Trinity Gas Corp v. Taylor, et al

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 00-11194
TRINITY GAS CORP.
Plaintiff-Appellant
VERSUS
HENRY COOK TAYLOR, ET AL;
Defendants,
HENRY COOK TAYLOR and GEORGIE CAYER TAYLOR,
Defendants-Appellees.
Appeal from the United States District Court
For the Northern District of Texas
January 4, 2002
Before KING, Chief Judge, DUHÉ and BENAVIDES, Circuit Judges.
DUHÉ, Circuit Judge:
Trinity Gas Corporation sued to undo the redemption of the
sale of a residence by defendants Henry and Georgie Taylor to the
Serses, alleging that the redemption was in fraud of creditors and
violated a court order. The district court dismissed on the
Taylors’ Rule 12 motion. For the following reasons, we AFFIRM.
BACKGROUND
In May 1997 Defendants Henry and Georgie Taylor transferred
title to their Natchitoches, Louisiana residence to Sidney and

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2
Patricia Sers by an Act of Exchange. The consideration was 600,000
shares of Trinity Gas Corporation (“Trinity”) stock. Sidney Sers
was then the Chief Executive Officer and Chairman of the Board of
Plaintiff Trinity. The Act of Exchange gave the Taylors a lease-
back of the home and a right of redemption exercisable if Trinity
stock was trading for less than one dollar on the one-year
anniversary date of the Exchange. The Taylors timely exercised
their right of redemption.
During the intervening year, in an action by the Securities
and Exchange Commission (“SEC”) (based on Sidney Sers’ defrauding
public investors regarding Trinity’s prospects), the Serses and
others were enjoined from disposing of the Serses’ or Trinity’s
assets. Also during that year, Trinity filed for Chapter 11
bankruptcy protection.
Trinity filed this action seeking to undo the Serses’
“transfer” of the residence to the Taylors, or to obtain its value
from the Taylors, alleging violation of a court order, fraudulent
transfer, and civil conspiracy. The district court dismissed all
counts, noting preliminarily that Trinity never owned an interest
in the Taylor home and was not a party to the Taylors’ exchange
agreement with the Serses.
We review the Rule 12 dismissal de novo, construing the
complaint in the light most favorable to the plaintiff. Rubinstein
v. Collins, 20 F.3d 160, 166 (5th Cir. 1994). Accepting as true

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1 We do not believe the district court dismissed Count 1 based
on standing or privity and find the issues of privity, FRCP 71, and
standing obfuscated in the arguments on appeal. While the district
court mentioned privity in its opening remarks, privity was
pertinent only to its dismissal of Count 6, avoidance of the
exchange agreement.
The parties discuss Rule 71, pertinent to a non-party’s rights
to enforce orders, in connection with the question of Trinity’s
standing. The temporary restraining order issued in the SEC action
originally enjoined Trinity as a party (as well as the Serses) from
disposing of assets. Trinity subsequently began operating under a
Plan of Reorganization, which binds the SEC and recognizes that the
district court in the SEC action would be apprised that the SEC and
reorganized Trinity were not adverse to each other. The permanent
injunction entered in the SEC action was not against Trinity.
Rather, the SEC action eventually included an order that the
millions of dollars the Serses owed in disgorgement were to be paid
directly to Trinity as distribution agent. We refuse to read Rule
71 which provides a procedure for non-parties as restricting
Trinity’s right to proceed with its claims in this action.
Rule 71 does nothing to disturb the threshold requirement of
standing to sue, a jurisdictional issue. Moore v. Tangipahoa
Parish Sch. Bd., 625 F.2d 33, 34-35 (5th Cir. 1980). Plaintiff has
standing, having a sufficient “personal stake in the outcome of the
controversy,” Arlington Heights v. Metropolitan Hous. Dev. Corp.,
3
the well-pleaded facts of the complaint, we affirm the dismissal,
holding that Plaintiff can prove no set of facts in support of the
allegations which would entitle it to relief.
I. Count One: Violation of Court Order.
Trinity first complains that the Taylors’ redemption of the
property previously conveyed to the Serses violated the injunction
in the SEC action. The district court dismissed this count,
concluding that contempt was the proper remedy to enforce the
injunction, and that the government, not Trinity, would be the
proper party to bring such an action. Our ruling rests on grounds
distinct from those of the district court.1

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429 U.S. 252, 261 (1977), in protecting its position as judgment
creditor of the Serses, whom it alleges have illegally disposed of
valuable assets. Both Texas and Louisiana law provide a cause of
action for a creditor to avoid prejudicial transactions in which
its debtor has engaged with a third person. Tex. Bus. & Com. Code
Ann. §§ 24.008 (Vernon 1987); La. Civ. Code Ann. arts. 2038-42
(West 1987).
4
Before the SEC obtained its injunction, the Serses held title
to the property subject to the lease-back and subject to the
Taylors’ right of redemption. Although Trinity asserts that the
Serses had “record” title, they did not have unencumbered property.
Louisiana law follows the first-in-time rule of priority, based on
when instruments burdening real estate are filed in the parish
records. La. Rev. Stat. Ann. §§ 9: 2721, 2756 (West 1991 & West
Supp. 2001). The Taylors’ right of redemption, contained within
the same instrument by which the Serses acquired the property,
encumbered the property from the moment the Serses acquired the
property. The right of redemption affects third parties from the
time of the filing of the instrument that contains the right. See
La. Civ. Code Ann. art. 2572 (West 1996) (emphasis added).
The Serses would not have held an unconditional or absolute
title until the lapse of the time within which the Taylors had a
reserved right to take back the thing exchanged. La. Civ. Code
Ann. art. 2570 (West 1996); Brooks v. Broussard, 136 La. 380, 384,
67 So. 65, 66 (1914). Regardless of the prohibitions in the
injunction, the Taylors’ right to recover the property (and the
Serses’ obligation to honor that right) pursuant to the Act of

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2 The district court correctly applied Louisiana law. Trinity
contends that under Texas choice-of-law precepts, the district
court should have used a “most significant relationship” test, or
5
Exchange existed before the injunction was entered. “The seller
who exercises the right of redemption is entitled to recover the
thing free of any encumbrances placed upon it by the buyer.” La.
Civ. Code Ann. art. 2588 (West 1996).
Even if Trinity had succeeded in recovering the property from
the Serses before the expiration of the right of redemption,
Trinity too would have held it subject to the Taylors’ right to
reclaim the property free from other claims under the right of
redemption, which is a resolutory condition. The Taylors’ right to
exercise their redemption and reclaim the property primes any
rights acquired by later judgments or judgment creditors.
Under no set of facts could Trinity prove that it could have
proceeded against the property to satisfy its claims and judgments.
II. Counts Two, Three and Four: Fraudulent Transfer.
Trinity complains that the Taylor’s redemption of the property
from the Serses is avoidable as a transfer made to defraud the
Serses’ creditors, or made without the Serses’ receiving reasonably
equivalent value, and made while the Serses were insolvent. Tex.
Bus & Com. Code Ann. §§ 24.005(a)(1) & (2), 24.006(a) (Vernon 1987
& Supp. 2000). The district court dismissed the fraudulent
transfer counts in part because no transfer from the Serses to
Taylor occurred under Louisiana law.2 We agree.

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allowed it to amend its complaint to assert the similar avoidable-
transfer claims actionable under the Civil Code. Regardless of
which state’s law applies to determine status as a creditor to
avoid a fraudulent transfer, we look to Louisiana law, specifically
Civil Code article 2567 referenced in the exchange agreement, to
determine the nature of the right of redemption retained in the
instrument.
6
Under the Louisiana Civil Code, “The exercise of redemption
does not involve a new sale. When the right to redeem is
exercised, it effects a dissolution of the sale and of the transfer
of the property. . . .” La. Civ. Code Ann. art. 2567, comment (c)
(West 1996). A sale with a right of redemption is distinguished
from a resale by the very fact that the right to take back the
property is stipulated in the act of sale itself and not in a
subsequent act. Pitts v. Lewis, 7 La. Ann. 552, 552-53 (1852). No
new transfer occurred.
III. Count Six: Avoidance of the Exchange Agreement and Conveyance.
Count Six of the amended complaint asserts that the Taylors
failed to abide by the terms of the Act of Exchange within the time
limitations and seeks to set aside the conveyance from the Serses
to the Taylors based on lack of consideration.
Because, as we have stated, Louisiana law does not consider
the redemption a new conveyance, this argument assumes an attempted
redemption may be deficient in such a way that it is deemed a new
transaction. Trinity argues that the redemption should be set
aside because the right of redemption was not self-executing, that
is, certain conditions precedent in the Act of Exchange were never

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met: the Serses were to execute new deeds, the deeds were to be
quitclaim rather than warranty, the Taylors were to pay all the
rent under the lease-back, the Taylors were to return the 600,000
shares of Trinity stock to the Serses, and the Taylors were to post
a letter to the Serses at their last known address.
The Act of Exchange shows that the Taylors’ right of
redemption is conditioned solely on the stock price and is
exercisable by the posting of the notice via certified letter.
Both the condition precedent and the resolutory condition appear in
the following provision:
The Taylors are willing to accept the Stock in exchange
for the Real Estate Property subject to the Stock having
an average quoted bid price . . . of not less than $1.00
per share on any public stock exchange on which the Stock
is listed for sale at the close of trading on the
Anniversary Date. In the event the Stock should have an
average quoted bid price less than $1.00 per share at the
close of business on the Anniversary Date, the Taylors
shall have the right to redeem the Real Estate Property
for a period of thirty (30) days from the Anniversary
Date. It is expressly agreed and understood by the
parties hereto that the posting of the notice of
redemption by certified mail addressed to the Sers at
their last known residence address is a resolutory
condition which will automatically operate to dissolve
this Act of Exchange. In such event, the Taylors, shall
return the stock to the Sers.
Ex. A to Am. Complaint, para. 4 of Exchange Agreement (emphasis
added). A certified letter to the Serses stating the Taylors’
intent to redeem and offering to return the stock to them or their
designee is also appended to the complaint (ex. E). The sole
condition precedent of the redemption – the stock price on the

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3 Trinity also complains, not that the stock price was actually
more than $1.00 on the Anniversary Date precluding the redemption
(it was not), but that the Taylors never proved the stock price on
the Anniversary Date, as they should have been required to prove in
connection with their motion to dismiss. Because this objection
was never lodged in the district court, we will not entertain it
for the first time in this appeal.
4 The complaint did not ask the Taylors for return of the
Trinity stock but did seek to set aside the Act of Exchange and
conveyance because the shares were not returned to the Serses. It
appears undisputed that the Taylors stand ready to return the stock
upon receipt of appropriate instructions.
5 Regarding the deed, the exchange provides, “in the event the
Taylors exercise their right of redemption . . . the Sers shall
execute a Quitclaim Deed and Acknowledgment of Redemption . . .
when called upon to do so.” The deed is properly executed after
the Taylors exercised their right to redeem. As for the rent, the
agreement further recites that “additional consideration” given for
the exchange was that “the Sers have agreed to lease [the realty]
to the Taylors.” No defect in the redemption is shown by this
provision, even if no rentals were paid to the Serses. It matters
not whether the price of a redemption is higher or lower than the
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Anniversary Date – is not at issue.3 The resolutory condition
occurred when the letter was posted. Though Trinity complains that
Sidney Sers executed the deed from Cali, Columbia, where he was a
fugitive, on the same day the Taylors sent the certified letter to
him in Texas, nothing in the agreement requires proof that written
notice was delivered before execution of the instrument recognizing
that the property was redeemed.
The last sentence in the provision quoted above demonstrates
that the return of the stock is not a condition precedent but
rather occurs after the resolution of the exchange.4 Nor are the
execution of a deed and payment of rent conditions precedent to
exercising the right to redeem.5 Accordingly, the redemption was

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purchase price paid by the original vendee. La. Civ. Code Ann.
art. 2567, comment (d) (West 1996).
9
exercised by the posting of the notice, and placed the parties in
the same state as though the Exchange Agreement had never been
entered.
Under no circumstances could Trinity prove that any failure to
abide by the terms of the Act of Exchange entitles Trinity to
recover the real estate from the Taylors, or that their redemption
can be characterized as a new transfer from the Serses.
IV. Count Seven: Civil Conspiracy.
Trinity also alleges the Taylors’ involvement in a civil
conspiracy, by their agreeing to wrongfully and fraudulently
participate in the transfer of assets from the Serses in violation
of the injunctive orders and with a purpose to prevent the SEC,
Trinity, and its shareholders from recovering assets from the
Serses. As discussed above, plaintiff can prove no set of facts to
support the allegations of violation of injunction and unlawful
transfer or act. With no unlawful subject of the claimed
conspiracy, we affirm the dismissal of the civil conspiracy claim.
Schlumberger Well Surveying Corp. v. Nortex Oil & Gas Corp., 435
S.W.2d 854, 856 (Tex. 1968).
V. Conclusion.
In this case no violation of injunction occurred, nor any
transfer in fraud of creditors, nor any unlawful act to support the

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alleged conspiracy. The plaintiff being unable to support any
allegations which would entitle it to relief, the Taylors’ motion
to dismiss is well-taken. The judgment of the district court is
AFFIRMED.

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