 1999 With out problems."
*50472. On or around November 30, 2016, MacKenzie again requested a screenshot of the IOLTA to confirm the amount of funds in it. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 243:14-25]. In reply, Prins sent MacKenzie another falsified screenshot of the IOLTA, once against showing a balance of $3,144,000.00. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 243:14-244:3; United Sentry's Ex. 13].
73. On December 2, 2016, MacKenzie and United Sentry's counsel
74. On December 3, 2016, MacKenzie again requested another screenshot of the IOLTA from Prins. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 244:4-24; United Sentry's Ex. 14]. Prins responded to MacKenzie's email on December 4, 2016, and once again attached a falsified screenshot showing a balance of $3,144,000.00 in the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 245:18-24; United Sentry's Ex. 14]. This was at least the sixth time since October 24, 2016, that MacKenzie had requested that Prins send him a screenshot of the IOLTA as proof of the amount of funds in the account. In Prins' own words: "Mr. MacKenzie expressed to me a great deal of concern about this money. Mr. MacKenzie was-for lack of a better term-like a dog on a bone on it and contacted me more than anybody, yes." [TransWorld's Ex. HH, Prins Dep. 190:16-20].
75. On December 5, 2016, pursuant to yet another request from MacKenzie for verification of the amount of funds in the IOLTA, Prins, with MacKenzie listening in on the call, impersonated a BBVA employee-one "Levon Martin"-in order to falsely confirm the balance in the IOLTA as $3,144,000.00. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 246:9-18, 247:10-14, 248:17-20; United Sentry's Ex. 16; TransWorld's Ex. HH, Prins Dep. 192:15-20, 201:20-204:13; Tape Recording, Feb. 7, 2018, Tr. at 5:11:00-5:13:32 P.M.]. MacKenzie tape recorded this phone call. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 246:14-15]. On the same day, Prins also created a false email from "Levon Martin," confirming the balance of the IOLTA as $3,144,000.00. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 248:3-16; United Sentry's Ex. 15; TransWorld's Ex. HH, Prins Dep. 191:18-192:8]. Prins then forwarded this email to MacKenzie to continue attempting to deceive MacKenzie into believing that all of the Proceeds were still in the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 248:11-16; United Sentry's Ex. 15; TransWorld's Ex. HH, Prins Dep. 191:18-192:8].
76. Around the beginning of December of 2016, because of MacKenzie's concerns about Prins based on news articles in San Antonio newspapers and the security of the Proceeds in the IOLTA, MacKenzie hired two ex-Texas Rangers to watch Prins and Ms. Prins 24 hours a day, so that MacKenzie would be alerted if Prins or Ms. Prins attempted to leave the country. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 252:22-253:24]. MacKenzie believed this "was the right thing to do for the whole situation." [Id. at 253:14-17].
77. On December 6, 2016, this Court held a status conference at the request of the Chapter 7 Trustee. At this hearing, the *505respective attorneys for the Chapter 7 Trustee, United Sentry, and Elbar raised very troubling concerns about Prins' misappropriation of funds from his IOLTA. [Main Case Doc. No. 197 at 7 of 20, ¶ 27]. Specifically, United Sentry's counsel stated that he had learned from communications with the FBI that Prins had transferred funds out of his IOLTA on October 18, 2016, which would make his statements on the record at the hearing held on November 8, 2016, that he was still holding all of the $2.4 million in the IOLTA blatantly false.
78. On December 7, 2016, based upon the statements made by the attorneys who appeared at the status conference on December 6, 2016, this Court entered its Order (1) Requiring Todd Prins to Wire Transfer $2.4 million to the Chapter 7 Trustee by No Later than 5:00 P.M. on December 12, 2016; and (2) Requiring Todd Prins to Personally Appear in Court and Show Cause Why He Should Not be Sanctioned ("Prins Show Cause Order").
A. violating the automatic stay on October 4, 2016 by conducting a foreclosure sale on 5506 Holly Springs Drive, Houston, Texas 77056 (the "Property"), which is property of the Debtor's bankruptcy estate;
B. violating the automatic stay on October 6, 2016 by accepting a wire of the Proceeds from Elbar Investments, Inc., which monies represent the funds attributable to the foreclosure sale of the Property; and
C. making a specific representation on the record via his telephonic appearance at the status conference held in this case on November 8, 2016 regarding the Proceeds: to wit, that on that day, the Proceeds were on deposit in his law firm's IOLTA account.
[Id. ].
79. On December 7, 2016, the Chapter 7 Trustee served Prins with a copy of the Prins Show Cause Order by email and facsimile. [Main Case Doc. No. 53]. The Chapter 7 Trustee also served a courtesy copy of the Prins Show Cause Order on Prins' bankruptcy counsel, Seidler. [Id. ]. There is no question that Prins received notice of the Prins Show Cause Order.
80. Prins did not wire transfer $2.4 million to the Chapter 7 Trustee by 5:00 *506p.m. on December 12, 2016, as required by the Prins Show Cause Order. [Main Case Doc. No. 60; Main Case Doc. No. 197 at 8 of 20, ¶ 33].
81. On December 9, 2016, Prins' license to practice law was placed on an interim suspension by the State Bar of Texas. [Main Case Doc. No. 197 at 8 of 20, ¶ 32].
82. On December 12, 2016, the United States (through the Department of Justice) seized the entirety of the funds in the Wells Fargo Operating Account, which amounted at that time to $1,601,542.14. [Pl.'s Ex. 9; TransWorld's Ex. HH, Prins Dep. 50:12-51:8].
83. On December 14, 2016, Prins filed his response to the Prins Show Cause Order (the "Response"), [Doc. No. 63], in which he asserted that (a) he did not violate the automatic stay because he believed the Property was owned by Triple Gate and was not property of the Debtor's estate, and (b) it was "impossible for him to effectuate the Court's [Prins Show Cause] [O]rder [because] [t]he United States, through the Department of Justice, has seized the account of Respondent rendering it impossible for him to transfer any funds or even afford transportation to Houston, Texas from San Antonio, Texas." [Main Case Doc. No. 63 at 3 of 5, ¶ 11]. In the Response, Prins admitted that by no later than 10:15 a.m. on October 5, 2016, he had knowledge that the Property was titled in the name of the Debtor and her non-debtor spouse, i.e., Amos.
84. On December 14, 2016, this Court held a hearing on the Prins Show Cause Order (the "Show Cause Hearing"). Prins failed to appear at the Show Cause Hearing as required by the Prins Show Cause Order. [Main Case Doc. No. 197 at 9 of 20, ¶ 37]. Counsel for United Sentry also informed the Court at this hearing about the United States' seizure of funds in Prins' accounts. [Id. ]. On December 14, 2016, this Court entered its Order (1) Holding Todd A. Prins in Contempt of this Court's Order of December 7, 2016; and (2) Requiring the U.S. Marshals Service to Take Todd A. Prins Into Custody and Produce Him in Court (the "Contempt Order"). [Main Case Doc. No. 64]. In the Contempt Order, the Court found that (a) Prins had received adequate notice of the Prins Show Cause Order, (b) Prins failed to turn over the $2.4 million as required by the Prins Show Cause Order, and (c) Prins failed to appear before the Court at a hearing on the Prins Show Cause Order held on December 14, 2016, at 11:30 a.m. [Id. ]. As a result, the Court held Prins in civil contempt of the Prins Show Cause Order and required the U.S. Marshals Service to take him into custody and produce him in court. [Id. ].
85. On December 15, 2016, Prins voluntarily appeared at the Bob Casey Federal Courthouse, 515 Rusk, Houston, Texas, 77002 and turned himself into the custody of the U.S. Marshals.
86. At the continued Show Cause Hearing on December 19, 2016, the parties made further oral arguments about the testimonial and documentary Fifth Amendment privilege issues raised at the Show Cause Hearing held on December 15, 2016. After listening to these oral arguments, the Court requested the parties to file written briefs on the privilege issues raised at the December 15 hearing. [See Main Case Doc. Nos. 74 (Prins' brief) and 75 (Trustee's brief) ]. The Court therefore recessed the Show Cause Hearing for approximately six hours. After considering the parties' written submissions, the Court went back on the record and ruled that Prins did not have a Fifth Amendment privilege over his bank statements and, therefore, had to produce them to the Chapter 7 Trustee. [Main Case Doc. No. 197 at 12 of 20, ¶ 47; see also Main Case Doc. No. 77]. The Court further ruled that Prins had waived his Fifth Amendment privilege and was required to answer questions regarding the status of the $2.4 million wired by Elbar and into the IOLTA. [Main Case Doc. No. 197 at 12 of 20, ¶ 47]. Thus, counsel for the Trustee was allowed to resume examining Prins. Prins admitted that, even if the IOLTA had not been seized by the United States, he would not have been able to comply with the Show Cause Order because all $2.4 million had been transferred out of the IOLTA and several hundred thousand dollars of the $2.4 million was no longer in the Wells Fargo Operating Account-i.e., he had spent many of the Proceeds. [Id. at 12 of 20, ¶ 48]. Prins further admitted that he had no justification or basis for transferring the $2.4 million from the IOLTA to the Wells Fargo Operating Account. [Id. ]. Prins also admitted to transferring substantial sums to two entities, TransWorld and Industry Drive.
87. On December 21, 2016, the Court entered an order requiring Prins to produce to the Chapter 7 Trustee bank statements for September to December 2016, for the IOLTA, the BBVA Operating Account, and the Wells Fargo Operating Account. [See Main Case Doc. No. 77]. The Court gave Prins until noon on January 6, 2017, to comply with the order. [Id. ].
88. On January 2, 2017, Elbar filed the instant adversary proceeding against the Debtor, Amos, the Trustee, Prins, United Sentry, MacKenzie, TransWorld, and Industry Drive. [Adv. Doc. No. 1].
89. On January 3, 2017, Elbar filed a lis pendens on the Property. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 126:8-23; Industry Drive's Ex. 10]. Elbar filed this lis pendens knowing that the Debtor claimed an interest in the Property and that therefore the Property was property of her Chapter 7 estate and protected by the automatic stay. [See Pl.'s Exs. 26-27; Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 126:8-23; TransWorld Ex.'s HH, Prins Dep. 154:5-25]. Elbar did not seek relief from the automatic stay from this Court before filing the lis pendens. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 126:11-13].
90. On January 9, 2017, this Court held the continued Show Cause Hearing. The Chapter 7 Trustee introduced the bank statements Prins had produced for the Wells Fargo Operating Account and the BBVA Operating Account discussed above.
91. On January 27, 2017, Mr. Cash died. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 11:17-22].
92. In late February of 2017, when she (as president of TransWorld) was served with a lawsuit, Ms. Cash learned for the first time that the check in the amount of $230,853.66 that TransWorld had made to the order of the IOLTA on February 4, 2008, for the purpose of Prins settling TransWorld's tax dispute with the Tax Assessor, *509may not have in fact been paid to the Tax Assessor. [Id. at 23:20-24:1].
93. On March 7, 2017, Prins submitted a resignation of his law license in lieu of discipline.
94. On March 13, 2017, Elbar filed a proof claim in the Debtor's Chapter 7 case, setting forth that its claim totals $1,594,424.17 and that it believes the Property is worth $3,500,000.00. [Proof of Claim, Case No. 16-35021, Claim 11, at 2].
95. On March 27, 2017, this Court, having completed the Show Cause Hearing on the Prins Show Cause Order, entered Findings of Fact and Conclusions of Law Regarding Order (1) Requiring Todd Prins to Wire Transfer $2.4 Million to the Chapter 7 Trustee By No Later Than 5:00 P.M. on December 12, 2016; and (2) Requiring Todd Prins to Personally Appear in Court and Show Cause Why He Should Not Be Sanctioned. [Main Case Doc. No. 197]. The Court then entered an order imposing sanctions against Prins, which ordered the following:
[1] [Prins] is liable to Elbar for sanctions in the amount of $800,000.00, representing [the] approximate difference between the $2.4 million paid by Elbar at the foreclosure sale and the funds frozen by the United States; [and]
[2] Prins is liable for sanctions in the following amount of attorneys' fees to the following parties:
[A] The Trustee in the amount of $20,485.00;
[B] Elbar in the amount of $13,350.00 for Richard A. Battaglia and $2,820.00 for Jerel S. Twyman; and
[C] United Sentry in the amount of $19,808.11.
[Main Case Doc. No. 198]. This Court ordered that Prins was immediately liable for all sanctions set forth in the order and that Prins was to immediately pay all sanctions. [Id. ]. Prins has failed to comply with any portion of this order.
96. On March 29, 2017, the Trustee filed a motion requesting this Court to approve the sale of the Property, [Main Case Doc. No. 199], which this Court granted. [Main Case Doc. No. 200]. Pursuant to the Court's order granting approval of the sale of the Property, as amended, the amount of proceeds necessary to pay off United Sentry's mortgage on the Property was to be placed into the Court's registry. [Main Case Doc. Nos. 200, 209].
97. On April 5, 2017, the Debtor and Amos were indicted for conspiracy to commit health care fraud, health care fraud, and engaging in monetary transactions in property derived from specified unlawful activity, in the Southern District of Texas, Houston Division.
98. On April 27, 2017, in the adversary proceeding at bar, this Court granted the Trustee's motion to dismiss and dismissed all claims asserted by Elbar against the Trustee. [Adv. Doc. No. 45]. Elbar did not file any opposition to the Trustee's motion to dismiss all of the claims against the Trustee.
*51099. On May 26, 2017, the Trustee closed on the sale of the Property. [Main Case Doc. Nos. 218, 219].
100. On May 30, 2017, pursuant to the Court's order approving the sale of the Property, $1,719,062.93, was placed into the Court's registry. [See docket entry in Main Case dated 05/30/2017]. This action was taken because prior to the sale, Elbar had filed the instant adversary proceeding and, among other relief requested, asserts that it should receive some or all of these sale proceeds in order to be made whole before United Sentry receives any portion of these proceeds. [Adv. Doc. No. 1 at 6-7 of 9, ¶¶ 27-28].
101. On June 7, 2017, Prins entered into a plea agreement with the U.S. Attorney for the Western District of Texas regarding the matter of United States of America v. Todd A. Prins ("Prins' Criminal Case"). [See Pl.'s Ex. 1; United States v. Todd A. Prins , Crim. No. 5:17-cr-00482-DAE-1, W.D. Tex., ECF. No. 3]. In the plea agreement, Prins stated that he "well knew and believed[ ] the true balance of the IOLTA account was less than $1,000, having been $2,041.17 prior to the receipt of the $2,400,000 transfer from E[lbar] I[nvestments], Inc." [Pl.'s Ex. 1; United States v. Todd A. Prins , Crim. No. 5:17-cr-00482-DAE-1, W.D. Tex., ECF. No. 3 at 7-8 of 17]. Pursuant to the plea agreement, Prins is to make restitution to Elbar in the amount of $2.4 million. [Pl.'s Ex. 1; United States v. Todd A. Prins , Crim. No. 5:17-cr-00482-DAE-1, W.D. Tex., ECF. No. 3 at 17 of 17]. Under the plea agreement, Prins is also to make restitution to other individuals; however, neither Industry Drive nor TransWorld are included in Prins' plea agreement.
102. Because Triple Gate defaulted under the Note, the 13 investors who invested in United Sentry's loan to Triple Gate have not received any return on their investments in the form of interest payments by Triple Gate. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 77:6-24]. However, since July of 2017, MacKenzie himself has been making interest payments to the 11 investors (minus United Sentry and himself), in the amount of approximately $13,000.00 a month, as he believes that it is the "right thing to do." [Id. at 77:6-24, 94:7-14].
103. On July 6, 2017, Elbar filed a first amended complaint in this adversary proceeding, asserting the following claims: (1) equitable subrogation as to Prins, United Sentry, and MacKenzie; (2) fraud in real estate transactions as to Prins, United Sentry, and MacKenzie; (3) common law fraud as to Prins, United Sentry, and MacKenzie; (4) Texas Theft Liability Act as to Prins, United Sentry, and MacKenzie; (5) theft as to Prins; and (6) money had and received, unjust enrichment, theft, and conversion against TransWorld and Industry Drive. [Adv. Doc. No. 68].
104. On August 10, 2017, Elbar, Bustamante, Abdullatif, and Jabbour filed a petition in the Prins' Criminal Case, claiming that they are entitled to recover the entire $1,601,542.14 that the United States government seized from the IOLTA. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 77:9-15; Pl.'s Ex. 49].
105. On August 11, 2017, Elbar filed a proposed order approving dismissal of Elbar's theft claim against Industry Drive. [Adv. Doc. No. 114]. The Court subsequently signed the proposed order later that same day, thereby dismissing Elbar's theft claim against Industry Drive. [Adv. Doc. No. 116].
106. On February 6, 2018, a three-day trial commenced in the instant adversary proceeding.
*512107. Thus, the only causes of action asserted by Elbar remaining in this adversary proceeding are the following:
A. As to United Sentry: causes of action for equitable subrogation, fraud in real estate transaction, common law fraud, and the Texas Theft Liability Act;62
B. As to TransWorld: causes of action for money had and received, unjust enrichment, and conversion;
C. As to Industry Drive: causes of action for money had and received, unjust enrichment, and conversion; and
D. As to Prins: causes of action for fraud in real estate transaction, common law fraud, and the Texas Theft Liability Act.63
108. Ms. Cash estimated that she has paid approximately $20,000.00 for counsel to represent her in the instant adversary proceeding. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 40:24-41:1].
109. Industry Drive has paid $44,000.00 in legal fees for this suit, not including the trial itself. [Id. at 150:24-25].
110. On February 22, 2018, in the Prins' Bankruptcy, Bankruptcy Judge Gargotta entered an Order Granting Motion of the United States of America, Internal Revenue Service, to Approve Compromise Pursuant to Federal Rule of Bankruptcy Procedure 9019. [Todd A. Prins and Paula R. Prins , Case No. 16-52187-cag, Bankr. W.D. Tex., ECF. No. 135]. Judge Gargotta found that (1) the $82,373.28 paid to the IRS by Prins on October 19, 2016, from the IOLTA is the sole property of Elbar; and (2) the $82,373.28 is not part of the bankruptcy estate of Prins and Ms. Prins. [Id. ]. On that same day, Judge Gargotta approved an Agreed Final Judgment in the adversary proceeding that the U.S. Internal Revenue Service had filed in the Prins' Bankruptcy. [United States of America, Internal Revenue Service v. Prins , Adv. Pro. No. 17-05063-cag, Bankr. W.D. Tex., ECF. No. 38]. The Agreed Final Judgment ordered, in relevant part, that (1) the $82,373.28 paid to the IRS on October 19, 2016, is the sole property of Elbar; and (2) the IRS is directed to turn over the $82,373.28 to Elbar within 30 days of the date of the order. [Id. ].
111. On March 20, 2018, Elbar received a check from the United States Treasury in the amount of $82,373.28, in accordance with the Agreed Final Judgment signed by Judge Gargotta in the Prins' Bankruptcy. [Adv. Doc. No. 237].
112. On May 15, 2018, Prins was sentenced in the Prins' Criminal Case to 72 months imprisonment, three years of supervised release, and was ordered to pay $2,975,264.00 in restitution (of which, $2.4 million is restitution to Elbar). [United States v. Todd A. Prins , Crim. No. 5:17-cr-00482-DAE-1, W.D. Tex., ECF. Nos. 58, 59]. Also on May 15, 2018, the District Court in the Prins' Criminal Case granted *513the United States' motion to set aside the preliminary order of forfeiture in lieu of restitution, [id. at ECF No. 62], essentially meaning that the government would not seek the funds and would allow the funds to be returned to Elbar.
113. On June 7, 2018, the United States Attorney for the Western District of Texas filed a "Process Receipt and Return" in the Prins' Criminal Case, requesting that the Clerk of the Court in the Western District of Texas, San Antonio Division, transfer funds in the amount of $1,601,542.14 to Elbar for the purpose of payment as restitution. [United States v. Todd A. Prins , Crim. No. 5:17-cr-00482-DAE-1, W.D. Tex., ECF. No. 63]. On July 2, 2018, Elbar in fact received a check from the United States Treasury in the amount of $1,601,542.14. [Adv. Doc. No. 237].
114. Of the $2.4 million that it initially sought to recover by initiating the instant adversary proceeding, Elbar has now received a total of $1,683,915.42: $82,373.28 from the IRS in the Prins' Bankruptcy plus $1,601,542.14 from the Prins' Criminal Case. [Adv. Doc. No. 237]. Thus, in this adversary proceeding, Elbar now seeks the return of $716,084.58 in order to be made whole (i.e., $2,400,000.00 minus $1,683,915.42 equals $716,084.58). Additionally, Elbar seeks to recover attorneys' fees for the prosecution of this adversary proceeding.
115. For their part, United Sentry, TransWorld, and Industry Drive seek to recover from Elbar all of the attorneys' fees that they have incurred in defending themselves against the claims brought by Elbar.
III. CREDIBILITY OF WITNESSES
A. Vincent Bustamante
Bustamante gave testimony both as a fact witness and as an expert witness. With respect to serving as a fact witness, the Court finds that Bustamante, for the most part, forthrightly answered the questions posed to him, and therefore the Court finds that he is a credible witness and gives some measure of weight to his testimony. The Court wants to emphasize, however, that this finding is not to be construed as this Court condoning Bustamante's apparent belief that it is acceptable to violate the automatic stay by: (1) wiring funds to Prins with the knowledge that the Property was protected by the automatic stay, [see Finding of Fact Nos. 38-41]; and (2) filing a lis pendens against the Property with the knowledge that the Property was protected by the automatic stay, [see Finding of Fact No. 89].
With respect to serving as an expert witness, the Court does not find Bustamante to be credible when he suggests that it is acceptable to consummate any foreclosure sale knowing that the automatic stay is in place.
B. Todd Prins
The Court finds that Prins is a dishonest individual whose credibility is sorely lacking. After all, Prins, among other despicable acts, did the following: (1) he improperly transferred the Proceeds from the IOLTA to the IRS, to the Wells Fargo Operating Account, and to the BBVA Operating Account, and used many of these funds for his own personal benefit, [Finding of Fact Nos. 46-50, 57, 59]; (2) he lied at the hearing held on November 8, 2016, when he stated-in response to a question by Elbar's counsel-that the $2.4 million was still in the IOLTA when in fact he had already transferred these funds out of the IOLTA and had begun using them, [Finding of Fact No. 58]; (3) he lied at the hearing held on November 8, 2016, when he stated-in response to a question by this Court-that he was ill at home in San Antonio when in fact he was in London, England with his wife and two children on a trip that was made possible through his use of a portion of the Proceeds that he had stolen, [Finding of Fact Nos. 58-59]; (4) on April 6, 2016, he fabricated a letter on the letterhead of Linebarger (outside counsel for the Tax Assessor) setting forth that TransWorld owed taxes of $169,807.29 in order to trick Ms. Cash into delivering a check for this amount to Prins, which he deposited into the IOLTA, and thereafter spent for his own purposes, [Finding of Fact Nos. 9-10]; and (5) on December 5, 2016, he impersonated an employee of BBVA Compass Bank on a conference call with MacKenzie in an effort to convince MacKenzie that Prins had not spent the Proceeds and that these funds were still in the IOLTA, [Finding of Fact No. 75]. These five examples by no means represent the universe of Prins' skullduggery-there are many more. However, for purposes *515of this credibility section, these five examples underscore his lack of trustworthiness; and because he is not trustworthy, this Court does not give much weight to Prins' testimony.
Indeed, given his outrageous behavior this Court would ordinarily give no weight whatsoever to any of his testimony. However, there is one reason to give at least some weight to portions of his testimony, much of which was given by deposition in this adversary proceeding on November 15, 2017.
C. Peggy Cash
The Court finds that Ms. Cash testified forthrightly and the Court finds her testimony to be very credible. The Court therefore gives her testimony substantial weight.
D. Donald "Tony" MacKenzie
The Court finds that MacKenzie testified forthrightly and the Court finds his testimony to be very credible. The Court therefore gives his testimony substantial weight.
E. Inez Cindy Gabriel
The Court finds that Gabriel testified forthrightly and the Court finds her testimony to be very credible. The Court therefore gives her testimony substantial weight.
F. Osama Abdullatif
The Court has reviewed Abdullatiff's deposition testimony and finds it be credible; thus, the Court gives Abdullatif's testimony substantial weight.
G. John Jabbour
The Court has reviewed Jabbour's deposition testimony and finds it be credible; thus, the Court gives Jabbour's testimony substantial weight.
H. Elias Klaimy
The Court has reviewed Klaimy's deposition testimony and finds it be credible; thus, the Court gives Klaimy's testimony substantial weight.
IV. CONCLUSIONS OF LAW
A. Jurisdiction, Venue, and Constitutional Authority to Enter a Final Judgment
1. Jurisdiction
The Court has jurisdiction over this adversary proceeding pursuant to
This adversary proceeding is a core proceeding pursuant to
2. Venue
Venue is proper pursuant to
3. Constitutional Authority
Having concluded that this Court has jurisdiction over this dispute, the Court nevertheless notes that Stern v. Marshall ,
In the suit at bar, this Court concludes that it does indeed have the authority to enter a final judgment. All of the parties have consented, either expressly or impliedly, to adjudication of this dispute by this Court. Wellness Int'l Network, Ltd. v. Sharif , --- U.S. ----,
B. Elbar's Standing to Seek to Recover $2.4 Million
Although none of the defendants, in any of their respective answers or in the pretrial statement, pleaded that Elbar lacked standing to prosecute this lawsuit, the defendants began raising this issue at trial. TransWorld, Industry Drive, and United Sentry argue that if this Court is to find in Elbar's favor on any of Elbar's claims, the most Elbar can recover is $200,000.00, as that is the amount of money Elbar itself contributed to the purchase price of the Property, [see Adv. Doc. No. 216 at 15 of 43; Adv. Doc. No. 227 at 8-9 of 13; Adv. Doc. No. 219 at 1-2 of 16; Adv. Doc. No. 222, Feb. 8, 2018, Trial Tr. 170:11-12]; Elbar, on the other hand, argues that Federal Rule of Civil Procedure ("FRCP") 17(a)(1)(F), made applicable to this adversary proceeding through Bankruptcy Rule 7017, allows it to bring suit on behalf of all Purchasers, because the Purchasers are third party beneficiaries. [Adv. Doc. No. 217 at 28 of 35, ¶ 60; Adv. Doc. No. 228 at 12-13 of 19, ¶¶ 33-35; Adv. Doc. No. 230 at 9-10 of 19, ¶¶ 23-24]. Without identifying the contract it alleges was made, Elbar argues that "[t]he evidence is uncontroverted that Elbar made a contract in its name to purchase the Property for the benefit of those who provided the funds." [Adv. Doc. No. 217 at 28 of 35, ¶ 60]. In their post-trial briefs, neither United Sentry, TransWorld, nor Industry Drive address Elbar's argument regarding FRCP 17.
The Court first considers whether Elbar has standing to bring this adversary proceeding. Article III of the Constitution limits the jurisdiction of federal courts to "cases" and "controversies." U.S. Const. art. III, § 2. One element of the case-or-controversy requirement is the doctrine of standing. Lujan v. Defenders of Wildlife ,
Over several decades of jurisprudence, the Supreme Court has formulated a two-component test to enable the federal courts to determine the standing of complainants before them. Such parties must demonstrate both constitutional and prudential standing.
...
To meet the requirement of constitutional standing, [a party] must show that it has suffered an "injury in fact" that is: concrete and particularized and actual or imminent; fairly traceable to the challenged action of the [opposing party]; and likely to be redressed by a favorable decision. The party must have such a personal stake in the outcome of the controversy as to assure ... concrete adverseness. The injury-in-fact must be palpable, though this requirement is not onerous. The injury need not be current; even a "threatened" injury will suffice.
Once a party has met these constitutional requirements, its standing may yet be challenged on three "prudential" grounds .... A complainant's bid for standing may be defeated if: (a) it is asserting a third party's rights; (b) it alleges a generalized grievance rather than an injury particular to it; or (c) it asserts an injury outside the zone of interest the statute was designed to protect.
In re Cypresswood Land Partners, I ,
*5181. Elbar's Constitutional Standing
In the suit at bar, Elbar meets the requirements for constitutional standing: (1) Elbar has suffered an injury-in-fact in the form of monetary damage: namely, at a minimum, Prins stole $200,000.00 of its money, [Finding of Fact Nos. 33, 46-50, 57]; (2) there is a "fairly traceable" connection between Elbar's asserted injury and the alleged actions of the defendant(s): Prins (one of the defendants) himself stole all of the Proceeds (including Elbar's $200,000.00 pro rata share), and the $300,000.00 Prins distributed to Industry Drive (one of the defendants) and the $164,807.29 Prins distributed to TransWorld (one of the defendants) can be traced to these Proceeds, [Finding of Fact Nos. 33, 46-50, 57]; and (3) there is a non-speculative likelihood that Elbar's injury can be remedied by Elbar's requested relief. There is no doubt that if this Court grants the relief requested by Elbar, Elbar will recover all of the $200,000.00 from the Proceeds presently in the registry of this Court. Thus, there is no question that Elbar has constitutional standing to bring this suit and to recover a judgment for up to its $200,000.00 share of the Proceeds.
The question therefore is whether Elbar may prosecute this adversary proceeding in order to recover a judgment for not only its own $200,000.00, but also for the $2.2 million contributed by the other Purchasers.
2. Elbar's Prudential Standing
Elbar easily meets two of the prudential standing grounds. First, the injury Elbar is alleging is a particular injury, as opposed to a general grievance that is shared in equal measure by all or a large class of citizens. See In re A.P.I. Inc. ,
As to the third prudential standing ground, generally, a complainant's assertion of a third party's rights will defeat a complainant's bid for prudential standing. See In re Cypresswood Land Partners, I ,
An action must be prosecuted in the name of the real party in interest. The following may sue in their own names without joining the person for whose benefit the action is brought: ... a party with whom or in whose name a contract has been made for another's benefit[.]
Thus, the question is whether Elbar, in seeking to recover a judgment for the $2.2 million contributed by the other Purchasers, can establish that a contract was made for their benefit.
a. Third Party Beneficiary Status Under FRCP 17(a)(1)(F)
Elbar essentially argues that it is a real party in interest and that it can prosecute the instant adversary proceeding on behalf of all Purchasers because Elbar made a contract in its name to purchase the Property for the benefit of those who provided the funds (i.e., the Purchasers). As stated above, FRCP 17(a)(1)(F) specifically addresses third-party beneficiary contracts by providing that "a party with whom or in whose name a contract has been made for another's benefit" "may sue in [its] own name[ ] without joining the person for whose benefit the action is brought." See also Drew Hardware, L.L.C. v. Hartford Fire Ins., Co. , No. Civ-14-845-R,
Whether a third party beneficiary contract exists is governed by Texas law. See Farrell Const. Co. v. Jefferson Parish, La. ,
In Key , the homeowners defaulted on their mortgage obligation and the mortgage company requested that the substitute trustee, Kevin Key ("Key") post the property for a nonjudicial foreclosure sale.
Pierce filed suit against Key and the mortgage company seeking a declaratory *521judgment (among other causes of action) that awarded him title to the property.
The judgment was then appealed. On appeal, the defendants argued that there was no writing for the purchase of the property sufficient to satisfy the statute of frauds, while Pierce asserted that the posted notice of sale and the deed of trust were "sufficient memoranda" to satisfy the statute of frauds.
Whether a contract comes within the statute of frauds is a question of law. The statute of frauds requires the written agreement or memorandum to contain all of the essential elements of the agreement so that the contract can be ascertained from the writings without resort to oral testimony. It does not require that the contract itself be in writing . Rather, the written instrument merely furnishes written evidence of a contract and its essential terms. A valid memorandum of the contract may consist of numerous communiques signed by the party to be charged and addressed to his agent or the other party to the contract, or even to a third party not connected with the transaction.
Applying the above law to the facts of the case, the court of appeals affirmed the trial court and found that: (1) the notice of sale was signed by Key; (2) the notice of sale described the property; (3) the notice of sale stated that the property would be sold to the highest bidder for cash; (4) the deed of trust dictated when, where, and upon what terms the property must be sold; (5) the deed of trust required that Key deliver a trustee's deed to the highest bidder; and (6) Pierce's tender of the purchase price, all together, "provide[d] all essential terms of the contract and satisfie[d] the statute of frauds."
This Court extrapolates Key's holding to the facts at bar and finds that even though there is no express written contract for the sale of the Property, the following documents provide all of the essential terms of a contract: (1) the notice of sale being signed by the substitute trustee (i.e., Prins), [Pl.'s Ex. 18]; (2) the notice of sale describing the Property, [Pl.'s Ex. 18]; (3) the notice of sale stating the Property will be sold to the highest bidder or bidders for cash, [Pl.'s Ex. 18]; (4) the Deed of Trust dictating under what terms the Property must be sold, and the notice of sale, under the terms of the Deed of Trust, setting forth the date, location, and upon what terms the Property must be sold, [Pl.'s Exs. 14, 18]; (5) the Deed of Trust requiring that the Trustee deliver a trustee's deed to the highest bidder,
*522and (6) the Purchasers' tender of the purchase price on October 4 and 6, 2016,
The question now is whether it is possible to have a third party beneficiary to this contract under Texas law. The answer is yes. Indeed, under Texas law, one can be a third party beneficiary even if the contract is an oral contract. See Cunningham v. Healthco, Inc. ,
To qualify as a third party beneficiary under Texas law, an alleged third party beneficiary must prove:
(1) that [the alleged third party beneficiary] was not privy to the written agreements; (2) that the contracts were actually made for [the alleged third party beneficiary]'s benefit; and (3) that the contracting parties intended for [the alleged third party beneficiary] to benefit by their written agreements.
Talman Home Fed. Sav. & Loan Ass'n of Ill. v. Am. Bankers Ins. ,
Here, the first element is met. "Privity of contract is established by proving that [one] [is] a party to an enforceable *523contract with either [another person] or a party who assigned its cause of action to [that other person]." Allan v. Nersesova ,
The second and third elements are met as well. In determining whether one is a third party beneficiary to a contract, "the intention of the contracting parties is controlling." MCI Telecomms. Corp. v. Tex. Utils. Elec. Co. ,
The evidence clearly shows that (1) the purchase of the Property was made for the Purchasers' benefit and (2) the contracting parties (i.e., Elbar and United Sentry) intended for the agreement to benefit the Purchasers. Even though the eleven cashier's checks, and later the wire-transfer of the Proceeds, came from Abdullatif, Jabbour, and Bustamante themselves, it is clear that Elbar was the contemplated purchaser of the Property at the foreclosure sale. First, Twyman-who is a vice president of Elbar-was the individual who attended the foreclosure sale (and was the successful highest bidder) as a representative of Elbar. [Finding of Fact No. 32]. Second, even though the money came from Bustamante himself, the four cashier's checks (that were not from Abdullatif and Jabbour) given to Shum at the foreclosure sale on October 4, 2016, were made payable to the order of Elbar. [Finding of Fact No. 32; see Pl.'s Ex. 20]. Third, the receipt tendered by Shum-that is signed by both Shum as substitute trustee and Twyman as Elbar's vice president-sets forth that payment was received from Elbar. [See Pl.'s Ex. 20]. Fourth, Bustamante testified that when purchasing real property, the individuals (and Elbar itself) provide the funds to purchase properties as their beneficial owners, and that Elbar then acquires the legal title to the properties.
Fifth, before the wire transfer of the $2.4 million was sent to the IOLTA, Bustamante requested that the wire show Elbar as the sending party. [Pl.'s Ex. 31]. Sixth, all of the correspondence after the occurrence of the foreclosure sale on October 4, 2016, concerning the return of the cashier's checks and payment by wire was between Shum/Prins and Twyman, as the attorney and vice president representing Elbar. [See Pl.'s Exs. 21-31]. Thus, the evidence shows that Elbar, although not fronting all of the money for the purchase of the Property, was the intended legal purchaser of the Property. All of the above described circumstances show that the Purchasers were the intended third-party beneficiaries of the agreement that Elbar entered into with United Sentry's substitute trustees to purchase the Property.
For all these reasons, Elbar has the right to prosecute this suit on behalf of itself and all other Purchasers seeking a judgment to recover all amounts still owed to all of the Purchasers.
C. Elbar's Violation of the Automatic Stay
In determining whether Elbar should recover on its claims for equitable subrogation, money had and received, and unjust enrichment, this Court is required to weigh the equities based upon the totality of the circumstances. See Murray v. Cadle Co. ,
1. October 4, 2016, Stay Violation
An analysis of whether Elbar violated the stay begins with a review of the Code provision that imposes the stay:
Elbar's participation in the foreclosure sale on the Property held at approximately noon on October 4, 2016, [Main Case Doc. No. 118, Dec. 15, 2016, Hrg. 10:12-17], coming away as the highest bidder, and its attempt to pay the bid price by tender of the eleven cashier's checks-even without the knowledge that the Debtor had filed her bankruptcy petition at approximately 8:20 a.m. on October 4, 2016, [Finding of Fact No. 28], three and a half hours prior to the foreclosure sale taking place-amounts to a violation of the automatic stay. See, e.g. , Jackson v. Priority Trs. Servs. of Miss., L.L.C. (In re Jackson) ,
2. October 6, 2016, Stay Violation
The next question is whether Elbar's act of wiring the $2.4 million to Prins was an act to obtain possession of property of the estate. Case law says that it was.
If, as concluded here, payment of the bid price is necessary for the high bidder to conclude his purchase of the property, then payment of the bid price must be regarded as an "act to obtain possession of property of the estate." Consequently payment of the bid price, unlike recordation of a trustee's deed, is not merely a ministerial act that preserves the status quo or only gives the world notice of what has occurred, but rather is an act of legal substance that changes the relationship of the parties and effectively removes property from property of the estate. Consequently payment of the bid price after the bankruptcy petition is filed violates the automatic stay pursuant to § 362(a)(3).
*527
The undersigned judge agrees with this conclusion. An act to obtain title to estate property violates the stay pursuant to the very language of § 362(a)(3). The sole objective of any purchaser at a foreclosure sale in giving money to the trustee is to have the trustee execute and deliver to the money-giver a deed to the property. Yet, if this property is "property of the estate," then the money-giver's act-and objective-necessarily seeks to deprive the estate of title to the subject property. Thus, here, Elbar violated the stay by wire transferring the $2.4 million to the IOLTA. [See Finding of Fact No. 40].
To the extent that Elbar suggests that its wire transferring the Proceeds in violation of the automatic stay is essentially "no harm, no foul" because Elbar (or another party, such as Prins) could have moved to have the automatic stay retroactively annulled, such argument holds no weight with this Court.
Whether an asset is property of the estate is a legal determination which frequently entails complex analyses involving a number of legal elements and a variety of facts .... [t]hese questions concerning the characterization of the ... property ... can only be answered with finality through the judicial process ....
Application of In re Chesnut to the suit at bar lends strength to this Court's finding that Elbar willfully violated the stay on October 6, 2016, when it wired the Proceeds to the IOLTA. [
*528See Finding of Fact Nos. 38-41]. If Elbar had complied with In re Chesnut , it would not have wired the $2.4 million on the afternoon of October 6, 2016. By this time and date, Elbar knew that the Debtor had filed a bankruptcy petition and that she was asserting that she had an interest in the Property. [Finding of Fact No. 37]. Under these circumstances, Elbar could not-as a matter of law-take the position that the Debtor had no interest in the Property and therefore disregard the automatic stay and wire the $2.4 million. Rather, pursuant to In re Chesnut , Elbar should have filed a motion to lift stay, describing the factual background to support its position, and requesting this Court to lift the stay to: (1) allow Elbar to wire the $2.4 million to Prins, as substitute trustee; and (2) authorize Prins to take all steps appropriate under state law to complete the foreclosure sale under the Deed of Trust, including executing and delivering a deed to Elbar conveying title to the Property. See also In re Lile ,
If Elbar had chosen this course, it would have fulfilled the public policy objectives of the Bankruptcy Code and due process as articulated in In re Chesnut : namely, to afford all parties in interest, including the Debtor and all of her creditors, the opportunity to be heard; and to allow this Court to consider the evidence, reflect upon the parties' arguments, and then render a decision as to whether the Property was property of the Debtor's estate subject to the automatic stay and, if so, whether the stay should be annulled. In re Chesnut ,
3. January 3, 2017, Stay Violation
Elbar not only willfully violated the automatic stay on October 6, 2016, when it wire transferred the Proceeds to the IOLTA; Elbar also willfully violated the automatic stay for a second time when it filed a lis pendens against the Property in January 2017. [Finding of Fact No. 89]. Filing a lis pendens postpetition with knowledge of the debtor's Chapter 7 case is a blatant violation of the automatic stay. See, e.g. , In re Thornburg ,
Elbar's business model and prior litigation history regarding foreclosure sales make its willful violations of the stay on October 6, 2016, and January 3, 2017, particularly egregious-which in turn makes this Court's finding of Elbar's bad faith and lack of equitable and righteous dealing even more pronounced. Elbar's entire business is based upon conducting research about real properties that have been posted for foreclosure, deciding on which properties to bid, and then attending and participating at these sales. [See Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 53:9-11, 111:24-112:15, 112:25-113:2, 113:16 -22, 114:4-7; TransWorld's Ex. JJ, Klaimy Dep. 7:10-18, 8:14-18, 13:5-7, 13:17-14:7]. Elbar has been pursuing this business model for approximately 34 years, and has frequently participated in sales where the owner of the property has filed for bankruptcy. [TransWorld's Ex. II, Bustamante Dep. 67:15-20, 182:6-10; TransWorld's Ex. JJ, Klaimy Dep. 13:13-15; Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 134:11-14]. So, there is no question that Elbar is an extremely sophisticated entity that understands that property owners frequently file bankruptcy petitions at the last second in order to stop the foreclosure process through the imposition of the automatic stay. Indeed, Elbar's in-house counsel-Twyman-has a substantial background himself representing home lenders in consumer bankruptcy cases in the Southern District of Texas before joining Elbar.
The circumstances here are similar to In re Burke ,
[The investor]'s purchase of the property was a deliberate attempt to exercise control over estate property and he is deemed to have had notice of the bankruptcy estate's interest such that he should have known of that interest. [The investor] is not an innocent consumer who purchased this property for a residence. He is an inveterate investor in distress properties and a regular buyer of foreclosure property. As such a higher standard of knowledge foreshadows his actions .
But, there is more. Not only are Elbar and Bustamante experienced in participating at foreclosure sales, they are also experienced in appeals involving foreclosure sale disputes. Indeed, Elbar and Bustamante have been on the losing end of two disputes that have resulted in published opinions from the Fifth Circuit: Elbar Investments Inc. v. Pierce (In re Pierce) ,
In In re Pierce , Elbar purchased property at a judicial tax sale without knowledge of the bankruptcy petition and automatic stay.
In In re Cueva , Bustamante-who, it must be remembered, is a vice president of Elbar-purchased a one-half interest in property sold at a foreclosure sale without knowledge of the bankruptcy petition and automatic stay.
The holdings issued in these opinions lead this Court to find that Elbar is an extremely knowledgeable and sophisticated litigant that understands perfectly that it is a direct violation of the Bankruptcy Code to (1) attempt to acquire fee simple to real property when the foreclosure sale occurs after the filing of the property owner's bankruptcy; and (2) file a lis pendens against a property in bankruptcy.
And, there is even more. To the extent that Elbar suggests that it has clean hands because § 362(d) allows it-or, United Sentry-to seek to annul the stay in order to overcome any violation of the stay, this Court disagrees. The problem with this position is that there is ample case law holding that only innocent parties-in-interest who had no knowledge of the bankruptcy-and therefore no notice that the automatic stay was in effect-are able to obtain annulment of the stay. See, e.g. , Jones v. Garcia (In re Jones) ,
In In re Soares , the creditor, with knowledge of the debtor's bankruptcy, sought an order of default and a judgment authorizing foreclosure in state court but failed to notify the state court of the debtor's *532bankruptcy and the automatic stay.
If Elbar's seasoned and veteran counsel (i.e., Twyman and Bustamante) had only done research on the law, they would have found this case and other case law on point. See, e.g. , IMC Mortg. Co., Inc. v. Brown (In re Brown) ,
In fact, Elbar and Bustamante should be well aware of the specific set of circumstances in which it is proper for the Court to grant a motion to annul the stay. In In re Jefferson , Elbar filed a motion to annul the automatic stay. No. 13-33515-H3-13,
Here, unlike In re Jefferson , Elbar did violate the stay-willfully-because it knew of the Debtor's bankruptcy prior to wire-transferring the Proceeds and filing *533the lis pendens, [Finding of Fact Nos. 37-41, 89]; therefore, annulment of the stay for Elbar's benefit would be wholly inappropriate. Elbar violated the automatic stay clear and simple, and any annulment argument is simply not persuasive.
In sum, Elbar violated the automatic stay three times, and in two of these instances, Elbar did so willfully. The Court will take this conduct into account when analyzing Elbar's claims for equitable subrogation, money had and received, and unjust enrichment.
D. The Claims Against Prins and United Sentry: Fraud in Real Estate Transactions, Common Law Fraud, Texas Theft Liability Act, and Equitable Subrogation
1. Agency Law as it Applies to the Fraud in Real Estate Transactions, Common Law Fraud, and Texas Theft Liability Act Claims
Elbar argues that because Prins, as the substitute trustee under the Deed of Trust expressly appointed by United Sentry, [Finding of Fact No. 19], had actual or apparent authority to act as United Sentry's agent, United Sentry is liable for Prins' fraud and theft. [Adv. Doc. No. 217 at 11-12 of 35, ¶¶ 28-29]. Elbar concedes that if this Court finds that Prins was not acting with actual or apparent authority, then Elbar's claims against United Sentry for fraud in real estate transactions, common law fraud, and the Texas Theft Liability Act fail as a matter of law. [Adv. Doc. No. 222, Feb. 8, 2017, Trial Tr. 23:6-15]. Thus, the threshold question is whether Prins was acting with actual or apparent authority from United Sentry.
a. Review of Applicable Agency Law
"Under Texas law, an agent is someone authorized by a person or entity to transact business or manage some affair for that person or entity." Tex. Soil Recycling, Inc. v. Intercargo Ins. Co. ,
"An agency relationship may be demonstrated by 'written or spoken words or conduct, by the principal, communicated either to the agent (actual authority) or to the third party (apparent authority)." Bridas S.A.P.I.C. v. Gov't of Turkm. ,
"Actual authority includes both express and implied authority and usually denotes the authority a principal (1) intentionally confers upon an agent, (2) intentionally allows the agent to believe he possesses, or (3) by want of due care allows the agent to believe he possesses." Utils. Optimization Grp., L.L.C. ,
Apparent authority, on the other hand, "is based on estoppel arising either from a principal knowingly permitting an agent to hold [himself] out as having authority" or "by a principal's actions which lack such ordinary care as to clothe an agent with the indicia of authority, thus leading a reasonably prudent person to believe that the agent has the authority [he] purports to exercise." Utils. Optimization Grp., L.L.C. ,
"Key to the tests for both actual and apparent authority is the need for some action or omission by the principal, not merely the agent." Utils. Optimization Grp., L.L.C. ,
A principal is liable for the torts of his agent "committed in the course and scope of their employment." Ross v. Marshall ,
*535"[U]nder Texas law, an agent's 'serious criminal activity' is almost never taken within the scope of authority granted by the principal." Ross ,
Generally, "a principal is deemed to know facts that are known to its agent." Secs. Inv'r Prot. Corp. v. Cheshier & Fuller, L.L.P. (In re Sunpoint Secs., Inc.) ,
b. Application of Agency Law to the Facts in This Adversary Proceeding
The Court now applies these agency principles to the suit at bar. Whether United Sentry is liable for the acts committed by Prins hinges on whether Prins committed these acts in the course and scope of his employment. Ross ,
1. Either personally or by agent give notice of the foreclosure sale as required by the Texas Property Code as then amended;
2. Sell and convey all or part of the Property to the highest bidder for cash with a general warranty binding Grantor, subject to prior liens and to other exceptions to conveyances and warranty; and
3. From the proceeds of the sale, pay, in this order:
a. expenses of foreclosure, including a normal hourly fee of the Trustee;
b. to Beneficiary, the full amount advanced, or the full amount of the principal, interest, attorney's fees, and other charges due and unpaid;
c. any amounts required by law to be paid before payment to Grantor; and to Grantor, any balance.
[Pl.'s Ex. 14].
A principal is liable only for the torts of his agent committed in the course and scope of the agent's employment. Ross ,
He most certainly did not. The Deed of Trust did not authorize Prins to steal the Proceeds and use them for his own personal benefit. Indeed, the Deed of Trust did not authorize Prins: (1) to hold the sale after learning about the Debtor's bankruptcy , [see Finding of Fact No. 29]; or (2) to accept the $2.4 million wire transfer from Elbar at a time when he knew of the Debtor's filing of her bankruptcy petition and her position that she owned the Property , [see Finding of Fact Nos. 29, 36, 39, 40]. Stated differently, the Deed of Trust did not authorize Prins to violate the automatic stay. Further, there was no trial testimony that MacKenzie expressly directed Prins to go forward with the foreclosure sale after MacKenzie learned about the Debtor's bankruptcy. To the contrary, MacKenzie testified at trial that it was Prins who decided to proceed with the sale on October 4, 2016, [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 256:17-19], and that October 11, 2016, was the first time Prins told MacKenzie that Elbar had wire transferred the Proceeds to the IOLTA, [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 221:3-10, 222:10-15; United Sentry's Ex. 1]. Therefore, Prins did not have actual authority to hold the foreclosure sale on the Property illegally or to accept the $2.4 million wire transfer from Elbar after the automatic stay was in effect.
The Court next considers the scope of any apparent authority Prins may have had. "An agent's authority ... depends on some communication by the principal ... to the third party ( [to establish] apparent ... authority)." Utils. Optimization Grp., L.L.C. ,
Even if it was within the scope of Prins' employment as trustee under the Deed of Trust to accept the $2.4 million wire transfer from Elbar after notice of the bankruptcy and imposition of the automatic stay, it is wholly unforeseeable that Prins, as trustee, would engage in such serious criminal activity after receiving the $2.4 million by absconding with all of the funds for his own personal benefit. [See Finding of Fact Nos. 46-50, 57]. It is so unforeseeable for a trustee under a deed of trust to misappropriate and steal such funds that even Elbar's own expert witness, Bustamante, testified that in his over 40 years of experience, he has never seen anything like Prins' misconduct. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 81:21-82:2]. Under Texas law, United Sentry simply cannot be held liable for Prins' unforeseeable serious and egregious criminal activity. See Ross ,
Finally, Prins, in first accepting and thereafter absconding with the $2.4 million, was acting adversely to the interest of United Sentry.
In sum, this Court finds that Prins had neither actual nor apparent authority from United Sentry to take the actions that he did: i.e., hold the foreclosure sale after learning that the Debtor was in bankruptcy, accept the $2.4 million wire transfer in violation of the automatic stay, and then abscond with all of these funds for his own personal benefit. [See Finding of Fact Nos. 29, 36, 39-40, 46-50, 57]. And, because Prins had no authority from United Sentry to take these illegal actions, the claims brought by Elbar against United Sentry for fraud in real estate transactions, common law fraud, and the Texas Theft Liability Act must necessarily fail-indeed, Elbar has admitted that if this Court finds that Prins had no authority, then these claims must be denied. [Adv. Doc. No. 222, Feb. 8, 2017, Trial Tr. 23:6-15].
Thus, Elbar's only remaining claim against United Sentry is its claim for equitable subrogation, discussed infra in Section IV.D.5. Now, however, the Court addresses Elbar's claims against Prins for fraud in real estate transactions, common law fraud, and the Texas Theft Liability Act.
2. Fraud in Real Estate Transactions
a. Applicable Law
" Section 27.01 of the Texas Business and Commerce Code establishes a statutory cause of action for fraud in real-estate transactions." United States v. Lacy ,
The first occurs when (1) the defendant makes a false representation of a past or existing material fact, (2) for the purpose of inducing the plaintiff to enter into a contract, and (3) the plaintiff relies on the false representation in entering into that contract. The second type consists of a false promise to do an act that is (1) material, (2) made with the intention of not fulfilling it, (3) for the purpose of inducing a person to enter into a contract, and (4) relied on by that person in entering into a contract.
Ponce v. Conseco Fin. Servicing Corp. , 1:13-CV-762 LY,
"Statutory fraud differs from common law fraud only in that [statutory fraud] does not require proof of knowledge or recklessness as a prerequisite to the recovery of actual damages." Lacy ,
"Intent to defraud is a fact question uniquely within the realm of the trier of fact and depends upon the credibility of the witnesses and the weight to be given to their testimony." Tsai v. Chang , No. 05-00-00177-CV,
b. Application of the Law of Fraud in Real Estate Transactions to the Facts at Bar
Here, Elbar has not met its burden in proving that Prins committed statutory fraud in real estate transactions. First, Elbar has not shown that Prins made a "material misrepresentation" that caused Elbar to enter into a contract for the purchase of the Property, as required by the first type of statutory fraud set forth in Texas Business & Commerce Code § 27.01. The evidence does not show that at the relevant time period (i.e., at the foreclosure sale of the Property), Prins made any material misrepresentations to induce Elbar to purchase the Property. Second, Elbar has also failed to meet its burden to show that Prins engaged in the second type of statutory fraud set forth in Texas Business & Commerce Code § 27.01 : the evidence simply does not show that Prins made a false promise to do an act with the intention of not fulfilling it. There is nothing in the record evidencing that Prins did not intend to deliver the deed to the Property at the time the foreclosure sale took place on October 4, 2016. Further, he learned about the Debtor's bankruptcy and her claim that she had an interest in the Property it made sense for him not to deliver a deed to Elbar: to do so would have violated the automatic stay. See, e.g. , In re Wheeler ,
3. Common Law Fraud
a. Applicable Law
Under Texas law, to bring a successful claim for common law fraud, a plaintiff must prove the following: (1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury. Law v. Ocwen Loan Servicing, LLC , No. CV H-16-2675,
b. Application of the Law of Common Law Fraud to the Facts at Bar
Like its claim for statutory fraud in real estate, Elbar has also failed to meet its burden in proving that Prins made a "material misrepresentation" that caused Elbar to purchase the Property. Thus, Elbar also cannot recover in its common law fraud claim against Prins.
4. Texas Theft Liability Act
a. Applicable Law
Under the Texas Theft Liability Act ("TTLA"), "a person who commits *541theft is liable for damages resulting from the theft." Beardmore v. Jacobsen ,
The Texas Penal Code defines "deprive" as (1) to withhold property from the owner permanently or for so extended a period of time that a major portion of the value or enjoyment of the property is lost to the owner; or (2) to dispose of property in a manner that makes recovery of the property by the owner unlikely. Tex. Pen. Code § 31.01(2). Intent to deprive under Texas Penal Code § 31.03(a) must exist at the time of the taking. In re Powers,
Although the TTLA is silent as to what burden of proof should be applied, "under Texas law, [legislative] silence mitigates in favor of applying the same burden of proof as any other civil action-the preponderance *542of the evidence standard."
An individual who sustains damages under the TTLA resulting from the theft may recover "from a person who commits theft, the amount of actual damages found by the trier of fact and, in addition to actual damages, damages awarded by the trier of fact in a sum not to exceed $1,000[.]" Tex. Civ. Prac. & Rem. Code § 134.005(a). Additionally, "Texas courts have consistently held that a party who successfully defends a claim under the Theft Liability Act is a prevailing party, even if he loses on all other claims." Merritt Hawkins & Assocs., L.L.C. v. Gresham ,
Although the TTLA does not define what it means to "prevail" in a suit, Texas courts have held that the phrase applies to defendants who successfully defend against a TTLA claim. See, e.g. , Peoples v. Genco Fed. Credit Union , No. 10-09-00032-CV,
b. Application of the Law of the Texas Theft Liability Act to the Facts at Bar
i. Elbar's Claim Under the TTLA Against Prins
Here, Elbar has met its burden of proof in showing that Prins has violated the TTLA. Under the Texas Penal Code, "[a] person commits an offense if [1] he unlawfully appropriates property [2] with intent to deprive the owner of property." Tex. Pen. Code § 31.03(a). Prins appropriated the Proceeds when he exercised control over the Proceeds by transferring $2.0 million to the Wells Fargo Operating Account on October 18, 2016, and $300,000.00 to the BBVA Operating Account on November 4, 2016, without Elbar's consent. [Finding of Fact Nos. 46, 57]. See Bailey ,
*543Further, Prins acted with the intent to deprive Elbar of the Proceeds when he began freely spending the Proceeds for his own personal use, such as using the Proceeds to pay his personal taxes to the IRS on October 19, 2016; purchasing plane tickets on October 20, 2016, for an extended overseas family holiday and continuing to use the Proceeds to fund that vacation from approximately October 24, 2016, to November 28, 2016; paying salaries of the employees of the Prins Law Firm on October 21, 2016; paying his personal bankruptcy attorney on November 17, 2016; paying his criminal defense attorneys on November 21, 2016, and November 30, 2016; and using the Proceeds to make purchases from Office Depot, Brookstone, Central Market grocery store, Gamestop, and the iTunes store throughout the months of October, November, and December of 2016. [Finding of Fact No. 47].
Prins' intent to deprive can be inferred from all of the surrounding circumstances. Countrywide Home Loans, Inc. v. Cowin (In re Cowin) ,
Here, because Elbar has met its burden of proof in showing that Prins has violated the TTLA, Elbar is a "prevailing party" and is entitled not only to damages but also to its reasonable attorneys' fees and costs. When Elbar filed suit, it was seeking a judgment for $2.4 million; since the filing of the suit, Elbar has recovered $1,683,915.42, [Finding of Fact No. 114], leaving the amount now owed to be $716,084.58, [id. ]. Thus, Elbar is entitled to a judgment against Prins for $716,084.58, plus its reasonable attorneys' fees and costs.
*544ii. Elbar's Claim Under the TTLA Against MacKenzie
At the close of trial, Elbar's counsel (Battaglia) represented in open court that Elbar had decided to dismiss all claims against MacKenzie.
A party prevails [under the TTLA] if he successfully prosecutes the action or successfully defends against it ....
...
The legal relationship between a plaintiff and defendant ... change[s] ... when the plaintiff's claims are dismissed with prejudice. When a plaintiff's claims are dismissed with prejudice, the doctrine of res judicata prohibits the plaintiff from re-asserting his claims against that defendant in a later suit.
Res judicata attaches to a dismissal with prejudice even though the plaintiff's claims have not been fully litigated at trial. Res judicata applies because a dismissal or nonsuit with prejudice is tantamount to a judgment on the merits, and the effect of res judicata in that instance works a permanent, inalterable change in the parties' legal relationship to the defendant's benefit: the defendant can never again be sued by the plaintiff or its privies for claims arising out of the same subject matter.
iii. Elbar's Claim Under the TTLA Against United Sentry
Just as the Court has determined that Elbar has to pay MacKenzie's court costs and reasonable and necessary attorneys'
*545fees because MacKenzie was the prevailing party on Elbar's TTLA claim, so too must Elbar pay United Sentry's court costs and reasonable and necessary attorneys' fees. As discussed above, this Court has found that Prins had neither actual nor apparent authority from United Sentry to take the actions that he did: i.e., holding the foreclosure sale, despite being on notice of the Debtor's Chapter 7 case, then accepting the $2.4 million wire transfer in violation of the automatic stay, and then absconding with all of these funds for his own personal benefit. [Finding of Fact Nos. 29-41, 46-48]. And, because Prins had no authority from United Sentry to take these actions, the TTLA claim brought by Elbar against United Sentry must necessarily fail and the Court will therefore deny this claim with prejudice against United Sentry. Now the question is whether Elbar can prevail against United Sentry on its equitable subrogation claim.
5. Equitable Subrogation
a. Applicable Law
Equitable subrogation is "a legal fiction whereby an obligation, extinguished by a payment made by a third person, is treated as still subsisting for the benefit of this third person, so that by means of it one creditor is substituted to the rights, remedies, and securities of another." Cont'l Cas. Co. v. N.A. Capacity Ins. Co. ,
*546Frymire Eng'g Co. v. Jomar Int'l, Ltd. ,
"There are two key elements to equitable subrogation: (1) the person whose debt was paid was primarily liable on the debt, and (2) the claimant paid the debt involuntarily." Cho v. Wells Fargo Bank, N.A. , No. 4:16-CV-256,
When the issue is purely equitable subrogation, each case is controlled by its own facts. Murray ,
"Factors a court may consider in conducting this balancing test are the negligence of the party claiming subrogation, whether that party had notice of the intervening lien, and whether the intervening lienholder will be prejudiced if equitable subrogation is allowed." Murray ,
*547b. Application of the Law of Equitable Subrogation to the Facts at Bar
Elbar argues that it should be equitably subrogated to the Note and Deed of Trust held by United Sentry because the non-judicial foreclosure sale on October 4, 2016, was invalid. [Adv. Doc. No. 217 at 13 of 35, ¶ 31; Adv. Doc. No. 229 at 2-3 of 10, ¶¶ 3-10]. Elbar does not explain why it believes that that the foreclosure sale on October 4, 2016, was invalid; it merely states that it was so.
One who discharges the vendor's lien upon lands, even the homestead, either by paying as surety, or at the request of the debtor, or at a judicial sale, which, for irregularities in the process, fails to convey the title, is entitled to be subrogated to the lien of the creditor to the extent of the payment so made.
Faires v. Cockrill ,
United Sentry argues that Elbar is not entitled to equitable subrogation of United Sentry's interest on the Property because Elbar was negligent when it willfully violated the automatic stay, Elbar was aware of United Sentry's lien on the Property, and United Sentry will be extremely prejudiced if equitable subrogation is allowed. [Adv. Doc. No. 218 at 12-14 of 24]. United Sentry also argues that Elbar is not entitled to equitable subrogation because there is no evidence that Elbar discharged a lien on the Property. [Id. at 15 of 24].
The Court finds that Elbar has failed to satisfy all the elements to prevail under its equitable subrogation claim. Here, because *548Prins stole the Proceeds, the debt to United Sentry-i.e., the balance owed under the Note-was never paid. The Fifth Circuit, citing the Texas Supreme Court, has stated that "[a]s a general rule, a person is not entitled to subrogate to the rights of a creditor until the creditor's claim against the debtor has been satisfied or paid in full." Dietrich Indus., Inc. ,
The first factor a court may consider in conducting this balancing test is the negligence of the party claiming subrogation-in this instance, Elbar.
Elbar did none of these things. Instead of investigating whether a wire transfer of the $2.4 million purchase price would violate the automatic stay if in fact the Property had pre-petition been deeded to the Debtor, Elbar did nothing. Further, once it was confirmed the next day (prior to the Proceeds being wire transferred) that the Property had in fact been deeded to the Debtor pre-petition, Bustamante did not change his mind about wire-transferring the $2.4 million to Prins; stated differently, he did not worry that wiring the Proceeds would violate the automatic stay. [Finding of Fact Nos. 27-41]. In Bustamante's own words, "We paid the money knowing about the bankruptcy. It doesn't get more complicated than that." [Finding of Fact No. 41]. Bustamante testified that he "didn't know of any" downside to tendering the $2.4 million when he already knew about the Debtor's bankruptcy filing. [TransWorld's Ex. II, Bustamante Dep. 83:5-10]. In Bustamante's mind, one of two scenarios would happen if the Purchasers wire-transferred the money after learning about the bankruptcy filing and the automatic stay: the stay would either be annulled and the Purchasers would receive a deed to the Property or the stay would not be annulled and the Purchasers would receive their money back. [Adv. Doc. No. 220, Feb. 6, 2018, Trial. Tr. 96:25-97:4, 133:13-25, 135:2-6; TransWorld's Ex. II, Bustamante Dep. 190:6-17, 194:13-19].
Essentially, the Purchasers-and it must be kept in mind that Elbar is one of the Purchasers-were willing to roll the dice and see what happened when they violated the automatic stay by wire transferring the Proceeds; according to Bustamante, wiring the money (i.e., violating the automatic stay) was just something the Purchasers had to do to preserve their right to the Property. [Adv. Doc. No. 220, Feb. 6, 2018, Trial. Tr. 89:19-21, 133:13-134:10, 135:19-25; TransWorld's Ex. II, Bustamante Dep. 82:10-83:3]. Stated differently, it did not matter to the Purchasers that the Debtor held title to the Property and that the automatic stay was in effect; the Purchasers really wanted the Property and they were willing to violate the automatic stay to make sure its bid on the Property was secure. Elbar's failure to conduct due diligence regarding whether the Debtor held title to the Property-and, frankly, Elbar's bald apathy regarding violating the automatic stay as expressed by Bustamante's testimony
The second factor a court may consider is whether the party claiming subrogation had "notice of other interests."
The third factor a court may consider is whether "the superior or equal equities of other interests will be prejudiced if equitable subrogation is allowed." Kaleta ,
*551Stated differently, United Sentry will be prejudiced if equitable subrogation is allowed here. This factor therefore weighs against a finding that Elbar is subrogated to United Sentry's interest in the Property.
Besides considering the three factors identified above when deciding whether equitable subrogation should apply in a particular suit, a court may also consider whether the party who is requesting equitable subrogation has come to the court with unclean hands. Cho ,
The doctrine of unclean hands closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief, however improper may have been the behavior of the defendant. Although equity does not demand that the parties have led blameless lives ... it does require that they shall have acted fairly and without fraud or deceit as to the controversy in issue. For the doctrine to apply, a party's conduct does not need to be one punishable as a crime or one that would justify legal proceedings of any sort. Any willful act concerning the cause of action which rightfully can be said to transgress equitable standards of conduct is sufficient cause for the court to invoke the doctrine. The wrongful acts upon which the claim of unclean hands is premised must in some measure affect the equitable relations between the parties in respect of something brought before the court for adjudication. Plaintiff's alleged wrongdoing will not bar relief unless the defendant establishes personal injury resulting from plaintiff's conduct. The unclean hands doctrine does not purport to search out or deal with the general moral attributes or standing of a litigant.
Healthpoint, Ltd. v. Ethex Corp. ,
In the Fifth Circuit, the application of the unclean hands doctrine requires a defendant to show that he has personally been injured by the plaintiff's conduct.
Another factor to consider when weighing the equities based on the totality of the circumstances is that United Sentry is the party who selected Prins to serve as the substitute trustee. MacKenzie has known Prins for approximately 20 years and during that time, Prins occasionally performed legal work for MacKenzie. [Finding of Fact No. 13]. Prior to Prins stealing the Proceeds, during the time that MacKenzie knew Prins and Prins performed legal work for MacKenzie, MacKenzie did not have any indication that Prins might be engaged-to use MacKenzie's own words-in "questionable activities." [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 92:21-93:4]. MacKenzie, for his part, did everything he could to protect and return the Proceeds to Elbar. After Twyman directly contacted MacKenzie around the beginning of November 2016 and asked him to instruct Prins to return the Proceeds to Elbar, MacKenzie, at Prins' suggestion, had Prins draft a release-which MacKenzie immediately signed and returned to both Prins and Twyman-so that the Proceeds could quickly be returned to the Purchasers. [Finding of Fact No. 68 and Footnote 39]. After MacKenzie began to suspect that something suspicious was going on with Prins, it was MacKenzie who contacted the FBI and provided assistance to the FBI regarding the recovery of approximately $1.6 million of the Proceeds. [Finding of Fact No. 73]. It was MacKenzie's actions that led to the FBI becoming involved and ultimately seizing the funds in the Wells Fargo Operating Account. [Finding of Fact No. 82]. The $1,601,542.14, that was seized by the FBI in the Wells Fargo Operating Account *553eventually went to Elbar as restitution in the Prins' Criminal Case. [Finding of Fact No. 113]. MacKenzie also tried to safeguard the Proceeds-once he became suspicious of Prins-by paying for two ex-Texas Rangers to watch Prins and Ms. Prins 24 hours a day, so that MacKenzie would be alerted if Prins or Ms. Prins attempted to leave the country. [Finding of Fact No. 76]. Thus, although it was MacKenzie who selected Prins to serve as the substitute trustee,
Finally, the Court emphasizes that the "general purpose of equitable subrogation is 'to prevent the unjust enrichment of the debtor who owed the debt that is paid.' " Babu ,
Considering all of the above factors, Elbar, as the party claiming equitable subrogation, has failed to meet its burden that it is entitled to be equitably subrogated to United Sentry's Deed of Trust on the Property.
E. The Claims Against TransWorld and Industry Drive: Money Had and Received, Unjust Enrichment, and Conversion
1. Money Had and Received
a. Applicable Law
"Money had and received is an equitable doctrine designed to prevent unjust enrichment." Merry Homes, Inc. v. Dao ,
Under Texas law, "[t]o establish a cause of action for money had and received, a plaintiff must show that a defendant holds money which in equity and good conscience belongs to him." Brown v. Wells Fargo Bank, N.A. , No. H-13-3228,
In defending against a money had and received claim, "a defendant may present any facts and raise any defenses that would deny the claimant's right or show that the claimant should not recover." First Am. Title, Ins. Co. ,
*555Chesapeake Operating, Inc. v. Whitehead , No. C-10-301,
The affirmative defense of "unclean hands" can also apply to an action for money had and received. See Bank of Saipan ,
Finally, "[w]hat the parties knew and intended are all relevant factors in balancing the equities ...." In re Hwang ,
b. Application of the Law of Money Had and Received to the Facts at Bar
i. TransWorld
Elbar argues that it should prevail on its claim for money had and received because (1) the $164,807.29 Prins gave to TransWord was not received in the due course of TransWorld's business; (2) the $164,807.29 Prins gave to TransWorld was not received in good faith; and (3) TransWorld did not pay valuable consideration for the $164,807.29 it received from Prins. [Adv. Doc. No. 217 at 24 of 35, ¶ 53]. Elbar further argues that TransWorld had notice of Prins' poor financial condition. [Adv. Doc. No. 217 at 21-23 of 35, ¶¶ 47-50]. Essentially, Elbar argues that TransWorld does not meet the requirements, as articulated by Sinclair and other cases, to qualify as an exception to the general rule that one who acquires stolen property does not acquire its title.
TransWorld argues that Elbar's claim for money had and received fails for lack of tracing because Elbar gave its $200,000.00 share directly to Bustamante and there was no testimony that Bustamante used this exact $200,000.00 to fund (in part) the purchase of the Property. [Adv. Doc. No. 216 at 15-25 of 43]. Unlike conversion, "tracing" is not an element of the claim of money had and received,
To be successful on its claim for money had and received, Elbar must show that the $164,807.29 Prins gave to TransWorld, in equity and good conscience, belongs to Elbar. Plains Expl. & Prod. Co. ,
(1) "Good Conscience" Considerations
a) Good Conscience: Due Course of Business
Elbar argues that there was no evidence that the $164,807.29 that Prins paid to TransWorld on October 21, 2016, was received in the due course of TransWorld's business of leasing property. [See Adv. Doc. No. 217 at 24 of 35, ¶ 53; Adv. Doc. No. 230 at 6 of 19, ¶ 18]. TransWorld argues that a business paying its taxes and/or settling its tax disputes-as TransWorld believed it was doing when Prins gave TransWorld the $164,807.29 on October 21, 2016, and told it that TransWorld had settled its outstanding issues with the Tax Assessor for $5,000.00-falls within the due course of a business. [Adv. Doc. No. 225 at 13-14, ¶¶ 33-34].
The Court finds that settling a tax dispute is not in the due or ordinary course of TransWorld's business. TransWorld is a leasing company. [Finding of Fact No. 1]. If, for example, Prins had wanted to lease a truck and gave TransWorld $164,807.29 in order to lease that truck, then the $164,807.29 TransWorld received from Prins would have been received in the "due course" of TransWorld's business-i.e., leasing personalty. Here, however, at least from TransWorld's point of view, the $164,807.29 Prins gave TransWorld represented a settlement with the Tax Assessor over outstanding tax issues. [See Finding of Fact No. 50]. Transactions not directly related to a business's purpose are not conducted in "due course of business." Compare Shelby Eng'g Co., Inc. v. Action Steel Supply, Inc. ,
*557b) Good Conscience: In Good Faith
Elbar asserts that TransWorld did not offer any evidence that TransWorld was acting in good faith when it received the $164,807.29 from Prins. [Adv. Doc. No. 217 at 24 of 35, ¶ 53]. Moreover, Elbar argues that TransWorld had notice about Prins' poor financial condition because (1) Ms. Cash testified that she was curious as to why TransWorld's check to the Tax Assessor in 2008 for taxes due was made out to the IOLTA instead of directly to the Tax Assessor; (2) Ms. Cash testified that in January of 2016 she discovered that TransWorld was listed in the local newspaper as one of the largest delinquent taxpayers in San Antonio; and (3) TransWorld was listed as a creditor in the Prins' Bankruptcy and, thus, had notice of all proceedings in the Prins' Bankruptcy. [Adv. Doc. No. 217 at 21-23 of 35, ¶¶ 47-50]. Citing no case law, Elbar further argues that after experiencing continued issues with TransWorld's taxes after Prins claimed they had been paid, TransWorld had a "duty of inquiry that could not be satisfied by simply continuing to rely solely on information obtained from Prins" and that TransWorld's continued reliance on Prins from 2008 to 2016 was not reasonable. [Adv. Doc. No. 230 at 15-16 of 19, ¶¶ 39-40]. Elbar further argues that after TransWorld learned about the Prins' Bankruptcy, TransWorld should have continually monitored the Prins' Bankruptcy and doing so would have led to notice of the contents of the Wasserteil Motion to Lift Stay and the Ozer Adversary, both of which made allegations regarding Prins' wrongful conduct towards the Wasserteils and the Ozers.
*558TransWorld argues that the good faith element is met because TransWorld did not acquire the $164,807.29 in an unlawful manner and there is no evidence that TransWorld knew that the funds were stolen. [Adv. Doc. No. 216 at 33 of 43]. TransWorld further argues that Ms. Cash did not know about the Prins' Bankruptcy until October 21, 2016, and-citing Elbar's Amended Complaint-that even if TransWorld had known about the Prins' Bankruptcy prior to receiving the $164,807.29, there is no evidence to suggest that such knowledge should have put TransWorld on notice that the $164,807.29 Prins paid to TransWorld might have been stolen. [Adv. Doc. No. 216 at 35-37 of 43].
The Court finds that TransWorld received the $164,807.29 in good faith. TransWorld had been working, through Prins, from sometime in 2008 through October 2016 to sort out the tax issues TransWorld believed it had with the Tax Assessor. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 19:7-21:14]. Because of his poor health, it was very important to Mr. Cash to resolve all outstanding issues with the business that he founded, TransWorld, as soon as possible. [Finding of Fact Nos. 7, 49]. Ms. Cash testified that she believed that the $164,807.29 TransWorld received from Prins on October 21, 2016-which represented the amount it had paid to the IOLTA on May 17, 2016, in order to resolve the tax issues with the Tax Assessor, minus $5,000.00-represented a settlement with the Tax Assessor regarding TransWorld's outstanding tax issues, and that the money it was receiving from Prins was TransWorld's own money, less $5,000.00 paid for the settlement. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 22:5-15]. As noted in the Credibility of Witnesses Section, the Court has found Ms. Cash to be a very credible witness. Further, Prins himself testified that he told TransWorld that the matter with the Tax Assessor was settled for $5,000.00, [TransWorld's Ex. HH, Prins Dep. 96:19-97:3], and that is why TransWorld would be receiving back from Prins the amount of $164,807.29, [Finding of Fact No. 50]. Having known Prins as a personal friend for several years, and also having trusted him as TransWorld's attorney for this same period of time, [Finding of Fact No. 2], this Court finds that Ms. Cash was reasonable to believe that Prins' representation was truthful.
Additionally, Ms. Cash has testified that she did not know about the Prins' Bankruptcy until after TransWorld received the $164,807.29. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 163:3-21]. Even if Ms. Cash and/or TransWorld had learned about the Prins' Bankruptcy prior to receiving the $164,807.29 from Prins, the mere fact that Prins had personally filed for bankruptcy would not automatically put the Cashes and/or TransWorld on notice that any business dealings with Prins should be suspect. As TransWorld pointed out in its briefing, the vast majority of people who file for bankruptcy every year do so in good faith. [See Adv. Doc. No. 216, at 36 of 43]. Prins had worked as TransWorld's attorney for almost two decades, and Prins had a personal relationship with the Cashes, and they trusted him. [Finding of Fact No. 2]. Prins also had no history of professional misconduct that could put a client on notice-at least the Cashes-that Prins was not the upright attorney he presented *559as. [TransWorld's Ex. HH, Prins Dep. 12:1-18].
The Court is not persuaded by Elbar's argument that TransWorld lacked good faith because it continued to rely upon Prins as its attorney once the tax issues were brought to its attention in January 2014 and January 2016. [See Finding of Fact Nos. 5, 9-10]. While it may be true that a reasonable business would have conducted a more thorough investigation once tax issues that it believed were settled in 2008 were twice again brought up in 2014 and 2016, TransWorld's reliance on Prins-which perhaps could be characterized as naïve-was honest. Only when the receiver of the money has actual knowledge that the money was stolen will the receiver of the money be found to be not in "good faith": "[M]ere ground of suspicion of defect of title, or knowledge of circumstances which would excite such suspicion in the mind of a prudent man, or gross negligence on the part of the taker, will not defeat title. Bad faith alone will defeat the right of the taker without knowledge ." See Merchants' Loan & Trust Co. v. Lamson ,
c) Good Conscience: For Valuable Consideration
TransWorld contends that the $5,000.00 settlement the Cashes accepted with the Tax Assessor qualifies as valuable consideration.
Here, this Court finds that TransWorld did not provide valuable consideration for the $164,807.29 Prins gave TransWorld on October 21, 2016, which amount allegedly represented a $5,000.00 settlement with the Tax Assessor regarding TransWorld's tax issues. Even if TransWorld is correct regarding the general proposition that satisfaction of an antecedent debt constitutes valuable consideration in Texas, in the dispute at bar, there was no antecedent debt that was satisfied when Prins gave TransWorld the $164,807.29 because there was no actual settlement between TransWorld and the Tax Assessor. As such, no consideration passed between those two parties. "Consideration is a present exchange bargained for in return for a promise. It consists of either a benefit to the promisor or a detriment to the promisee. The detriment must induce the making of the promise, and the promise must induce the incurring of the detriment." Roark v. Stallworth Oil & Gas, Inc. ,
TransWorld's argument that forbearance constitutes valuable consideration-i.e., TransWorld not pursuing any claims against Prins-also fails. Again, this argument fails because there was no present bargained-for exchange between Prins and TransWorld specifically setting out that TransWorld would not pursue any potential claims against Prins as long as Prins paid back TransWorld all the money he owed to TransWorld. In order for the exchange of consideration to occur, there must be two parties to the promise. There is absolutely no evidence indicating that Prins and TransWorld exchanged consideration on this subject. For example, there is no evidence that TransWorld signed a release of all claims it had-or might have-against Prins when he gave the $164,807.29 to TransWorld.
Thus, in determining whether Elbar has shown that TransWorld holds money which "in good conscience" belongs to Elbar, of the three considerations identified by the court in GE Capital Commercial, Inc. , one weighs in favor of TransWorld and the other two weigh in favor of Elbar. Specifically, TransWorld received the *561$164,807.29 from Prins in good faith. However, TransWorld did not receive the $164,807.29 from Prins in "due course of business," nor did TransWorld give valuable consideration for the $164,807.29. Under these circumstances, Elbar has satisfied the first element of its claim against TransWorld for money had and received.
The second element the Court must consider is whether the equities of the case "in view of the totality of the circumstances," Murray ,
(2) "Balancing the Equities" Considerations
a) Balancing the Equities: Detrimental Reliance
TransWorld argues that it materially changed its position in reliance on the payment, which it claims is a full defense to a claim for money had and received. [Adv. Doc. No. 216 at 38 of 43]. TransWorld further argues that it "clearly" materially changed its position once it received the $164,807.29 from Prins by no longer pursuing Prins or the possible legal remedies that were available at the time (including filing a claim in the Prins' Bankruptcy or objecting to his discharge). [Id. at 39 of 43].
Here, TransWorld did not meet its burden in demonstrating that it materially changed its position in reliance on the $164,807.29 it received. See First Am. Title, Ins. Co. ,
Further, Ms. Cash testified that she did not discover until late February of 2017 when she was served with a lawsuit that Prins had not, in fact, resolved TransWorld's tax issues, [see Finding of Fact No. 92]. Thus, any impetus for TransWorld to pursue legal action against Prins related to the $164,807.29 (or other amounts related to taxes Prins supposedly paid on TransWorld's behalf but did not) arose in late February 2017-when Ms. Cash found out for the first time that the check in the amount of $230,853.66 that TransWorld made to the order of the IOLTA on February 4, 2008, (for the purpose of Prins settling TransWorld's tax dispute with the Tax Assessor) may not have in fact been paid to the Tax Assessor, [Finding of Fact No. 92]. Since Prins gave TransWorld the $164,807.29 on October 21, 2016, and the earliest possible date that TransWorld states that it learned that Prins was not being honest in its dealings with TransWorld was late February of 2017, then TransWorld could not possibly have materially changed its position on reliance of the payment of $164,807.29 when the first indication that TransWorld received that Prins was not being honest with TransWorld regarding the tax issues occurred after October 21, 2016. Thus, any detrimental reliance allegedly suffered by TransWorld does not come into play as the Court weighs the equities in regards to Elbar's claim of money had and received against TransWorld.
b) Balancing the Equities: Unclean Hands
As discussed supra in Section IV.D.5 regarding equitable subrogation, in the Fifth Circuit, "[t]he alleged wrongdoing of the plaintiff does not bar relief unless the defendant can show that he has personally been injured by the plaintiff's conduct." Mitchell Bros. Film Grp. ,
Finally, even if this Court were to find that TransWorld was liable for at least some percentage of Elbar's claim for money had and received, the source of TransWorld's injury (i.e., having to pay Elbar all or some portion of the $164,807.29) is due to Prins' misconduct of stealing the $2.4 million, not any misconduct of Elbar. Thus, the unclean hands doctrine does not come into play as the Court weighs the equities in regards to Elbar's claim of money had and received against TransWorld.
c) Balancing the Equities: What the Parties Knew and Intended
"What the parties knew and intended are all relevant factors in balancing the equities ...." In re Hwang ,
What Elbar "knew and intended" demonstrates that Elbar has little respect for the Bankruptcy Code and has acted solely in its perceived best interests. Elbar violated the automatic stay on October 4, 2016, when it was the highest bidder at the foreclosure sale. See In re Jackson ,
If this had been the only violation of the automatic stay, the Court would perhaps have more sympathy for Elbar. However, two days later, on October 6, 2016, Elbar willfully violated the automatic stay when it wire transferred the $2.4 million into the IOLTA. [See Finding of Fact No. 40]; see also In re Benson ,
There is even more. Elbar willfully violated the automatic stay for a second time when it filed a lis pendens against the Property on January 3, 2017. [Finding of Fact No. 89]. As discussed more fully supra in Section IV.C, Elbar's two willful violations of the automatic stay-particularly when Elbar is a sophisticated purchaser who has been involved in hundreds of foreclosure sales where the debtor was in bankruptcy, [Finding of Fact Nos. 30-31, 33-34, 41]-lead this Court to find Elbar's stay violations egregious and in bad faith, and this finding works heavily against Elbar as the Court weighs the equities of what "the parties knew and intended." Elbar intended to preserve its ability to complete the purchase of the Property, [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 133:13-134:10], and Elbar's two willful stay violations show the extreme lengths Elbar was willing to go to meet that goal. Elbar is not an innocent party here;
Another fact that Elbar knew was that its chosen line of work-purchasing foreclosed properties in nonjudicial foreclosure sales, [Finding of Fact No. 30]-is a risky business. The amount of risk Elbar is willing to undertake is measured against the profit it expects to make on any given foreclosed property. Here, Elbar hoped to make a substantial profit in its purchase of the Property. [Finding of Fact No. 34]. This Court can consider the type of work Elbar engages in when weighing the equities, and the fact that Elbar is engaged in a line of business that has inherent monetary risks that Elbar has freely chosen to take on and build into its business model works against Elbar when weighing the equities. See Edwards v. Mid-Continent Office Distributs., L.P. ,
In regards to what TransWorld "knew and intended" when Prins transferred the $164,807.29 to TransWorld on October 21, 2016, TransWorld (i.e., the Cashes) honestly believed that it was getting back its own money-the original $169,807.29 TransWorld gave to Prins, minus $5,000.00, allegedly representing a settlement with the Tax Assessor. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 22:2-12; Pl.'s Ex. No. 46]. TransWorld did not have any knowledge or any reason to believe that the $164,807.29 Prins gave to TransWorld was related to Elbar, or anyone else for that matter. [Pl.'s Ex. No. 46]. Further, at this point in time, October of 2016, in addition to trying to work out the issues related to TransWorld's tax delinquencies, Ms. Cash was also heavily focused on Mr. Cash's health, as his cancer had recently taken a turn for the worst:
Well, my husband had been very, very [ill] with cancer for almost six years. And in October we found out that not only was the cancer in his lungs and reactive but also in his brain and had gone to the bone. And so where he had not been in pain before, now he was in excruciating pain constantly.
[Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 11:17-22]. Given that Ms. Cash was devoting most, if not all, of her time to caring for and trying to comfort her dying husband, it is not surprising that she was not focused on Prins and his representation about TransWorld's tax issues.
Elbar argues that TransWorld had notice about Prins' poor financial condition and that this notice should have put TransWorld on alert to further investigate its own tax issues with the Tax Assessor because (1) Ms. Cash testified that she was curious as to why TransWorld's check to the Tax Assessor in 2008 for taxes due was made out to the IOLTA instead of directly to the Tax Assessor; (2) Ms. Cash testified that in January of 2016 she found out that TransWorld was listed in the local newspaper as one of the largest delinquent taxpayers in San Antonio; and (3) TransWorld was listed as a creditor in the Prins' Bankruptcy and, thus, had notice of all proceedings in the Prins' Bankruptcy. [Adv. Doc. No. 217 at 21-23 of 35, ¶¶ 47-50]. Citing no case law, Elbar further argues that after experiencing continued issues with TransWorld's taxes after Prins claimed they had been paid, TransWorld had a "duty of inquiry that could not be satisfied by simply *565continuing to rely solely on information obtained from Prins" and that TransWorld's continued reliance on Prins from 2008 to 2016 was not reasonable. [Adv. Doc. No. 230 at 15-16 of 19, ¶¶ 39-40]. Elbar further argues that after TransWorld learned about the Prins' Bankruptcy, TransWorld should have continually monitored the Prins' Bankruptcy and doing so would have led to notice of the contents of the Wasserteil Motion to Lift Stay and the Ozer Adversary, in which allegations regarding wrongful conduct of Prins were brought forth. [Id. at 16-17 of 19, ¶ 41].
The Court agrees that TransWorld should have done more on its own to investigate its tax issues once it received notice in January 2014, [Finding of Fact No. 5] and January 2016, [Finding of Fact Nos. 5, 8], that it was delinquent in its tax payments, especially since TransWorld was under the impression that its tax issues had been resolved in February 2008, [see Finding of Fact No. 3]. Although it is true that not only was TransWorld relying on Prins-its attorney of more than 15 years-to remedy its tax issues but also that Prins was actively telling TransWorld that he was working on the tax issues and that there was some kind of internal mistake with the Tax Assessor regarding the taxes due, a more prudent business would have investigated the matter itself, especially after receiving notice on two occasions that the tax issues were not resolved. Even though a more shrewd business might have acted differently under these circumstances, this Court has already found Ms. Cash to be a very credible witness and believes that TransWorld was not acting in bad faith or duplicitously in regard to its tax issues. On the contrary, this Court believes that TransWorld was doing what it believed was best in order to resolve the tax issues, even though a more sophisticated business might have taken different steps.
Additionally, the fact that Ms. Cash testified that she twice called into question-once in 2008 and again in 2016-why TransWorld's check for tax payments needed to be made out to the IOLTA instead of directly to the Tax Assessor but did not further question Prins on the matter is also troubling to the Court. [See Finding of Fact Nos. 3, 8]. When writing a check in 2008 to cover TransWorld's tax issues, Prins told Ms. Cash that she needed to make the check payable to the IOLTA, and that he (i.e., Prins) would then write a check to Linebarger and Linebarger would then apply the money to TransWorld's accounts for the county. [Finding of Fact No. 3; Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 35:22-24]. Ms. Cash initially questioned why she could not make the check directly payable to Romo (the actual Tax Assessor for Bexar County at that time) or to Linebarger, instead of to the IOLTA, as it was "kind of, you know, a long chain of everybody," [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 35:20-36:6], and Prins replied that this was the way things were done in order to avoid a tax payer writing a bad check, [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 36:6-8]. Ms. Cash then wrote the check to the order of the IOLTA instead of to the Tax Assessor directly because she believed that "that's the way things are done." [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 36:11-13].
In 2016, Ms. Cash again questioned why she needed to provide money directly to the IOLTA for TransWorld's tax issues. In approximately April 2016, Prins told the Cashes that the Tax Assessor wanted TransWorld to deposit into his IOLTA a percentage of the monies it owed as "good faith" money in the amount of $169,807.29 while he and the Tax Assessor worked out the issues. [Adv. Doc. No. 221, Feb. 7, *5662018, Trial Tr. 19:21-20:1; TransWorld's Ex. HH, Prins Dep. 78:2-10, 78:19-25]. Ms. Cash questioned Prins as to why she needed to put the disputed money into the IOLTA, as she did not believe that TransWorld owed any taxes. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 20:2-3]. Prins told Ms. Cash that it was "just a formality" and that TransWorld would get the money back as soon as the matter was settled [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 20:3-5]. "Reluctantly"-her words-Ms. Cash wrote out the check that Prins had requested to the order of the IOLTA. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 20:5-11].
Although in hindsight it is easy to question why TransWorld (i.e., the Cashes) did not more fully question Prins' suspicious activity of requiring that the money for TransWorld's tax issues be directly deposited into the IOLTA, Prins was, by all accounts, a crafty liar who was very skilled at hiding his thieving and skullduggery from his clients.
The Court rejects Elbar's argument that by merely being listed as a creditor in the Prins' Bankruptcy, TransWorld had an affirmative *567duty to monitor the bankruptcy and thus would have discovered Prins' misdeeds through the filing of the Wasserteil Motion to Lift Stay and the Ozer Adversary. Just because an entity is listed on a creditor matrix does not mean that the entity has an affirmative duty to monitor the bankruptcy docket. Granted, if an entity is represented by counsel and the entity files pleadings in the bankruptcy, the entity's counsel might then have a duty to monitor the bankruptcy; here, however, TransWorld had no counsel representing it in the Prins' Bankruptcy, as they had no inclination to believe that they needed representation in the Prins' Bankruptcy. Further, even though TransWorld was listed as a creditor in the Prins' Bankruptcy, there was no evidence that TransWorld received actual notice of the Wasserteil Motion to Lift Stay or the Ozer Adversary, which Elbar claims would have alerted TransWorld to Prins' misdeeds. In fact, TransWorld is not listed on the certificate of service on the motion for relief from stay filed by the Wasserteil Estate, [see Todd A. Prins and Paula R. Prins , Case No. 16-52187-cag, Bankr. W.D. Tex., ECF. No. 14], nor was the complaint in the Ozer Adversary served on TransWorld, [Ozer v. Prins , Case No. 16-05090-cag, Bankr. W.D. Tex., ECF. No. 1], so it is not as if Ms. Cash (or some other TransWorld employee) had the opportunity to conveniently open the mail and read these pleadings about various dishonest acts of Prins. Additionally, TransWorld received the $164,807.29 from Prins on October 21, 2016, [Finding of Fact No. 50], which was before the Wasserteil motion for relief from stay
In sum, when weighing the equities, detrimental reliance and unclean hands do not factor into the Court's analysis of Elbar's claim for money had and received; however, what the parties knew and intended weigh in TransWorld's favor. When weighing the equities, the Court is given much leeway and is permitted to give certain factors more weight than other factors. See Mid-Continent Office Distributs., L.P. ,
TransWorld, on the other hand, while its management (i.e., the Cashes) was perhaps naïve or unsophisticated in some of its business dealings, justifiably trusted its attorney and personal friend (Prins) and worked in good faith with Prins to resolve its tax issues. As some courts have noted when considering claims for money had and received: "[O]ther courts have held that as between two innocent parties, the party that must suffer the loss is the one that mistakenly created the situation and was in the best position to have avoided it." First Am. Title, Ins. Co. ,
ii. Industry Drive
Elbar argues that it should prevail on its claim for money had and received against Industry Drive because (1) the $300,000.00 Prins gave to Industry Drive was not received in due course of Industry Drive's business; (2) the $300,000.00 Prins gave to Industry Drive was not received in good *569faith; and (3) Industry Drive did not pay valuable consideration for the $300,000.00 it received from Prins. [Adv. Doc. No. 217 at 17-19 of 35, ¶ 41]. Elbar further argues that Industry Drive had notice of Prins' poor financial condition, and thus that Industry Drive "was on actual and inquiry notice that any money Industry [Drive] received from Prins did not belong to Prins." [Adv. Doc. No. 217 at 19 of 35, ¶ 42].
Industry Drive argues that Elbar cannot show that Industry Drive lacked good faith in the acceptance of the $300,000.00 sent by Prins. [Adv. Doc. No. 219 at 7-8 of 16]. Industry Drive also argues that, if the Court chooses to weigh the equities, there was no evidence adduced at trial that Industry Drive did anything wrong, whereas Elbar engaged in several questionable activities, including wiring the Proceeds when Elbar was aware that the automatic stay was in effect, filing a lis pendens against the Property with knowledge of the existence of the automatic stay, and only suing certain recipients of the funds traceable to the Proceeds. [Adv. Doc. No. 219 at 8-11 of 16].
There is no question that the $300,000.00 Prins gave to Industry Drive on November 4, 2016, from the BBVA Operating Account is directly traceable to the Proceeds. [See Finding of Fact Nos. 40, 57]. To be successful on its claim for money had and received, Elbar must show that the $300,000.00 Prins gave to Industry Drive, in equity and good conscience, belongs to Elbar. Plains Expl. & Prod. Co. ,
(1) "Good Conscience" Considerations
a) Good Conscience: Due Course of Business
Elbar argues that there was no evidence that the $300,000.00 Prins gave to Industry Drive on November 4, 2016, was received in the due course of Industry Drive's business of managing real estate. [See Adv. Doc. No. 217 at 17-19 of 35, ¶ 41; Adv. Doc. No. 228 at 11 of 19, ¶ 28]. Industry Drive argues that it is "any business's 'due course of business' to receive a refund of wrongfully-taken funds."
The Court finds that receiving a refund of wrongfully-taken funds is not in the due or ordinary course of Industry Drive's business. Industry Drive is a privately-held entity that owns G5's corporate office. [Finding of Fact No. 18]. Industry Drive collects money from the G5 property and maintains the property. [Finding of Fact No. 18]. Transactions not directly related to a business's purpose are not conducted *570in "due course of business." Compare Shelby Eng'g Co., Inc. ,
b) Good Conscience: In Good Faith
Elbar asserts that TransWorld offered no evidence that TransWorld was acting in good faith when it received the $300,000.00 from Prins. [Adv. Doc. No. 217 at 17-19 of 35, ¶ 41]. Moreover, Elbar argues that Industry Drive had notice about Prins' poor financial condition because Industry Drive had been made aware (1) that Prins had filed for Chapter 7 bankruptcy; and (2) of the Ozer Adversary that accused Prins of wrongdoing. [Adv. Doc. No. 217 at 19 of 35, ¶ 42].
For its part, Industry Drive argues that it received the $300,000.00 in good faith, and that there was no evidence at trial that Industry Drive knew of Elbar's existence or knew that the $300,000.00 it received was traceable to misappropriated funds. [Adv. Doc. No. 219 at 12 of 16; Adv. Doc. No. 226 at 5 of 12].
The Court finds that Industry Drive received the $300,000.00 in good faith. Industry Drive did not know anything about Elbar or even about Elbar's existence when Prins transferred the $300,000.00 to Industry Drive on November 4, 2016. [Finding of Fact No. 57; Adv. Doc. No. 221, Feb. 7, 2018, Trial. Tr. 149:7-11, 149:21-23]. Thus, Industry Drive had no reason to believe that the $300,000.00 that Prins transferred into the Industry Drive account was not the "original" $300,000.00 that was withdrawn by Pfirrmann and placed into Prins' IOLTA. From the moment Gabriel learned that Pfirrmann had taken $300,000.00 out of the Industry Drive account and given it to Prins to place in his IOLTA, she, as well as other members of the Gabriel Family, were singular in their efforts to have the money returned, including imploring Pfirrmann to return the money, [Finding of Fact No. 22; Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 123:23-124:7]; indeed, they even went so far as to file a lawsuit against Pfirrmann for return of the money, [Finding of Fact No. 23; Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 115:19-25]. In the year long period the $300,000.00 was missing from the Industry Drive account, Prins never indicated to Gabriel or to Pfirrmann that the money was no longer in his IOLTA. [Finding of Fact No. 24; TransWorld's Ex. HH, Prins Dep. 33:7-12]. In fact, Pfirrmann assured Gabriel that Prins was holding the money and that it was safe. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 117:19-20]. When Prins eventually returned the $300,000.00 to Industry Drive in November of 2016, the Court finds that Industry Drive genuinely believed that it was getting back the $300,000.00 Pfirrmann had taken in October 2015 and placed into Prins' IOLTA. [See Adv. Doc. No. 221, Feb. 7, 2018, Hrg. 146:16-20, 149:7-11, 149:21-23; see Finding of Fact No. 57].
Elbar asserts that prior to the $300,000.00 being returned to Industry Drive on November 4, 2017, Industry Drive had notice about the Prins' Bankruptcy and about the adversary proceeding filed by the Ozers in the Prins' Bankruptcy, *571which alleged that Prins committed fraud. As discussed previously, the Court has already found that the Prins' Bankruptcy was not discussed at the meeting among Gabriel, the Gabriel Family, and Pfirrmann on October 4, 2016, [Finding of Fact No. 24]. Further, there was no evidence adduced at trial indicating that Gabriel, the Gabriel Family, or Industry Drive were aware of the Ozer adversary in the Prins' Bankruptcy.
c) Good Conscience: For Valuable Consideration
Citing Texas Business and Commerce Code §§ 24.004 and 3.303, Industry Drive argues that the return of the $300,000.00 satisfied an antecedent debt, which constitutes valuable consideration.
Even if Industry Drive is correct regarding the general proposition that satisfaction of an antecedent debt constitutes valuable consideration under Texas law, here, there was no antecedent debt that was satisfied when Prins gave Industry Drive the $300,000.00 because (1) Pfirrmann did not owe a debt to Industry Drive; nor (2) did Prins owe a debt to Industry Drive.
First, Industry Drive has not identified any debt that Pfirrmann owed to Industry Drive. At least one Texas court has defined "debt" as "a contract by which one party agrees to let another party have the use of a specific sum of money for a definite period with the stipulation that the borrower repay it with or without interest." Trevino v. Trevino ,
Well, because my brother-in-law was used to controlling everything and I -- unfortunately when you want to sort of divorce someone, they don't take it very well when you say you don't want to be their partner anymore and, of course, this was all his in-laws and we were really his only family because he didn't really have one. He's not from Texas.
And so I just think emotionally it was more of a control issue for him and so he didn't want me to distribute it to the Partners. He liked to do all the distributions and control everything. And earlier on, we had a transaction where I actually did the distribution, not him and so he just wanted to control it. And so he gave it to his attorney, which was Mr. Prins.
[Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 122:11-24].
Second, there is absolutely nothing in the record indicating that Prins himself owed any kind of debt to Industry Drive. The Court therefore rejects Industry Drive's argument that the return of the $300,000.00 was valuable consideration because it satisfied an antecedent debt.
Thus, in determining whether Elbar has shown that Industry Drive holds money which "in good conscience" belongs to Elbar, of the three considerations identified by the court in GE Capital Commercial, Inc. , one weighs in favor of Industry Drive and the other two weigh in favor of Elbar. Specifically, Industry Drive received the $300,000.00 from Prins in good faith. However, Industry Drive did not receive the $300,000.00 from Prins in "due course of business," nor did Industry Drive give valuable consideration for the $300,000.00.
*573Under these circumstances, Elbar has satisfied the first element of its claim against Industry Drive for money had and received.
The second element the Court must consider is whether the equities of the case "in view of the totality of the circumstances," Murray ,
(2) "Balancing the Equities" Considerations
a) Balancing the Equities: Detrimental Reliance
Industry Drive asserts that it has "materially changed" its position in reliance on the $300,000.00 payment it received from Mr. Prins. [Adv. Doc. No. 219 at 4-5 of 16]. At trial, in response to the question of whether it would be a hardship to Industry Drive if it had to return the $300,000.00, Gabriel simply replied: "Yes, because then it'll be $300,000 plus whatever the litigation costs have been, so we will be more in the negative than how we even started out." [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 151:3-7]. Gabriel also testified that Industry Drive does not have much cash on hand. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 151:8-10]. Gabriel further testified that after receiving the $300,000.00 from Prins in November 2016, the $300,000.00 went back into Industry Drive's account and that Industry Drive paid its bills and other normal course of business expenses out of that account. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 133:24-134:5]. Industry Drive continued to do that until the other members of the Gabriel Family associated with Industry Drive bought out Pfirrmann and Eleanor's interests in the business in approximately September 2017. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 132:25-133:6, 136:6-8]. According to Gabriel, after Industry Drive "closed on the repurchase of Jim [Pfirrmann] and Eleanor's interests ... their portion of everything was distributed out to them including their portion of the $300,000." [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 132:25-133:6]. Gabriel also testified that attorneys' fees were being paid out of the account that held the $300,000.
Here, Industry Drive did not meet its burden in demonstrating that it materially changed its position in reliance on the $300,000.00 it received. See First Am. Title, Ins. Co. ,
b) Balancing the Equities: Unclean Hands
As discussed supra in Section IV.D.5 regarding equitable subrogation, in the Fifth Circuit, "[t]he alleged wrongdoing of the plaintiff does not bar relief unless the defendant can show that he has personally been injured by the plaintiff's conduct." Mitchell Bros. Film Grp. ,
c) Balancing the Equities: What the Parties Knew and Intended
"What the parties knew and intended are all relevant factors in balancing the equities ...." In re Hwang ,
What Elbar "knew and intended" demonstrates that Elbar has little respect for the Bankruptcy Code and has acted solely in its perceived best interests. Elbar violated the automatic stay on October 4, 2016, when it was the highest bidder at the foreclosure sale. [Finding of Fact No. 29 -*57535]; see In re Jackson ,
If this had been the only violation of the automatic stay, the Court would perhaps have sympathy for Elbar. However, two days later, on October 6, 2016, Elbar willfully violated the automatic stay when it wire transferred the $2.4 million into the IOLTA. [Finding of Fact No. 37-41]; see In re Benson ,
There is even more. Elbar knowingly violated the automatic stay for a second time when it filed a lis pendens against the Property on January 3, 2017, and Elbar took this action completely aware that the stay was in effect. [Finding of Fact No. 89]. As discussed more fully supra in Section IV.C, Elbar's two willful violations of the automatic stay-especially when Elbar is a sophisticated purchaser who has been involved in hundreds of foreclosure sales where the debtor was in bankruptcy-lead this Court to find Elbar's stay violations egregious and in bad faith, and this finding weighs heavily against Elbar as the Court weighs the equity of what "the parties knew and intended." Elbar intended to preserve its ability to complete the purchase of the Property, [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 133:13-134:10], and Elbar's two willful stay violations show the extreme lengths Elbar was willing to go to meet that goal. Elbar is not an innocent party here;
Another fact that Elbar knew was that its chosen line of work-purchasing foreclosed properties in nonjudicial foreclosure sales, [Finding of Fact No. 30]-is a risky business. The amount of risk Elbar is willing to undertake is measured against the profit it expects to make on any given foreclosed property. Here, Elbar hoped to make a substantial profit in its purchase of the Property. [Finding of Fact No. 34]. This Court can consider the type of work Elbar engages in when weighing the equities, and the fact that Elbar is engaged in a line of business that has inherent monetary risks that Elbar has freely chosen to take on and build into its business model works against Elbar when weighing the equities. See Mid-Continent Office Distributs., L.P. ,
In regards to what Industry Drive "knew and intended," Industry Drive did not know anything about Elbar or even about Elbar's existence when Prins transferred the $300,000.00 back to Industry Drive on November 4, 2016, [Adv. Doc. No. 221, Feb. 7, 2018, Trial. Tr. 149:7-11, 149:21-23], and thus Industry Drive had no reason to believe that the $300,000.00 that Prins transferred into the Industry Drive account was not the "original" $300,000.00 that was withdrawn by Pfirrmann and placed into Prins' IOLTA. From the moment Gabriel learned that Pfirrmann had taken $300,000.00 out of the Industry Drive account and given it to Prins to place in his IOLTA, she, as well as other members of the Gabriel Family, were singular in their efforts to have the money returned, including imploring Pfirrmann to return the money, [Finding of Fact No. 22; Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 123:23-124:7]; indeed, they even went so far as to file a lawsuit against Pfirrmann for return of the money, [Finding of Fact No. 23; Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 115:19-25; Pl.'s Ex. 47; Industry Drive's Ex. 1]. In the year long period the $300,000.00 was missing from the Industry Drive account, Prins never indicated to Gabriel or to Pfirrmann that the money was no longer in his IOLTA. [Finding of Fact No. 24; TransWorld's Ex. HH, Prins Dep. 33:7-12]. In fact, Pfirrmann assured Gabriel that Prins was holding the money and that it was safe. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 117:19-20]. When Prins eventually returned the $300,000.00 to Industry Drive in November of 2016, Industry Drive believed that it was simply getting back the $300,000.00 that Pfirrmann had taken in October 2015 and placed into Prins' IOLTA. [See Adv. Doc. No. 221, Feb. 7, 2018, Hrg. 146:16-20, 149:7-11, 149:21-23].
Additionally, Industry Drive did not have any business dealings, or any relationship at all, with Prins. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 115:10-18]. The only "connection" Industry Drive had to Prins was that a co-managing partner of Industry Drive (i.e., Pfirrmann) used Prins as his personal attorney. [Finding of Fact Nos. 19-20]. Further, as soon as Gabriel learned that there was an "issue" with Prins,
I'm just here trying to talk about my $300,000 and what role we had with Mr. Prins, which he was not our attorney. I was not making an investment with him. I was not trying to give - make some kind of return. I simply wanted to get out of real estate relationship with a brother-in-law who's still currently my brother-in-law and go down the road and not be in this court today.
[Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 155:17-23].
Elbar argues that prior to the $300,000.00 being returned to Industry Drive on November 4, 2017, Industry Drive had notice about the Prins' Bankruptcy and about the adversary proceeding filed by the Ozers in the Prins' Bankruptcy, which alleged that Prins committed fraud. As discussed above, this Court has already found that the Prins' Bankruptcy was not discussed at the mediation among Gabriel, the Gabriel Family, and Pfirrmann on October 4, 2016. [Finding of Fact No. 24]. Further, there was no evidence adduced at trial indicating that Gabriel, the Gabriel Family, or Industry Drive was aware of the Ozer adversary proceeding in the Prins' Bankruptcy.
Another factor the Court considers is that if Industry Drive is ordered to return the $300,000.00 to Elbar, Industry Drive will have no recourse to try and recover its $300,000.00 from Prins. Industry Drive was not listed as a creditor in the Prins' Bankruptcy or as a victim in the Prins' Criminal Case because Industry Drive had suffered no loss at that point. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 147:25-148:8, 149:24-150:12]. Elbar, on the other hand, in addition to requesting relief from this Court, has had two other sources to look to for collecting its $2.4 million: the Prins' Criminal Case and the Prins' Bankruptcy. And, in fact, Elbar has so far been very successful in obtaining money from these two sources. In the Prins' Bankruptcy, Elbar has received $82,373.28, and in the Prins' Crinimal Case it has received $1,601,542.14. [Finding of Fact Nos. 110, 113-114].
In sum, when weighing the equities, detrimental reliance and unclean hands do not factor into the Court's analysis of Elbar's claim for money had and received; however, what the parties knew and intended weigh in Industry Drive's favor. When weighing the equities, the Court is given much leeway and is permitted to give certain factors more weight than other factors. See Mid-Continent Office Distributs., L.P. ,
This Court gives most weight to the factor of what the parties knew and intended. The Purchasers are sophisticated businessmen-two of them trained and seasoned attorneys with experience in bankruptcy law-who went into the foreclosure sale of the Debtor's Property hoping to make a large return on their investment. [Finding of Fact Nos. 30-34, 41]. It is Elbar's entire business model to purchase distressed properties at foreclosure sales in order to make a profit. [Finding of Fact No. 30]. Yet, the Purchasers-including Elbar-willfully violated the automatic stay twice in pursuit of receiving the deed to the Property. Bustamante did not hesitate to make the decision to wire transfer the $2.4 million after the Purchasers learned of the automatic stay because, according to Bustamante, the Purchasers would either receive the deed to the Property if the automatic stay was eventually annulled or they would get their money back if the automatic stay was not annulled. [Finding of Fact No. 40; Adv. Doc. No. 220, Feb. 6, 2018, Trial. Tr. 96:25-97:4, 133:13-25, 135:2-6; TransWorld's Ex. II, Bustamante Dep. 190:6-17, 194:13-19]. Prins stealing the Proceeds was an unforeseeable consequence of wire transferring the Proceeds, but the Purchasers would not be in the position that they are if they had not violated the automatic stay in the first place by wire transferring the Proceeds. Industry Drive, on the other hand, had no business dealings with Prins; it was merely trying to recover the money a co-managing partner and brother-in-law unilaterally and surreptitiously took from Industry Drive's bank account. [Finding of Fact Nos. 21-24]. As some courts have noted when considering claims for money had and received: "[O]ther courts have held that as between two innocent parties, the party that must suffer the loss is the one that mistakenly created the situation and was in the best position to have avoided it." First Am. Title, Ins. Co. ,
Here, in the Court's view, Elbar and Industry Drive are not equally innocent parties. Both are innocent in the sense that both are victims of Prins' bad acts, but Elbar is less innocent than Industry Drive because Elbar twice willfully violated the automatic stay. Because of this stark fact, Elbar must suffer the loss on its claim for money had and received because it purposefully created the situation-by wire transferring the Proceeds in violation of the stay-and it was in the best position to have avoided it. Thus, when balancing all the equities, the Court holds that Elbar does not prevail on its claim for money had and received against Industry Drive.
2. Unjust Enrichment
a. Applicable Law
Texas law is not completely clear on whether unjust enrichment is recognized as an independent cause of action or is merely recognized as a quasi-contractual theory of recovery. See Perales v. Bank of Am., N.A. , No. H-14-1791,
Other courts in the Southern District of Texas recognize that:
Despite the lack of unanimity among Texas courts, one thing remains clear: even in the cases [suggesting unjust enrichment is not an independent cause of action,] the courts have still allowed plaintiffs to recover based on the theory of unjust enrichment so long as a person has obtained a benefit from another by fraud, duress, or the taking of undue advantage.
Yosemite Auto (Shanghai) Co., Ltd. v. JRS Metals, Inc. , No. 4:15-CV-1641,
This Court agrees with those district courts in the Southern District of Texas that have found that whether characterized as an independent cause of action or as a theory of recovery, a plaintiff can nonetheless recover when "one person has obtained a benefit from another by fraud, duress, or the taking of an undue advantage." Heldenfels Bros. v. City of Corpus Christi ,
*580Turning to Texas law regarding unjust enrichment, "[u]njust enrichment is an implied-contract basis for requiring restitution when it would be unjust to retain benefits received." Perales ,
One of the elements of an unjust enrichment claim is some underlying contact or nexus between the plaintiff seeking the recovery and the defendant from whom the recovery is sought. [ Burlington N. R.R. v. Sw. Elec. Power ,925 S.W.2d 92 , 96-97 (Tex. Ct. App. 1996) ]. Texas law also demands that, in some way, those dealings must have been inequitable, in favor of the defendant and at the expense of the plaintiff, for an unjust enrichment claim to hold. See Dudley Constr. [v. Dawson ], 258 S.W.3d [694,] 703 [ (Tex. Ct. App. 2008) ] (including "fraud, duress or taking of undue advantage"); see also Burlington N. R.R. ,925 S.W.2d at 98 n. 6 ("Appellee does not aver fraud, accident, mistake, duress or bad faith on the part of the appellant [therefore making unjust enrichment unavailable]."). This can be viewed as an "active" form of unjust enrichment.
Texas law also reveals that unjust enrichment can touch "passively received" benefits, where the nexus is some related third party's acts against the plaintiff, when it would be "unconscionable for the receiving party to retain" them. Mowbray v. Avery ,76 S.W.3d 663 , 679 (Tex. Ct. App. 2002). It is not available "merely because it might appear expedient or generally fair that some recompense be afforded for an unfortunate loss to the claimant, or because the benefits to the person sought to be charged amount to a windfall."Id. at 679-80 (citing Heldenfels Bros. v. Corpus Christi,832 S.W.2d 39 , 40 (Tex. 1992) ). Rather, it requires a specific justification, such as unconscionability.Id.
Cty. of El Paso, Tex. v. Jones , No. EP-09-00119-KC,
Further, "[t]o recover under an unjust enrichment theory, the benefits to the other party must be actually unjust under the principles of equity." Smith v. Jimenez (In re IFS Fin. Corp.) , No. 02-39553,
*581b. Application of the Law of Unjust Enrichment to the Facts at Bar
Elbar argues that both TransWorld and Industry Drive were unjustly enriched because they obtained a benefit by the taking of an undue advantage.
i. TransWorld
Elbar argues that TransWorld has obtained a benefit by the taking of an undue advantage by obtaining possession of, and continuing to retain possession of, the $164,807.20. [Adv. Doc. No. 230 at 3-4 of 19, ¶ 6]. TransWorld argues that (1) unjust enrichment is not a separate cause of action and therefore Elbar's claim should be dismissed;
To succeed on a claim for "active" unjust enrichment, there must be a "nexus of exchange between the parties":
Unjust enrichment includes both a material gain by the defendant and a material loss by the plaintiff. Moreover, the loss and gain do not come together by random chance. They are two sides of the same coin-that coin being a transfer of wealth from plaintiff to defendant. There is a nexus of exchange between the parties.
Davis v. Wells Fargo Bank, N.A. , No. 6:11-CV-00047,
Here, there is no nexus between Elbar and TransWorld sufficient enough to sustain a claim for "active" unjust enrichment. Elbar's loss (the Proceeds being stolen by Prins) and TransWorld's gain (Prins giving TransWorld $164,807.29 after TransWorld gave Prins $169,807.29 to hold as good *582faith money) came together by random chance: but for Prins stealing the Proceeds, Prins could not have used the money Elbar wire transferred to the IOLTA to remit the $164,807.29 to TransWorld. [See Finding of Fact No. 50]. There was no money transferred directly from Elbar to TransWorld; further, TransWorld did not make any promises to Elbar to pay for any type of benefit. Thus, there are no circumstances here for "active" unjust enrichment to apply.
Elbar has also failed to show that "passive" unjust enrichment occurred. To be successful on a theory of "passive" unjust enrichment, Elbar would need to show that it would be unconscionable for TransWorld to retain the money ($164,807.29) given to it by Prins when the $164,807.29 can be traced to the Proceeds that Prins pilfered. Elbar has not met this standard.
Further, this Court keeps in mind that "[t]he decision whether to grant relief for unjust enrichment depends on the particular facts and equities of the case, and on what constitutes good public policy." Helm ,
ii. Industry Drive
Elbar asserts that Industry Drive "obtaining and retaining possession" of the $300,000.00 when Industry Drive had notice that there were "problems with Prins" before obtaining possession of the $300,000.00 amounts to the taking of an undue advantage. [Adv. Doc. No. 228 at 6-9 of 19, ¶¶ 13-23]. Industry Drive argues that Elbar presented no evidence that Industry Drive obtained a benefit from Elbar by fraud, duress, or by the taking of an undue advantage. [Adv. Doc. No. 219 at 6 of 16].
Just like its unsuccessful claim for unjust enrichment against TransWorld, there is also no nexus between Elbar and Industry Drive sufficient enough to sustain a claim for "active" unjust enrichment against Industry Drive. Elbar's loss (the *584Proceeds being stolen by Prins) and Industry World's gain (Prins giving Industry Drive $300,000.00 after Pfirrmann took $300,000.00 from the Industry Drive account) came together by random chance: but for Prins stealing the Proceeds, Prins could not have used the money Elbar wire transferred to the IOLTA to return to Industry Drive. There was no money transferred directly from Elbar to Industry Drive; further, Industry Drive did not make any promises to Elbar to pay for any type of benefit. Thus, there are no circumstances here for "active" unjust enrichment to apply.
Elbar has also failed to show that "passive" unjust enrichment occurred. To be successful on a theory of "passive" unjust enrichment, Elbar would need to show that it would be unconscionable for Industry Drive to retain the money ($300,000.00) given to it by Prins when the $300,000.00 can be traced to the Proceeds that Prins pilfered. Elbar has not met this standard. There is no question that Elbar has been harmed by Prins' actions due to his theft of the Proceeds; whereas, Industry Drive (unlike Elbar and TransWorld) has not been harmed by Prins' actions in that it has recovered all of the $300,000.00 that Pfirrmann initially withdrew from Industry Drive's account and gave to Prins. All that can be said of Industry Drive is that it has had to pay $44,000.00 in attorneys' fees to defend itself in this suit, [Finding of Fact No. 109], although such expenditures do not constitute harm as a matter of law. See News Am. Mktg. In-Store, LLC ,
However, as discussed at length previously, Elbar is the ultimate source of its own misfortune: Elbar broke the law when it willfully violated the automatic stay and wire transferred $2.4 million to the IOLTA. [Finding of Fact Nos. 37-41]. That the $300,000.00 Prins gave to Industry Drive (which, again, Industry Drive believed was Prins returning Industry Drive's own money, which had previously been taken from Industry Drive's bank account without permission by Pfirrmann) is traceable to the Proceeds does not in any way equate to Industry Drive breaking the law-at worst, it amounts to a windfall to Industry Drive. See Cty. of El Paso, Tex. ,
Further, this Court keeps in mind that "[t]he decision whether to grant relief for unjust enrichment depends on the particular *585facts and equities of the case, and on what constitutes good public policy." Helm ,
3. Conversion
a. Applicable Law
"Under Texas law, conversion is the wrongful exercise of dominion and control over another's property in violation of the property owner's rights." ITT Commercial Fin. Corp. v. Bank of the W. ,
When the plaintiff alleges that the specific chattel converted was money, as is the case here, then the plaintiff must show "the money (1) was delivered to the defendant for safekeeping, (2) was intended to be kept segregated, (3) was substantially in the form in which it was received or intact, and (4) was not the subject of a title claim by the defendant." Club Escapade 2000, Inc. v. Ticketmaster, L.L.C. , No. EP-11-CV-166-KC,
Despite recognizing the existence of a claim for the conversion of money, Texas courts have cautioned that because the title to money passes with delivery by its nature, a cause of action for conversion fails when the plaintiff cannot trace the exact funds claimed to be converted, making it impossible to identify the specific monies in dispute. In other words, money can be the subject of a conversion *586claim only if it can be identified as a specific chattel.137 Moreover, when an indebtedness can be discharged by the payment of money, a conversion action is inappropriate.
Ellis ,
b. Application of the Law of Conversion to the Facts at Bar
Here, Elbar fails to prove its conversion of money claim as to both TransWorld and Industry Drive. Elbar has failed to show the first element in a claim for conversion of money-that is, Elbar had to prove that money was delivered to the defendant for safekeeping. Here, Elbar did not deliver any money to TransWorld or Industry Drive for safekeeping; to the contrary, Elbar delivered the $2.4 million to Prins for safekeeping. Alas, Elbar did not bring a conversion of money claim against Prins-even though Elbar brought a number of other claims against him-and thus Elbar's conversion of money claim fails. Further, even if the first element of the conversion of money claim could be construed as the portion of the Purchasers' money that Prins delivered to TransWorld and Industry Drive, this too would fail as Prins did not deliver the $164,807.29 and $300,000.00 to TransWorld and Industry Drive, respectively, for any kind of "safekeeping"; the opposite, in fact, occurred: Prins gave those respective sums to TransWorld and Industry Drive as a "return" of those parties' own money, which TransWorld and Industry Drive could then dispose of as they saw fit. [See Finding of Fact Nos. 50, 57]. Thus, because no money was delivered to TransWorld or Industry Drive for safekeeping, Elbar's claim for conversion of money must fail. See Cannon v. Cannon , No. SA-13-CA-710-HJB,
V. CONCLUSION
Elbar has brought numerous claims against Prins, United Sentry, TransWorld, and Industry Drive. For the reasons set forth herein, the Court finds that all of Elbar's claims must fail with one exception: Elbar has proven the elements of its TTLA claim against Prins. Accordingly, Elbar is entitled to judgment against Prins for $716,084.58, representing the difference between the $2.4 million that Prins stole and the $1,683,915.42 that Elbar has recovered through the Prins' Criminal Case and the Prins' Bankruptcy Case. [See Finding of Fact Nos. 110, 113-114]. Additionally, because Elbar has prevailed under its TTLA claim, Elbar is entitled to recover the reasonable attorneys' fees and costs it has expended in prosecuting this particular claim.
Conversely, because Elbar is not the prevailing party in its TTLA claims against MacKenzie and United Sentry, Elbar is liable to these two defendants for their respective reasonable attorneys' fees *587and costs in defending themselves against Elbar.
Counsel for MacKenzie and United Sentry has seven (7) days to provide to counsel for Elbar all invoices that his two clients believe represent the reasonable fees and costs incurred in defending themselves against Elbar's TTLA claim. If counsel for MacKenzie and United Sentry fails to deliver these invoices within the seven (7) day deadline, then the fees and costs will be deemed waived. If they are timely delivered, then counsel for Elbar has seven (7) days to file a certificate setting forth that Elbar either does object or does not object to the reasonableness of the requested fees and expenses.
If Elbar's counsel certifies that Elbar does object to the reasonableness of the requested fees and costs of MacKenzie and United Sentry, then this Court will hold a hearing on solely this issue, and thereafter will render a ruling on reasonableness and then enter a judgment consistent with these findings of fact and conclusions of law.
Finally, with respect to Elbar's fees and costs for prosecuting its TTLA claim against Prins, Elbar's counsel has seven (7) days to submit to this Court all invoices that Elbar believes represent its reasonable fees and expenses. The Court will review these invoices in camera and then issue a ruling on the amount it finds to be reasonable. As with the fees and costs of MacKenzie and United Sentry, Elbar's fees and costs will be incorporated into the judgment.
On March 27, 2017, this Court issued its Findings of Fact and Conclusions of Law Regarding Order (1) Requiring Todd Prins to Wire Transfer $2.4 Million to the Chapter 7 Trustee by No Later Than 5:00 P.M. on December 12, 2016; and (2) Requiring Todd Prins to Personally Appear in Court and Show Cause Why He Should Not Be Sanctioned. [Main Case Doc. No. 197]. The instant Memorandum Opinion adopts certain findings of the March 27, 2017, Findings of Fact and Conclusions of Law that this Court made in the Main Case with respect to the show cause order and cites to them throughout this Memorandum Opinion.
See State Bar of Texas - Find a Lawyer - Todd A. Prins , State Bar of Texas, https://www.texasbar.com/AM/Template.cfm?Section=Find_A_Lawyer&template=/Customsource/MemberDirectory/MemberDirectoryDetail.cfm&ContactID=183309 (last visited September 28, 2018).
"IOLTA" is an acronym for Interest on Lawyers Trust Accounts. The last four digits of the IOLTA are 8544. [Pl.'s Ex. 2].
It is not entirely clear what happened after the default judgment was entered against TransWorld. Prins testified that the judgment was set aside on TransWorld's motion, and that eventually the Tax Assessor was paid the money it was owed related to this lawsuit. [TransWorld's Ex. D, Prins Dep. 98:20-25, 116:17-117:8]. Ms. Cash, on the other hand, testified that the matter was "settled." [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 19:7-20, 35:1-6, 35:16-18].
Linebarger Goggan Blair & Sampson, LLP, ("Linebarger") is the law firm that has been representing the Tax Assessor in the tax matters related to TransWorld. [See id. at 35:10-14].
Romo was the Tax Assessor at that time. [See id. at 35:25-36:3].
The record is murky as to just exactly how many tax disputes TransWorld had or might have had-or still has-with the Tax Assessor over the many years that Prins represented TransWorld; and the record is equally unclear as to just exactly how many payments, if any, Prins made to the Tax Assessor on behalf of TransWorld. Unfortunately, none of the parties at trial presented the Court with any written accounting or charts to give clarity on this issue. What is unquestionably clear is that TransWorld has paid approximately $15,000 to $18,000 in legal fees to the law firm (a different law firm than the Prins Law Firm) that TransWorld hired to represent it in the current dispute with the Tax Assessor. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 40:2-14; TransWorld's Ex. EE].
It is not entirely clear whether the $496,198.52 in delinquent taxes arose solely from the judgment that was entered against TransWorld and was subsequently allegedly set aside and then fully paid off according to Prins, [see TransWorld's Ex. K; supra Finding of Fact No. 3], or whether the $496,198.52 in delinquent taxes was related to one or more of the other tax lawsuits that TransWorld was apparently involved in around approximately 2006 to 2008, [see TransWorld's Ex. HH, Prins Dep. 98:1-4, 98:20-25, 114:23-115:3, 115:20-24, 117:9-118:1; supra footnote 7 discussing potential tax disputes TransWorld had with the Tax Assessor]. Nonetheless, as discussed in Finding of Fact Nos. 3 and 5-6, Ms. Cash believed that the $496,198.52 in delinquent taxes was related to a matter that had previously been fully paid off and disposed of during Prins' representation of TransWorld.
The Court notes that Prins testified that the money he paid the Tax Assessor in January 2016 on TransWorld's behalf actually belonged to Industry Drive. [TransWorld Ex. HH, Prins Dep. 77:20-23, 78:4-10]. It appears to the Court that Prins did not pay the $143,000.00 because presently the Tax Assessor claims that TransWorld owes half a million dollars in delinquent taxes and fees. [Finding of Fact No. 5].
Even though the Deed of Trust contains language suggesting that it was executed by more than one grantor, the fact is that only Triple Gate executed the Deed of Trust. [Pl.'s Ex. 14].
The names of Gabriel's siblings are as follows: Johnny Gabriel, Ronnie Gabriel, Roslyn Gabriel, Jennifer Barbara Gabriel, and Eleanor Gabriel. [Adv. Doc. No. 221, Feb. 7, 2018, Trial. Tr. 118:15-18; Pl.'s Ex. 47]. The Court will refer to Inez Cindy Gabriel, Johnny Gabriel, Ronnie Gabriel, Roslyn Gabriel, and Jennifer Barbara Gabriel as the "Gabriel Family."
The Gabriel Family and Industry Drive filed a First Amended Petition and Application for Injunctive Relief on September 27, 2016. [Industry Drive's Ex. 1].
The last four digits of the BBVA Operating Account are 8552. [Pl.'s Ex. 5].
The last four digits of the Wells Fargo Operating Account are 2166. [Pl.'s Ex. 7].
In its March 27, 2017, Findings of Fact and Conclusions of Law, [Main Case Doc. No. 197], this Court found that the buyer of the Property was solely Elbar. The Court did so based upon the evidence before it at that time. Indeed, the Court made these findings and conclusions long before the trial of this adversary proceeding. Having heard extensive testimony at trial, and having admitted and reviewed numerous exhibits introduced at the trial, it is more accurate to find that the individuals and entity who provided the funds to purchase the Property were Bustamante, Abdullatif, Jabbour, and Elbar. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 57:17-58:14; Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 166:5-9, 170:20-171:1; TransWorld's Ex. II, Bustamante Dep. 110:3-10, 110:25-111:4].
In its March 27, 2017, Findings of Fact and Conclusions of Law, [Main Case Doc. No. 197], this Court found that three principals of Elbar attempted to pay the purchase price at the foreclosure sale by several cashier's checks. Based upon testimony adduced at trial, the Court has learned that Abdullatif and Jabbour have no formal roles in Elbar, [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 165:13-16; 166:5-9, 168:13-19; TransWorld's Ex. II, Bustamante Dep. 105:23-106:1, 137:17-21]; only Bustamante is an officer (vice president) of Elbar, [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 52:24-53:1, 130:8-20]. Thus, it is more accurate to state that three individuals attempted to pay the purchase price at the foreclosure sale by having Twyman deliver several cashier's checks to Shum. Moreover, even though Bustamante was personally purchasing an $800,000.00 interest in the Property, he signed his cashier's checks on behalf of Elbar, as one of its vice presidents. [Pl.'s Ex. 20].
Bustamante was unable to recall when Elbar purchased 25% of Bustamante's 1/3 portion: "... I don't know if [Elbar] gave it to me on the 4th, the 5th, the 6th or after the 6th. It was never an issue. Eventually I got it." [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 83:2-8]. Even though Bustamante was unable to recall the precise date Elbar paid him for its 25% share of his 1/3 interest in the Property, the Court emphasizes that it finds Bustamante's testimony credible that Elbar did in fact, at some point close in time to Elbar's wire transfer of the $2.4 million, purchase a portion of Bustamante's interest in the Property, thereby making Elbar a Purchaser of the Property as well.
In fact, Bustamante further testified that Twyman paid him the sum of $24,000.00 so that Twyman himself could participate in acquiring an interest in the Property. [Id. at 83:20-24]. It is not clear at what point in time-either pre or post wire transfer of the Proceeds-that Twyman purchased his interest in the Property. The Court concludes that Twyman should be included in the definition of "Purchasers" (as defined supra by this Court in Finding of Fact No. 30), as Twyman, regardless of whether he purchased Bustamante's share pre or post wire transfer of the Proceeds, became a "Purchaser" with knowledge of the Debtor's bankruptcy and imposition of the automatic stay.
The Court notes that even though Bustamante testified that Elbar was hoping to make a 20% return on the Property, the actual return on the Property would have been much greater. In its proof of claim filed in the Main Case, Elbar sets forth that it believes the Property is worth $3,500,000.00. [Proof of Claim, Case No. 16-35021, Claim 11, at 2]. The Purchasers' bid price on the Property was $2.4 million, which-if the sale had actually been completely consummated-would have resulted in an approximate 45.8% return on the Purchasers' investment and a $1.1 million aggregate total return.
These suits are subsequently discussed in greater detail.
Case law is clear that any property in which a debtor has an interest on the date of the filing of the bankruptcy petition constitutes "property of the estate" pursuant to
The Court notes that the Debtor eventually attempted to exempt the Property and therefore remove it from being property of the estate. However, the Trustee objected to the Debtor's exemption, [Main Case Doc. No. 47], and this Court sustained the objection, [Main Case Doc. No. 96]. Therefore, as a matter of law, the Property was not only property of the estate on the date of the filing of her petition, it remained property of the estate because the Debtor failed in her attempt to remove the Property out of the estate. Accordingly, title to the Property has always vested in the Trustee, and that is why the Trustee had the right to sell the Property in the Main Chapter 7 case. See Studensky v. Morgan (In re Morgan) ,
Public Access to Court Electronic Records, or "PACER," provides on-line access to U.S. Appellate, District, and Bankruptcy Court records and documents nationwide.
In fact, it was not the Debtor and Amos who executed the deed transferring the Property from Triple Gate to themselves. It was only the Debtor, in her capacity as the Manager of Triple Gate, who executed this deed. [Pl.'s Ex. 16].
After learning about the bankruptcy, Bustamante himself made the decision to wire the Proceeds to Prins. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 86:23-25; TransWorld's Ex. II, Bustamante Dep. 82:17-20].
The $2.4 million wire-transferred from Abdullatif's bank to the IOLTA was Abdullatif's own funds. [TransWorld's Ex. II, Bustamante Dep. 110:3-15]. At some point post-wire transfer of the Proceeds, Bustamante and Jabbour paid Abdullatif their portion (i.e., $800,000.00 each) of the purchase price. [See id. at 106:10-13, 110:19-24].
Subsequently, at the same deposition, Bustamante testified that it is not "uncommon" to pay with cashier's checks after knowledge of a bankruptcy. [Id. at 182:6-184:20].
During his cross-examination by counsel for Industry Drive, Leslie Hyman ("Hyman"), Bustamante also testified as follows at trial:
Hyman: So you made the bid on October 4th hoping to make a 20 percent return on the property, and you authorized wiring the funds to Mr. Prins on October 6th after you were aware of the bankruptcy filing, in order to continue to maintain the hope of making that 20 percent?
Bustamante: Yes.
[Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 135:19-24].
This is the date, discussed infra at Finding of Fact No. 82, on which the U.S. Department of Justice seized the funds that were in the Wells Fargo Operating Account.
It strains credulity for Prins to testify that as of October 21, 2016, he had not yet decided to travel overseas, as the prior day (i.e., October 20, 2016) he had actually purchased four plane tickets (for his wife, his two children, and himself) for a family trip to Europe. This testimony further underscores that Prins is not a credible witness on most issues. (See Credibility of Witnesses Section infra ).
As of this date, Prins had not yet been indicted for theft of the Proceeds, among other crimes. However, he clearly knew that he had criminal problems due his theft of the Proceeds, and he therefore decided to retain criminal counsel. Eventually, he was indicted, and thereafter entered into a plea agreement with the United States Attorney for the Western District of Texas, and the U.S. District Court approved this agreement. [See Finding of Fact No. 101].
Prins was well aware that Mr. Cash was dying of cancer. [See TransWorld's Ex. HH, Prins Dep. 80:7-13].
See Finding of Fact Nos. 9-10 as to why and when Ms. Cash (on behalf of TransWorld) had given Prins a check for $169,807.29.
See Finding of Fact Nos. 43-44. Prins, in his capacity as counsel of record for United Sentry, in the Main Chapter 7 case, had filed the Amended Motion for Relief on October 13, 2016, to obtain this Court's approval for United Sentry to "to complete foreclosure on the Property."
At trial, Gabriel indicated that one of the attorneys at the Pulman Law Firm sent her a document indicating that "something was up with Mr. Prins," but Gabriel was unable to remember the name of the individual or parties who were referenced in the document showing that Prins had "an issue." [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 126:6-128:7]. Gabriel further testified that she never actually read the contents of the email that detailed the "issue" Prins was having and instead she just reacted to the comments of the attorney from the Pulman Law Firm that Prins was experiencing some issues that were disconcerting. [Id. at 128:11-22]. Relying on the advice of the attorney from the Pulman Law Firm that Gabriel should be concerned about Prins' issues, Gabriel immediately called Pfirrmann and told him to contact Prins and insist that he immediately transfer the $300,000.00 out of the IOLTA and into the Industry Drive bank account. [Id. at 128:11-22].
With the transfer of this $300,000.00 out of the IOLTA, only $100,000.00 of the $2.4 million still remained in the IOLTA, as Prins had already transferred $2.0 million out of the IOLTA and into the Wells Fargo Operating Account on October 18, 2016. [See Finding of Fact No. 46].
There is nothing in the record to indicate, that Parks, who was an associate at the Prins Law Firm, had any knowledge whatsoever that Prins had improperly transferred the Proceeds out of the IOLTA and used a substantial portion of these funds for his personal benefit.
Elbar and United Sentry, through their respective agents, had previously conducted discussions as to Elbar's desire, under the right circumstances, to purchase the Note. [See United Sentry's Ex. 3].
Based upon Prins' lack of credibility, this Court believes that Prins gave this response with intent to deceive Twyman into believing that he (Prins) was going to return the Proceeds when, in fact, he had absolutely no intention of doing so.
MacKenzie testified that in the "first couple weeks" of November 2016, Twyman called him and asked him to instruct Prins to return the money to the Purchasers. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 102:1-6, 102:21-103:1]. MacKenzie told Twyman that "I'm willing to help in any way you think may help in this position." [Id. at 102:4-11]. MacKenzie then spoke with Prins, who suggested that a release be signed before Prins released the money back to the Purchasers. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 103:2-11; see United Sentry's Ex. 5 for release drafted by Prins]. MacKenzie instructed Prins to draft such a release so that the Proceeds could be returned to the Purchasers. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 102:4-14]. Prins drafted a release and sent it to MacKenzie; MacKenzie then immediately signed the release and emailed the signed release to Twyman and Prins. [Id. at 102:13-16, 103:12-18]. Twyman apparently never signed the release drafted by Prins. [Id. at 102:14-17, 103:19-104:10]. Even if Twyman had executed the release, there is no doubt in this Court's view that Prins would not have returned the Proceeds. By this time, Prins had already transferred $2.3 million of the Proceeds from the IOLTA to the Wells Fargo Operating Account and the BBVA Operating Account and he had already begun spending this $2.3 million. Thus, any communication that Prins was having with MacKenzie or Twyman about wiring the funds back to Elbar upon receipt of an executed release was nothing more than a ruse to delay their discovery that Prins had actually stolen the Proceeds, and Prins has admitted as much at his deposition. [See TransWorld's Ex. HH, Prins Dep. 45:19-46:5].
As already noted in footnotes 38 and 39, by responding that he would be willing to consider returning the funds to Elbar, Prins was clearly misleading Twyman because by this point, Prins had already transferred the Proceeds out of the IOLTA and spent or transferred to third parties a substantial portion of these funds. Prins never had any intention whatsoever of even considering interpleading the Proceeds. His statement to Twyman that he would be willing to consider interpleading the funds was a bald-faced lie.
MacKenzie's email was grammatically deficient.
The Court notes that United Sentry's counsel here was no longer Prins, but rather Benette Zivley ("Zivley"). [See United Sentry's Ex. 7]. MacKenzie, as the president of United Sentry, clearly had decided by this time that with respect to this particular matter, United Sentry needed a different lawyer than Prins to represent it.
For purposes of clarity, as of December 16, 2016, when this Court held the status conference, neither this Court nor the attorneys for Elbar, United Sentry, or the Trustee (or their respective clients) had any detailed information about Prins draining the IOLTA of the Proceeds and using these funds for his personal benefit. More facts only came to light after this status conference: (a) through discovery and evidence introduced at hearings held in the future in the Main Case; and (b) at the trial in this adversary proceeding.
The Court notes that in the Prins Show Cause Order, the Court made a finding that the $2.4 million was, at a minimum, arguably property of the estate over which this Court had jurisdiction. [Main Case Doc. No. 52].
In his Response, Prins indicates that the 10:15 a.m. email from Payne to him on October 5, 2016, [see Finding of Fact No. 36], is attached to the Response as Exhibit A; however, this email was filed as Exhibit 2.
Main Case Doc. No. 118 is the transcript of the December 15, 2016, hearing.
See Finding of Fact No. 82 regarding the seizure of the funds in the Wells Fargo Operating Account.
The Court released Prins because he expressly promised that he would return to court on December 19, 2016, and, further, because he knew that a bench warrant would be issued immediately if he failed to appear.
At the hearing on December 19, 2016, Prins testified that the amount that he had transferred to these two entities was $600,000.00. [Main Case Doc. No. 197 at 12 of 20, ¶ 49]. However, subsequently, based upon discovery conducted by the parties as well as testimony given by representatives of TransWorld and Industry Drive at the trial in this adversary proceeding, the aggregate amount that Prins actually transferred was $464,807.29, representing the sum of $300,000.00 (transferred to Industry Drive) plus $164,807.29 (transferred to TransWorld). [Main Case Doc. No. 197 at 4 of 20, ¶ 13; Pl.'s Exs. 5, 7, 10-11; TransWorld's Ex. HH, Prins Dep. 37:9-25, 38:18-25].
Prins' testimony here was false, as the funds that he had already spent were used not only for the expenses associated with the Prins Law Firm, but also for paying his personal taxes to the IRS, taking family trips to Europe and Portland, Oregon, and transferring monies to other clients in addition to TransWorld and Industry Drive. [See Finding of Fact Nos. 47-48].
Subsequently, Elbar filed a First Amended Complaint. [See infra Finding of Fact Nos. 103, 105-107 for further discussion of claims that were dismissed prior to, during, and after trial].
Prins testified that he was not able to access his online bank statements for the IOLTA as a result of the seizure of this account by the United States. [Main Case Doc. No. 121, Jan. 9, 2017, Hrg. 12:24-13:13, 26:1-10]. This is one piece of testimony from Prins that the Court actually believes is entirely true.
As noted at footnote 49, Prins actually transferred the aggregate amount of $464,807.29, not $600,000.00 to $700,000.00, to TransWorld and Industry Drive.
Todd Prins' public state bar profile is available at: https://www.texasbar.com/AM/Template.cfm?Section=Find_A_Lawyer&template=/Customsource/MemberDirectory/MemberDirectoryDetail.cfm&ContactID=183309 (last visited September 28, 2018).
No trial has yet been held in this criminal case.
The $1,719,062.93 that was placed into the Court's registry represents an amount agreed upon by the Trustee, United Sentry, and Elbar that was the amount necessary to pay off United Sentry's mortgage at closing had this adversary proceeding not been filed. [See Main Case Doc. No. 219]. Obviously, since the deposit of the $1,719,062.93, interest in the approximate amount of $26,000 has accrued. Therefore, not only will United Sentry be entitled to the $1,719,062.93 (as explained in this Memorandum Opinion), it will also be entitled to the interest that has accrued on these funds. See Oshman v. Hubler ,
Presumably, Industry Drive was not involved in the plea agreement because unlike Elbar, Industry Drive had suffered no harm at the time of the plea agreement. Indeed, Prins had paid $300,000.00 to Industry Drive on November 4, 2016, [Finding of Fact No. 57], and therefore Industry Drive was made whole. On the other hand, TransWorld has suffered damages from Prins' actions. At a minimum, it is certain that TransWorld has suffered damages of $5,000.00 and it is quite probable that the harm is much higher. As discussed in depth supra at Finding of Fact Nos. 9-10, TransWorld gave Prins $169,807.29 as "good faith" money while Prins allegedly worked out TransWorld's tax issues with the Tax Assessor. TransWorld, however, only ever received $164,807.29 back from Prins-hence, TransWorld's damages are, at a minimum, $5,000.00. [Finding of Fact No. 50]. Given Prins' blatant theft of the $2.4 million, it is conceivable that Prins never paid any money to the Tax Assessor on behalf of TransWorld, thus making the damages suffered by TransWorld much higher. After all, TransWorld, aside from giving Prins the amount of $169,807.29 on May 17, 2016, had previously given Prins the sum of $230,853.66 on February 4, 2008, for the express purpose of providing Prins with sufficient funds to pay the Tax Assessor the amount owed by TransWorld at that time. [See Finding of Facts No. 3]. Yet, it appears that Prins never paid the Tax Assessor any of the $230,853.66, as the Tax Assessor is now asserting that TransWorld owes almost a half million dollars. [Finding of Facts No. 3]. Under these circumstances, it is not clear why TransWorld was not included in Prins' plea agreement.
The Debtor, Amos, and Prins did not appear at trial. Amos has not participated in this adversary proceeding since January 27, 2017, when he filed an answer and cross-claim through his legal counsel at the time. [Adv. Doc. No. 10]. The Debtor has not participated in this adversary proceeding since February 13, 2017, when she filed an answer and cross-claim through her legal counsel at the time. [Adv. Doc. No. 20]. Both counsel for Amos and counsel for the Debtor eventually withdrew as counsel for their respective clients. [See Adv. Doc. Nos. 74, 75, 110, 111]. Prins, who was certainly well aware of the trial, could have appeared, as he had not yet been sentenced by the District Court in the Prins' Criminal Case. However, Prins chose not to appear and participate at trial.
On February 10, 2018, Elbar filed a "Stipulation of Dismissal of Claims Against Donald Anthony MacKenzie." [Adv. Doc. No. 195]. This document states that Elbar is dismissing all claims against MacKenzie with prejudice. [Id. ]. Also on February 10, 2018, Elbar filed a "Stipulation of Dismissal of Claims Against Oluyemisi Omokafe Okedokun and Felix Amos." [Adv. Doc. No. 196]. This document states that Elbar is dismissing all claims against the Debtor without prejudice. [Id. ]. Even though the stipulation only dismisses all claims as to the Debtor, at trial, Battaglia stated in open court that the dismissal was to both the Debtor and Amos. [Adv. Doc. No. 222, Feb. 8, 2018, Trial Tr. 57:21-22].
On February 15, 2018, this Court entered an order memorializing this ruling. [Adv. Doc. No. 202].
On February 26, 2018, this Court entered an order dismissing Elbar's theft claim against TransWorld. [See Adv. Doc. No. 212].
During his closing argument at trial, Battaglia stated that Elbar's claim for "theft" was not a separate claim than its claim under the Texas Theft Liability Act. [Adv. Doc. No. 222, Feb. 8, 2018, Trial Tr. 21:16-22:2]. Thus, there is no separate "theft" claim separate and apart from Elbar's Texas Theft Liability Act claim that Elbar is attempting to recover on.
During his closing argument at trial, Battaglia clarified that the only claims Elbar was still pursuing against Prins were common law fraud, fraud in real estate transactions, and Texas Theft Liability Act. [Adv. Doc. No. 222, Feb. 8, 2018, Trial Tr. 76:3-25].
Bustamante was very clear in his testimony that he did not believe the fact that the Debtor had filed a bankruptcy petition and that the automatic stay was in place affected in any way the right to wire transfer the $2.4 million:
Hyman: And what downside was there to tendering the funds knowing about the bankruptcy filing?
...
Bustamante: I didn't know of any. I didn't think of any.
Hyman: Okay. When you asked - who asked - what is -
Bustamante: Osama [Abdullatif]?
Hyman: Yes. Who asked Osama [Abdullatif] to wire the funds to Mr. Prins?
Bustamante: I don't think it was a question of asking. I know I spoke to Osama [Abdullatif] and we just have the kind of relationship that either he volunteered or I asked. It was not uncommon for him to wire funds for us.
Hyman: When you were - so you talked to Osama [Adbullatif] yourself about wiring the funds.
Bustamante: Right.
Hyman: Okay. Did you tell Osama [Abdullatif] that there had been a bankruptcy filing?
Bustamante: I don't remember.
Hyman: Would you have thought that was an important piece of information to share with him?
Bustamante: No.
Hyman: Why not?
Bustamante: Because he trusts my judgment.
Hyman: And you didn't think it mattered that there had been a bankruptcy filing?
Bustamante: No. I didn't think it mattered.
[TransWorld's Ex. II, Bustamante Dep. 83:5-84:13].
The Court notes that it may make credibility judgments when a person testifies by deposition. See Deville v. U.S. ex rel. Dept. of Veterans Affairs ,
Elbar has filed a claim in the amount of $1,594,424.17, [Proof of Claim, Case No. 16-35021, Claim No. 11, at 2], and United Sentry has filed a claim in the amount of $1,568,782.76, [Proof of Claim, Case No. 16-35021, Claim No. 12, at 2]. The Court notes that the amount of Elbar's claim listed in its Proof of Claim ($1,594,424.17) differs from the amount of its claim listed on the main page of the Claims Register on CM/ECF ($1,594,374.17). Battaglia entered both of these numbers. The Court finds that the amount Elbar indicated in its Official Form 410 - Proof of Claim ($1,594,424.17) is the amount Elbar intended to file a claim for in the Main Case.
Since Elbar filed this adversary proceeding on January 2, 2017, Elbar has been able to recover a total of $1,683,915.42. [See Finding of Fact No. 114]. Thus, Elbar now seeks a judgment for $716,084.58 in order to be made whole (i.e., $2,400,000.00 minus $1,683,915.42 equals $716,084.58).
[Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 82:24-83:12, 93:24-94:3; TransWorld's Ex. II, Bustamante Dep. 143:8-12]. Moreover, at his deposition, Bustamante testified that "[o]nly a small portion of [the $2.4 million] is Elbar's money." [TransWorld's Ex. II, Bustamante Dep. 145:6-7].
The Court notes that:
Both standing and real party in interest are used to designate a plaintiff who possesses a sufficient interest in the action to entitle him to be heard on the merits. The doctrine of standing requires a plaintiff to show that he suffered injury in fact traceable to the defendant's conduct and that this injury can be redressed by the relief the plaintiff seeks. On the other hand, the real party in interest doctrine requires that every action be prosecuted by the entity possessing the particular right sought to be enforced. Standing is jurisdictional, but real party in interest is not.
Salim v. Nisselson (In re Big Apple Volkswagen, LLC) , No. 11-11388 (JLG),
As noted above, Elbar summarily states that "[t]he evidence is uncontroverted that Elbar made a contract in its name to purchase the Property for the benefit of those who provided the funds." [Adv. Doc. No. 217 at 28 of 35, ¶ 60].
This Court rejects any effort to categorize Elbar's Exhibit Number 20 as a contract. [See Pl.'s Ex. 20]. This document is a receipt for the Purchasers' tender of the eleven cashier's checks on October 4, 2016. Bustamante himself identified Elbar's Exhibit Number 20 as a receipt given by Shum for the highest bid at the foreclosure sale. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 55:20-56:7]. Further, there is nothing from the face of the document that it intends to serve any other purpose than a receipt. [See Pl.'s Ex. 20]. Finally, Elbar's witness and exhibit list presented to this Court at the start of the trial in this adversary proceeding identifies this document as "Shum Receipt"-not as a contract.
Specifically, the Deed of Trust requires that the trustee "[s]ell and convey all or part of the Property to the highest bidder for cash with a general warranty binding Grantor[.]" [Pl.'s Ex. 14].
The: (1) receipt Shum provided to Twyman on October 4, 2016, for the tender of the eleven cashier's checks, [Pl.'s Ex. 20]; (2) the email exchange between Bustamante and Abdullatif on October 6, 2016, discussing how the wire transfer of the $2.4 million should be sent and then Abdullatif confirming with Bustamante that he in fact sent the wire, [Pl.'s Ex. 31]; (3) the Wire Transfer of Funds Notice from Allegiance Bank indicating that a wire transfer of $2.4 million was sent from Abdullatif's account to the IOLTA, [Pl.'s Ex. 32]; and (4) the account statement from the IOLTA showing it received an incoming wire transfer from Abdullatif in the amount of $2.4 million on October 6, 2016, represent written communications showing that the cash (i.e., the $2.4 million) was tendered.
The Court emphasizes that although there is no written contract, the documents surrounding the sale (the Deed of Trust, the notice of sale, and the tender of purchase money) are sufficient to satisfy the statute of frauds.
The Court finds that for this particular foreclosure sale (i.e., the one held on October 4, 2016), this arrangement between Elbar and the Purchasers constitutes an oral agreement between Elbar and the Purchasers as to how the Property would be purchased, as to how the Property would be titled, and as to what percentage of interest in the Property any one Purchaser would hold. Indeed, Bustamante credibly testified as his deposition as follows:
Q: And is there an agreement in place that that was the entity [i.e., Elbar] that you and Osama [Abdullatif] and Mr. Jabbour were going to use to purchase, or attempt to purchase, the Holly Springs property?
A: Yes.
Q: Oh, there is?
A: Yes.
Q: Okay. Is it a written agreement?
A: No.
Q: Okay. So it's just this verbal agreement that we're talking about.
A: The custom we've used for years.
[TransWorld's Ex. II, Bustamante Dep. 173:3-17].
The Court notes that Federal Rule of Civil Procedure 19 does not require that the Purchasers, as third party beneficiaries, be joined as required parties. See Trammell Crow Residential Co. v. Am. Prot. Ins. Co. , No. 3:11-CV-2853-N,
In its post-trial brief, Elbar argues that neither TransWorld nor Industry Drive has standing to assert any affirmative stay violation allegation against Elbar. [Adv. Doc. No. 217 at 31-32 of 35, ¶¶ 68-73]. Elbar is mistaken, however, as neither TransWorld nor Industry Drive has asserted any "claim" for a stay violation against Elbar; rather, Industry Drive and TransWorld persuasively argue that Elbar's violation of the automatic stay should be considered in any weighing of the equities this Court undertakes in evaluating Elbar's claims for money had and received, equitable subrogation, and unjust enrichment.
The Court notes that Bustamante tried to characterize the wire transfer of the $2.4 million to the IOLTA as merely a replacement of the earlier attempted tender of the eleven cashier's checks. [Adv. Doc. No. 220, Feb. 6, 2018, Trial Tr. 59:5-14, 89:23-25]. The Court finds this testimony to be disingenuous. Bustamante eventually admitted that by wiring the $2.4 million, the Purchasers acted with the goal to protect Elbar's ability to complete the purchase of the Property. [Id. at 133:13-134:10]. As discussed above, any action taken to complete the purchase of property of the bankruptcy estate is "an act to obtain possession of property of the estate" that constitutes a violation of the automatic stay.
In re Lile ,
Bustamante testified that he thought either (1) the stay would be annulled and the Purchasers would receive a deed to the Property; or (2) the stay would not be annulled and the Proceeds would be returned to the Purchasers. [Adv. Doc. No. 220, Feb. 6, 2018, Trial. Tr. 96:25-97:4, 133:13-25, 135:2-6; TransWorld's Ex. II, Bustamante Dep. 190:6-17, 194:13-19]. Either option seemed acceptable to Bustamante and wiring the $2.4 million (i.e., violating the stay) was just something the Purchasers had to do to preserve their claim to the Property. [Adv. Doc. No. 220, Feb. 6, 2018, Trial. Tr. 89:19-21, 133:13-134:10, 135:19-25; TransWorld's Ex. II, Bustamante Dep. 82:10-83:3].
Just to serve as a small example, Twyman-while serving as counsel for various home lenders in consumer bankruptcies-filed motions for relief from the automatic stay on multiple occasions. See, e.g. , In re Jerrard C. Williams , Case No. 02-31110, S.D. Tex., Doc. No. 37; In re Clarence Richard Dalrymple , Case No. 02-33496, S.D. Tex., Doc. No. 17; In re Girlena M. Buchanan , Case No. 02-37054, S.D. Tex., Doc. No. 30.
Even though Elbar was not mentioned as a party in Bustamante v. Cueva (In re Cueva) ,
The Court recognizes that Shum, who was an associate at the Prins Law Firm and took instructions from and was completely supervised by Prins, actually held the foreclosure sale pursuant to Prins' instructions; thereafter, however, Shum did not knowingly take any actions to assist Prins in violating the law, including but not limited to stealing the Proceeds. Thus, this Court's analysis of actual and apparent authority is focused on the relationship that Prins-not Shum-had with United Sentry. The Court emphasizes that the evidence does not in any way indicate that Shum knowingly took part in assisting Prins in violating the law, including his theft of the Proceeds and numerous attempts to cover up his use of these monies.
The Court recognizes that: (1) the Deed of Trust appointed Prins or Shum as the substitute trustee; and (2) it was Shum who was present in Houston and held the foreclosure sale on the Property. [Finding of Fact No. 30]. Shum was nevertheless an associate at the Prins Law Firm and even though Shum was conducting the sale, she conducted the sale under Prins' direction and supervision, and was in constant contact with Prins regarding the sale. [TransWorld's Ex. HH, Prins Dep. 210:24-211:14]. It is no coincidence that all of the emails regarding the foreclosure sale exchanged with MacKenzie and with Elbar include both Prins and Shum as recipients. [See, e.g. , Pl.'s Exs. 19, 22-23].
The Court notes that at trial, MacKenzie credibly testified that he did not authorize Prins to misappropriate or steal the Proceeds. [Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 88:12-16, 92:2-11, 256:23-25].
Specifically, the Deed of Trust provides for a fee to the trustee as follows:
If requested by Beneficiary to foreclose this lien, Trustee shall:
...
3. From the proceeds of the sale, pay, in this order:
a. expenses of foreclosure, including a normal hourly fee to the Trustee [.]
[Pl.'s Ex. 14] (emphasis added).
Prins testified that when he transferred the $2.0 million into the Wells Fargo Operating Account on October 18, 2016, he did not yet have the intention to leave for an overseas vacation. [Finding of Fact No. 47(A) ]. Prins later testified that as of October 19, 2016, he was contemplating the trip overseas. [Finding of Fact No. 47(A) ]. Later still, Prins testified that as of October 21, 2016, he had not made the decision to travel overseas but had made the decision to "shut down the practice and leave." [Finding of Fact No. 47(A) ].
It is likely that after the conclusion of the foreclosure sale of the Property and the transfer of the Proceeds to the IOLTA, Prins realized that the Proceeds would be "tied up" for a matter of time due to the Debtor's bankruptcy, and he saw these circumstances as an opportunity to use the Proceeds for his own use.
The Court notes that Texas Civil Practices & Remedies Code § 134.004 provides that: "A suit under this chapter may be brought in the county where the theft occurred or in the county where the defendant resides." Here, Prins' theft occurred in Bexar County, Texas, and this is the same county where Prins resided before being incarcerated. Yet, Elbar filed this adversary proceeding in the Houston Division of the Southern District of Texas, a District that does not include Bexar County. However, no challenge to the venue of this adversary proceeding has been made. Because venue is not jurisdictional, it may be waived. See Tex. R. Civ. Pro. 86(1) ("An objection to improper venue is waived if not made by written motion filed prior to or concurrently with any other plea, pleading or motion ...."); Gordon v. Jones ,
The record from the trial reflects that $2.4 million was wired into the IOLTA, and that Prins unquestionably transferred $2.0 million from the IOLTA to the Wells Fargo Operating Account and another $300,000.00 to the BBVA Operating Account. [Finding of Fact Nos. 40, 47, 57]. The record is unclear as to what Prins did with the remaining $100,000.00 of the $2.4 million. The lack of a record on this particular point does not in any way reduce the amount to which Prins is liable to Elbar. Indeed, in the Prins' Criminal Case, he was ordered to pay the entire $2.4 million to Elbar as restitution, so this Court's ruling is entirely consistent with the order in the Prins' Criminal Case.
Specifically, Battaglia stated that: "After consultation last night with counsel and my client, we don't believe the evidence that came in in this record would be sufficient on appeal to sustain a claim against Mr. Donald Anthony MacKenzie." [Adv. Doc. No. 222, Feb. 8, 2018, Trial Tr. 7:11-14].
Elbar is wrong on the law. In the Fifth Circuit, "actions taken in violation of an automatic stay are not void , but rather ... they are merely voidable , because the bankruptcy court has the power to annul the automatic stay pursuant to section 362(d)." Barnes v. Barnes (In re Barnes) ,
Citing Murray v. Cadle Co. ,
The Court is aware that at least one Texas court has analyzed the "negligence" factor according to the word's strict legal definition. See Babu ,
Bustamante's testimony that Elbar has, on multiple occasions, paid a purchase price at a foreclosure sale with full knowledge of a bankruptcy, [Finding of Fact No. 41], demonstrates the little regard Elbar holds for complying with the Bankruptcy Code and abiding by the automatic stay.
The Court notes that courts other than the court in Kaleta , No. 4:09-3674,
At the time of the foreclosure sale, there were also ad valorem tax liens on the Property. The record is unclear as to whether Elbar had notice of these tax liens. Unlike the lien held by United Sentry-which remains unpaid pending the outcome of this lawsuit-the tax liens were paid when the Trustee, with this Court's approval, sold the Property in the Main Chapter 7 case. [See Main Case. Doc. No. 209].
Presently in the registry of the Court is the amount of $1,719,062.93 (plus interest that has accrued since the funds were deposited in the registry). These funds were deposited into the registry of the Court by the Trustee after the sale of the Property. [See footnote 56]. If this Court holds that Elbar is subrogated to United Sentry, then Elbar would necessarily receive the amount of $716,084.58, thus making Elbar whole because it has already recovered the other $1,683,915.42. [Finding of Fact No. 114]. Thus, there would be $1,002,978.35 remaining for distribution to United Sentry, which amounts to United Sentry collecting 63.9% of its claim, as demonstrated by the mathematical calculation below:
$1,002,978.35 (the amount left in the Court's registry if Elbar is subrogated to United Sentry's claim)
÷
$1,568,782.76 (the amount of United Sentry's proof of claim).
=
63.9%
Application of the unclean hands defense under Texas law also requires that the party relying on the doctrine show that she herself suffered because of the other party's conduct. Kinsel v. Lindsey ,
The Court reiterates that at the point that MacKenzie chose Prins to serve as the substitute trustee, based on Prins' 20 plus years of providing intermittent legal services for MacKenzie, MacKenzie had no reason to think that Prins would behave unethically. [Finding of Fact No. 13].
TransWorld cites H.E.B., L.L.C. v. Ardinger ,
The Court notes that it is applying this factor from TransWorld's point of view, as it believed the facts to be at the time Prins delivered the $164,807.29. In reality, Prins had not negotiated any settlement at all with the Tax Assessor. [Finding of Fact No. 50]. If the Court considers this factor from Prins' point of view-that is, no settlement was being made and Prins was attempting to return the $169,807.29 TransWorld had given him a number of months prior-then the result is the same: he did not give these funds to TransWorld in its "due course of business."
The Wasserteil Motion for Relief from Stay was filed in the Prins' Bankruptcy on October 28, 2016. [Pl.'s Ex. 37]. In the Motion for Relief from Stay, the Wasserteil Estate alleged that Prins refused to turn over money that belonged to a former client of Prins. [Id. ]. Specifically, Jose Wasserteil was a former client of Prins for ten years. [Id. ]. Mr. Wasserteil died in June 2013; subsequent to Mr. Wasserteil's death, a limited partnership that Mr. Wasserteil had owned an interest in when he was alive made a distribution to its limited partners, which included a distribution to the (now deceased) Mr. Wasserteil. [Id. ]. Since a probate proceeding had not been filed at the time of the distribution, eventually the majority of the money from the distribution was wired to the IOLTA ($360,902.26), to be held by Prins until a probate proceeding was established. Mr. Wasserteil's estate was subsequently established and counsel for the Wasserteil Estate requested the $360,902.26 from Prins. [Id. ]. Prins agreed to deliver the money to the Wasserteil Estate, but never followed through with the delivery. [Id. ]. The Wasserteil Estate then filed the Motion for Relief from Stay, arguing that the $360,902.26 is not part of Prins' bankruptcy estate. [Id. ].
William and Karen Ozer, former clients of Prins and the Prins Law Firm, filed a complaint initiating an adversary proceeding in the Prins' Bankruptcy on or around November 4, 2016. [Pl.'s Ex. 38]. In their complaint, the Ozers allege that during the seven years that Prins represented them in a civil lawsuit in San Antonio, Texas, Prins repeatedly lied to them about the status of their lawsuit. [Id. ]. In furtherance of his lies, the Ozers allege that Prins: (1) forged court documents, including judicial opinions and final judgments, from state and federal judges; (2) forged numerous communications from various elected and appointed officials, including state court judges, federal court judges, a former San Antonio mayor, and the United States Attorney General; (3) claimed to have received over $1.6 million in settlement funds for the Ozers but never disbursed the settlement money; (4) failed to disclose to the Ozers that he had filed for personal bankruptcy; (5) after filing for bankruptcy, executed a $1.6 million promissory note in favor of the Ozers; and (6) failed to disclose the promissory note in his bankruptcy schedules. [Id. ]. The Ozers allege that Prins began forging court documents as early as April of 2011. [Id. ]. In their adversary proceeding, the Ozers bring claims for common law fraud, breach of fiduciary duty, the Texas Theft Liability Act, conversion, Online Impersonation, and an objection and an exception to discharge under the Bankruptcy Code. [Id. ].
The Court notes that at various points in its briefs, TransWorld characterizes the "consideration" that was exchanged was in payment on behalf of the debt (1) Prins owed to TransWorld [Adv. Doc. 216, at 38 of 43; Adv. Doc. No. 225, at 8 of 23, ¶ 22]; (2) TransWorld owed the Tax Assessor [Adv. Doc. 216, at 37, 38 of 43]; and (3) as both settlement of the tax issue and "return of the funds Prins owed TransWorld." [Adv. Doc. No. 216, at 32 of 43]. Prins, however, did not owe any debt to TransWorld; the only debt in play was the debt TransWorld owed to the Tax Assessor. From TransWorld's point of view at the time, Prins was acting as a conduit for the monies TransWorld owed to the Tax Assessor; TransWorld never adduced any testimony that it believed that Prins, personally , owed TransWorld some type of debt.
In truth, Prins did not enter any kind of settlement with the Tax Assessor on behalf of TransWorld and/or the Cashes. [Finding of Fact No. 50]. Prior to transferring the $164,807.29 to TransWorld on October 21, 2016-which was $5,000 less than the $169,807.29 TransWorld had given Prins on May 17, 2016, in order for Prins to negotiate the issues with the Tax Assessor, hence where the difference of $5,000.00 came from-Prins told the Cashes that he had settled with the Tax Assessor on TransWorld's behalf for $5,000.00. Prins, however, did not, negotiate any $5,000.00 settlement with the Tax Assessor. [Finding of Fact No. 50]. What he told TransWorld was simply a bald-faced lie.
Elbar does not address TransWorld's forbearance argument, but this Court does infra at Section IV.E.1.b.i.1.c.
Bank of Saipan v. CNG Fin. Corp. ,
Bank of Saipan ,
Prosper Bank v. Comerica Bank, N.A. (In re Hwang) ,
The Court notes that there are prior published opinions involving Elbar and/or Bustamante holding that foreclosure sales in these particular cases were void because they were held in violation of the stay. See In re Cueva ,
As discussed in footnote 19, based on the proof of claim Elbar filed in the Debtor's Main Chapter 7 case setting forth that Elbar believed the Property was worth $3.5 million, the Purchasers stood to make a $1.1 million profit on their investment in the Property, or a 45.8% return on their investment.
In his own case (the Prins' Bankruptcy), the filings by the Ozers and Wasserteil Estate show that Prins was lying and cheating not just TransWorld, but also other clients. [See Pl.'s Exs. 37-38]. Notably, in the complaint in the adversary proceeding filed by the Ozers, the Ozers allege that Prins had forged court orders and government documents as early as April of 2011. [Pl.'s Ex. 38].
Prins not only created false letters, but he also (1) forged false screenshots that he sent to MacKenzie in order to deceive MacKenzie about the amount of funds in the IOLTA; (2) created a false BBVA Compass Bank employee named "Levon Martin" and then pretended to be "Levon Martin" in a phone call with MacKenzie in order to convince MacKenzie that the IOLTA still held the Proceeds; and (3) created a false email from "Levon Martin" that followed up on the phone call with MacKenzie, again (falsely) confirming the amount of funds in the IOLTA. [Finding of Fact Nos. 66, 69, 71-72, 74-75].
The motion for relief from stay was filed on October 28, 2016. [See Todd A. Prins and Paula R. Prins , Case No. 16-52187-cag, Bankr. W.D. Tex., ECF. No. 14].
The Ozer Adversary was filed on November 4, 2016. [See Ozer v. Prins , Case No. 16-05090-cag, Bankr. W.D. Tex., ECF. No. 1].
If TransWorld had received the complaint in the Ozer Adversary and the Wasserteil motion to lift stay, then this Court would be more receptive to Elbar's argument. However, there is no evidence that TransWorld did in fact receive notice of these filings.
TransWorld's failure to pay taxes was not a blatant violation of the law; it had a legitimate dispute with the Tax Assessor and hired Prins to negotiate a settlement. [Finding of Facts Nos. 2-3].
The Court notes that Industry Drive makes this argument in the "conversion" section of its post-trial brief, [Adv. Doc. No. 226, at 4 of 12]; the Court, however, will consider it as part of Industry Drive's rebuttal to Elbar's claim for money had and received, since it is a defense to a claim for money had and received as well.
Gabriel testified that she could not remember the name of the individual and/or entity that Prins had "issues" with. [See supra footnote 34]. At his deposition, Prins testified that once Gabriel learned about the Ozer adversary, she no longer wanted Prins holding the $300,000.00. [TransWorld's Ex. HH, Prins Dep. 29:7-12]. The Court does not give any weight to Prins' account, as Prins does not have personal knowledge of what Gabriel knew or did not know. Further, the actual identity of the individual(s) or entity that Prins had an "issue" with and that Gabriel was sent information about does not matter, as Gabriel did not read the document that was sent to her; instead, she depended on the advice of the attorney at the Pulman Law Firm that she should be concerned about Prins, without reading the attached document. [See supra footnote 34].
The Court again notes that Industry Drive makes this argument in the "conversion" section of its post-trial brief [see Adv. Doc. No. 219 at 13 of 16]; the Court, however, will consider it as part of Industry Drive's rebuttal to Elbar's claim for money had and received, since it is a defense to a claim for money had and received as well.
Bank of Saipan ,
Bank of Saipan ,
In re Hwang ,
It is not clear whether the attorneys' fees that were being paid out of the Industry Drive account holding the $300,000.00 were related to the Pfirrmann Lawsuit, to the instant adversary proceeding, to legal work totally unrelated to either the Pfirrmann Lawsuit or the instant adversary proceeding, or some combination of the three. [See Adv. Doc. No. 221, Feb. 7, 2018, Trial Tr. 133:8-11, 136:13-137:15].
The Court notes that there are prior published opinions involving Elbar and/or Bustamante holding that foreclosure sales in these particular cases were void because they were held in violation of the stay. See In re Cueva ,
As discussed supra in footnote 19, based on the proof of claim Elbar filed in the Debtor's Main Chapter 7 Case which set forth that Elbar believed the Property was worth $3.5 million, the Purchasers stood to make a $1.1 million profit on their investment in the Property, or 45.8% return on their investment.
Prins' "issue" is discussed more in depth supra at footnote 34.
As previously discussed supra at footnote 34, Gabriel testified that she could not remember the name of the individual and/or entity that had Prins had "issues" with. At his deposition, Prins testified that once Gabriel learned about the Ozer adversary, she no longer wanted Prins holding the $300,000.00. [TransWorld's Ex. HH, Prins Dep. 29:7-12]. The Court does not give any weight to Prins' account, as Prins does not have personal knowledge of what Gabriel knew or did not know. Further, the actual identity of the individual(s) or entity that Prins had an "issue" with and that Gabriel was sent information about does not matter, as Gabriel did not read the document that was sent to her; instead, she depended on the advice of the attorney at the Pulman Law Firm that she should be concerned about Prins, without reading the attached document. [See supra footnote 34].
See In re Ritz ,
As aptly noted by District Judge David C. Godbey in the Northern District of Texas:
Given this varied authority [on whether unjust enrichment is an independent cause of action under Texas law], some Texas courts have read claims for "unjust enrichment" as pleading an equitable common law claim for money had and received. Indeed, the two claims are extremely similar. The Court thus refuses to dismiss [the party]'s unjust enrichment claim solely on the basis that some courts hold that it is not an independent cause of action. Under this varied history, the Court here chooses to analyze [the party]'s claims under both the substantive unjust enrichment and money had and received standards.
David O. Kemp, P.C. v. Nationwide Agribusiness Ins. Co. , No. 3:11-cv-1745-N,
Elbar admits that it cannot show that TransWorld or Industry Drive received a benefit through any fraud or duress on their part. [See Adv. Doc. No. 222, Feb. 8, 2018, Trial Tr. 147:7-15; Adv. Doc. No. 228 at 6 of 19, ¶ 13; Adv. Doc. No. 230 at 3 of 19, ¶ 6]. Hence, Elbar restricts its argument that they obtained a benefit by the taking of an undue advantage.
As already discussed above, the Court rejects TransWorld's first argument and will substantively analyze Elbar's claim for unjust enrichment.
The Court notes that most of the Texas courts and federal courts applying Texas law that analyze the term "unconscionable" do so either under the Texas Deceptive Trade Practices Consumer Protection Act (of which "unconscionable" is statutorily defined) or as to whether the terms of a particular contract are unconscionable as that term has been discussed in case law. Although the court in Wernecke v. W-Bar Ranches, Ltd. , was discussing the term "unconscionable" as it relates to contracts, this Court finds the Wernecke court's comments helpful in its analysis in the suit at bar:
"Unconscionable" is generally defined as "shockingly unfair or unjust." MERRIAM WEBSTER'S COLLEGIATE DICTIONARY 1286 (10th ed. 1996). However, Texas courts have held that the term carries no precise legal definition. Besteman v. Pitcock,272 S.W.3d 777 , 787 (Tex. App.-Texarkana 2008, no pet.) ; Arthur's Garage, Inc. v. Racal-Chubb Sec. Sys.,997 S.W.2d 803 , 815 (Tex. App.-Dallas 1999, no pet.). "Unconscionability is to be determined in light of a variety of factors, which aim to prevent oppression and unfair surprise ...." In re Poly-America, L.P.,262 S.W.3d 337 , 348 (Tex. 2008) (orig. proceeding).
No. 13-12-00782-CV,
It must be remembered that TransWorld has been harmed, at a minimum, in the amount of $5,000.00, which is the difference between the $169,708.29 it gave to Prins and the $164,807.29 he returned to TransWorld. There is no question that Prins told TransWorld that the $5,000.00 difference represented the amount he paid to the Tax Assessor to settle the tax issues that TransWorld had. However, this Court has already found that there was no such settlement and that Prins' representation to TransWorld was a bald-faced lie. [Finding of Fact No. 50]. Therefore, he unquestionably harmed TransWorld by $5,000.00. Moreover, it is quite likely that TransWorld has suffered substantially more harm than $5,000.00 because it is presently in a dispute with the same Tax Assessor, who alleges that TransWorld owes past due taxes totaling half a million dollars. It it worth emphasizing that TransWorld not only gave Prins $169,807.29 in May of 2016, but also $230,853.66 in February of 2008, and Prins never accounted for this latter sum-leading this Court to believe that Prins stole all or some of the $230,853.66 and therefore further damaged TransWorld in that its tax liability increased substantially as penalties and interest accrued.
Examples of specific chattel would include certain coins or a certificate of deposit. Jaffer v. Aviel , No. 3:13-CV-1674-G,
On September 12, 2018, this Court orally announced on the record its ruling regarding the adversary proceeding, and informed the parties that it would subsequently be entering this Memorandum Opinion on the docket to explain its ruling in detail. In issuing its oral ruling, the Court set forth deadlines for counsel to deliver invoices representing the reasonable fees and costs. In fact, counsel for MacKenzie and United Sentry timely delivered its invoices to counsel for Elbar and, in the aggregate, seeks to recover fees and costs of $60,725.00 and $1,851.45, respectively. [See Adv. Doc. No. 249].
After this Court issued its oral ruling on September 12, 2018, Elbar's counsel subsequently filed a certificate expressly setting forth that Elbar waives its attorneys' fees and expenses for prosecuting its TTLA claim against Prins. [See Adv. Doc. No. 250]. Hence, the judgment will set forth that Elbar shall recover only $716,084.58 from Prins.
Reference
- Full Case Name
- IN RE: Oluyemisi Omokafe OKEDOKUN, Debtor. Elbar Investments, Inc. v. Oluyemisi Omokafe Okedokun, Felix Amos, Eva S. Engelhart, Chapter 7 Trustee, Todd A. Prins, United Sentry Mortgage Investment Fund 1, LLC, Donald Anthony MacKenzie, TransWorld Leasing Corporation, and Industry Drive Partners, Ltd.
- Cited By
- 13 cases
- Status
- Published