James Poe and Senior Retirement Planners, LLC v. Eduardo S. Espinosa in His Capacity as Receiver of Retirement Value, LLC

ACCEPTED

03-14-00518-CV

4450891

THIRD COURT OF APPEALS

AUSTIN, TEXAS

3/11/2015 9:53:10 AM

JEFFREY D. KYLE

CLERK

NO. 03-14-00518-CV

IN THE COURT OF APPEALS FILED IN

3rd COURT OF APPEALS

THIRD DISTRICT OF TEXAS AUSTIN, TEXAS

AUSTIN, TEXAS 3/11/2015 9:53:10 AM

JEFFREY D. KYLE

Clerk

JAMES POE AND SENIOR RETIREMENT PLANNERS, LLC, Appellants

vs.

EDUARDO S. ESPINOSA, IN HIS CAPACITY AS RECEIVER OF

RETIREMENT VALUE, LLC, Appellee

Appeal from the 200th Civil District Court of

Travis County, Texas (Hon. Gisela Triana presiding)

APPELLANTS’ BRIEF

Respectfully submitted,

ALDRICH PLLC

Scott Lindsey

State Bar No. 24036969

1130 Fort Worth Club Tower

777 Taylor Street

Fort Worth, Texas 76102

Telephone: 817-336-5601

Facsimile: 817-336-5297

slindsey@aldrichpllc.com

ATTORNEY FOR APPELLANTS

APPELLANTS REQUEST ORAL ARGUMENT

IDENTITIES OF PARTIES AND COUNSEL

Appellants: James Poe and

Senior Retirement Planners, LLC

Attorney for Appellants: Scott Lindsey

Aldrich PLLC

1130 Fort Worth Club Tower

777 Taylor Street

Fort Worth, Texas 76102

Telephone: 817-336-5601

slindsey@aldrichpllc.com

Trial attorney for Appellants: Robert L. Wright (retired)

4501 Blue Lake Ct.

Fort Worth, TX 76103

Appellee: Eduardo S. Espinosa, in his

capacity as Receiver of

Retirement Value, LLC

Attorneys for Appellee: John W. Thomas

John R. McConnell

George, Brothers, Kincaid &

Horton, L.L.P.

114 W. Seventh, Suite 1100

Austin, TX 78701-3015

Telephone: 512-495-1400

jthomas@gbkh.com

jmcconnell@gbkh.com

ii

TABLE OF CONTENTS

I. IDENTITIES OF PARTIES AND COUNSEL ....................................... ii

II. INDEX OF AUTHORITIES .................................................................. v

III. STATEMENT OF THE CASE ........................................................... viii

IV. STATEMENT REGARDING ORAL ARGUMENT .............................. ix

V. ISSUES PRESENTED ........................................................................ x

VI. STATEMENT OF FACTS ................................................................... 1

A. Parties Relevant to this Appeal ................................................. 1

B. RV’s Life Settlement Program and RV’s Value.......................... 3

C. Plan of Distribution .................................................................... 5

D. Espinosa as Litigation Plaintiff ................................................... 6

E. Espinosa Collects Unallocated Settlement Proceeds ................ 9

F. Espinosa’s Motion for Summary Judgment Against Poe ........... 9

G. Poe Seeks Credit for Unallocated

James Settlement Proceeds .................................................... 11

H. Judgment and Appeal .............................................................. 11

VII. SUMMARY OF THE ARGUMENT .................................................... 12

VIII. ARGUMENT ..................................................................................... 14

Issue One: Proper allocation of the one-satisfaction rule

required that the trial court grant Appellants a settlement credit

for unallocated settlement proceeds of $5.5 million. Because

Appellants were found liable for an amount less than the

unallocated settlement proceeds, the trial court erred, as a

matter of law, by failing to render a take-nothing judgment in

Appellants’ favor.

A. Standard of Review ................................................................. 14

B. Applicable Law ........................................................................ 14

C. Applicable Facts ...................................................................... 16

D. Application of Law to Fact ....................................................... 19

E. Espinosa’s Trial Court Arguments Missed the Point................ 22

F. TUFTA Attorney Fee Award and Harmful Error ....................... 29

iii

Issue Two: The trial court abused its discretion by overruling

Appellants’ objections to Espinosa’s summary judgment

evidence.

A. Standard of Review ................................................................. 30

B. Argument ................................................................................. 30

1. Espinosa’s July 29, 2011 Affidavit .................................. 32

2. Espinosa’s May 1, 2013 Affidavit ................................... 35

3. Burchett May 1, 2013 Affidavit ....................................... 36

4. Reversible Error ............................................................. 37

Issue Three: The trial court erred by rendering summary

judgment for Espinosa on his TUFTA claim against Appellants

because Espinosa lacked standing and because genuine

issues of material fact existed for at least one element of each

of Espinosa’s TUFTA theories.

A. Standard of Review ................................................................. 38

B. Espinosa’s Grounds for Summary Judgment under TUFTA ... 38

C. Espinosa Lacks Standing to Recover Investor Money ............ 39

D. No Creditor has a Qualifying Claim under TUFTA................... 41

E. Insufficient Evidence of Insolvency .......................................... 44

1. Insolvency ...................................................................... 44

2. Value of Remaining Assets ............................................ 57

F. Reasonably Equivalent Value .................................................. 59

G. Actual Intent ............................................................................. 60

H. Ponzi Scheme Allegations ....................................................... 62

IX. PRAYER ........................................................................................... 64

X. CERTIFICATE OF COMPLIANCE.................................................... 66

XI. CERTIFICATE OF SERVICE............................................................ 66

XII. APPELLANTS’ APPENDIX ............................................................... 67

iv

INDEX OF AUTHORITITES

Cases

1. Akin, Gump, Strauss, Hauer and Feld, L.L.P. v. E-Court,

No. 03-02-00714-CV, 2003 Tex. App. LEXIS 3966

(Tex. App.—Austin May 8, 2003, no pet.) (mem. op.) ................ 39, 40

2. Austin Nursing Center, Inc. v. Lovato,

171 S.W.3d 845 (Tex. 2005) ............................................................. 40

3. Buccaneer Homes of Alabama, Inc. v. Pelis,

43 S.W.3d 586 (Tex. App.—Houston [1st Dist.]

2001, no pet.) ...................................................... 15, 19, 22, 23, 28, 29

4. Burrow v. Arce, 997 S.W.2d 229 (Tex. 1998) ............................. 32, 35

5. Caldwell v. State, 95 S.W.3d 563

(Tex. App.—Houston [1st. Dist.] 2002, no pet.) ................................ 63

6. Casso v. Brand, 776 S.W.2d 551 (Tex. 1989) .................................. 54

7. Cohen v. Arthur Anderson, L.L.P., 106 S.W.3d 304

(Tex. App.—Houston [1st Dist.] 2003, no pet.) ......... 14, 15, 16, 22, 28

8. Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378

(Tex. 2000) ............................................................... 15, 16, 22, 23, 27

9. Dalworth Restoration, Inc. v. Rife-Marshall,

433 S.W.3d 773 (Tex. App.—Fort Worth

2014, pet. dism’d w.o.j.) ................................ 14, 16, 20, 22, 23, 27, 28

10. Diversicare Gen. Partner, Inc. v. Rubio,

185 S.W.3d 842 (Tex. 2005) ............................................................. 38

11. E.I. du Pont de Nemours & Co. v. Robinson,

923 S.W.2d 549 (Tex. 1995) ................................................. 33, 35, 37

12. Fairfield Fin. Group, Inc. v. Synnott,

300 S.W.3d 316 (Tex. App.—Austin 2009, no pet.) .......................... 30

13. Galle, Inc. v. Pool, 262 S.W.3d 564

(Tex. App.—Austin 2008, pet. denied) ........................... 14, 21, 22, 28

14. Goldstein v. Morrison, 113 S.W.3d 769

(Tex. App.—Austin 2003, no pet.)..................................................... 63

15. Goodyear Tire & Rubber Co. v. Mayes,

236 S.W.3d 754 (Tex. 2007) ............................................................. 38

v

16. Goose Creek Consol. Indep. Sch. Dist.

of Chambers v. Jarrar’s Plumbing,

74 S.W.3d 486 (Tex. App.—Texarkana

2002, pet. denied) ........................................................... 23, 25, 26, 27

17. Gutierrez v. Cayman Is. Firm of Delloitte & Touche,

100 S.W.3d 261 (Tex. App.—San Antonio 2002, no pet.) ................ 63

18. Huckabee v. Time Warner Entertainment Co. L.P.,

19 S.W.3d 413 (Tex. 2000) ............................................................... 54

19. Manaham v. Meyer, 862 S.W.2d 130

(Tex. App.—Houston [1st Dist.] 1993, writ denied) ........................... 40

20. Mobil Oil Corp. v. Ellender,

968 S.W.2d 917 (Tex. 1998) ........................................... 15, 16, 19, 20

21. Neely v. Comm’n for Lawyer Discipline, 302 S.W.3d 331

(Tex. App.—Houston [14th Dist.] 2009, pet. denied) ........................ 30

22. Nixon v. Mr. Prop. Mgmt., 690 S.W.2d 546 (Tex.1985) .................... 38

23. Osborne v. Jauregui, Inc.,

252 S.W.3d 70 (Tex. App.—Austin

2008, pet. denied) (op. on reh’g) (en banc) .......................... 15, 22, 29

24. Owens-Corning Fiberglas Corp. v. Malone,

972 S.W.2d 35 (Tex. 1998) ............................................................... 30

25. Parker Barber & Beauty Supply, Inc. v.

Wella Corp., No. 03-04-00623-CV, 2006 Tex. App. LEXIS

8841 (Tex. App.—Austin Oct. 11, 2006, no pet.) (mem. op.) ............ 30

26. State Farm Fire & Cas. Co. v. S.S.,

858 S.W.2d 374, 380 (Tex. 1993) .............................................. 61, 62

27. Tex. Ass’n of Bus. v. Tex. Air Control Bd.,

852 S.W.2d 440 (Tex. 1993) ............................................................. 40

28. Tex. Capital Securities, Inc. v. Sandefer,

108 S.W.3d 923 (Tex. App.—Texarkana 2003, pet. denied) ............ 28

29. United Blood Servs. v. Longoria,

938 S.W.2d 29 (Tex. 1997) ....................................... 31, 32, 34, 35, 36

30. Utts v. Short, 81 S.W.3d 822 (Tex. 2002) ................................... 16, 20

31. Valence Operating Co. v. Dorsett,

164 S.W.3d 656 (Tex. 2005) ............................................................. 38

vi

32. Wein v. Sherman, No. 03-10-00499-CV, 2013 Tex. App. 10666

(Tex. App.—Austin Aug. 23, 2013, no pet.) (mem. op.) .................... 14

33. White v. Cole, 880 S.W.2d 292

(Tex. App.—Beaumont 1994, writ denied) ........................................ 40

Statutes

1. Tex. Bus. & Com. Code Ann. § 24.002 ............................................ 41

2. Tex. Bus. & Com. Code Ann. § 24.003 ............................................ 44

3. Tex. Bus. & Com. Code Ann. § 24.004 ............................................ 59

4. Tex. Bus. & Com. Code Ann. § 24.005

............................................... 2, 18, 37, 39, 41, 44, 57, 58, 59, 60, 61

5. Tex. Bus. & Com. Code Ann. § 24.006

............................................... 2, 18, 37, 39, 41, 44, 47, 57, 58, 59, 60

Rules

1. Tex. R. App. P. 39.1 .......................................................................... ix

2. Tex. R. App. P. 44.1 ................................................................... 30, 37

3. Tex. R. Civ. P. 166a ...................................... 30, 31, 32, 34, 35, 36, 38

4. Tex. R. Evid. 702 .............................................................................. 33

vii

STATEMENT OF THE CASE

NATURE OF THE CASE: Espinosa, as Receiver for Retirement

Value, LLC, sued Appellants Poe and

SRP and many others for the return of

investor money loaned to Retirement

Value for the purchase of life insurance

policies. [CR 614] As to Poe and SRP,

Espinosa sought the return of

commissions paid to them by

Retirement Value. [CR 614, 617, 705-

06] Poe and SRP asserted a general

denial and affirmative defenses. [CR

721-26]

COURSE OF THE

PROCEEDINGS: The trial court granted partial summary

judgment for Espinosa on his fraudulent

transfer claims against Poe and SRP.

[CR 1973; Appx Tab 1] Espinosa

nonsuited his remaining claim against

Poe and SRP. [CR 1983] The trial court

denied Poe and SRP’s motion to apply

settlement credits [CR 1989; 2 RR 38]

and severed Espinosa’s claims against

Poe and SRP. [CR 2133]

TRIAL COURT

DISPOSITION: The trial court signed the final judgment

on May 28, 2013. [1st Supp CR 3-5;

Appx Tab 2] Poe and SRP filed their

Motion to Modify the Judgment or

alternative Motion for New Trial on June

26, 2014, which was overruled by

operation of law. [1st Supp CR 6]

Appellants timely appealed on August

20, 2014. [1st Supp CR 64]

viii

STATEMENT REGARDING ORAL ARGUMENT

Appellants request oral argument pursuant to rule 39.1 of the rules of

appellate procedure. Although Appellants believe the facts and legal

arguments are thoroughly presented in this brief and in the record,

Appellants also believe that this Court’s decisional process will be

significantly aided by oral argument. Application of the one-satisfaction rule

should be simple, but oral argument will aid the Court in applying the rule in

this multi-party and multi-theory case. For Appellants’ other issues, the

record in this case is significant in size, and oral argument will aid the Court

in identifying the relevant portions of the record as well as the many

genuine issues of material fact that should have precluded summary

judgment.

ix

ISSUES PRESENTED

Issue One: Proper allocation of the one-satisfaction rule required that the

trial court grant Appellants a settlement credit for unallocated settlement

proceeds of $5.5 million. Because Appellants were found liable for an

amount less than the unallocated settlement proceeds, the trial court erred,

as a matter of law, by failing to render a take-nothing judgment in

Appellants’ favor.

Issue Two: The trial court abused its discretion by overruling Appellants’

objections to Espinosa’s summary judgment evidence.

Issue Three: The trial court erred by rendering summary judgment for

Espinosa on his TUFTA claim against Appellants because Espinosa lacked

standing and because genuine issues of material fact existed for at least

one element of each of Espinosa’s TUFTA theories.

x

STATEMENT OF FACTS

On May 5, 2010, the State of Texas filed suit against Retirement

Value, LLC (“RV”) and others alleging that they were selling unregistered

securities, engaging in securities fraud, and violating the Texas Deceptive

Trade Practices Act. [2nd Supp CR 72]1 The State sought appointment of a

receiver for RV, temporary and permanent injunctions, and restitution for

alleged participant-investor losses. [2nd Supp CR 72] Appellee Espinosa

was appointed as receiver for RV on that same date. [2nd Supp CR 72]

According to Espinosa, RV had assets totaling more than $179 million

($154 million in life insurance policies and $25 million in cash and

securities) at the time of the receivership and had obtained loan proceeds

of about $77 million from participant-investors. [2nd Supp CR 92-93]

A. Parties Relevant to this Appeal

Among the defendants and third-party defendants to the underlying

lawsuit are Ronald James, Donald James, Michael Beste, and James

Settlement Services, LLC (collectively, the “James Defendants”). [CR 613,

615] Espinosa has alleged that the James Defendants promoted the life

1

There are several volumes of the Clerk’s Record in this appeal. “CR” refers to

the original Clerk’s Record filed on September 26, 2014, “1st Supp CR” refers to the

Clerk’s Record filed on November 3, 2014, “2nd Supp CR” refers to the Clerk’s Record

filed on December 8, 2014, and “3rd Supp CR” refers to the Clerk’s Record filed on

December 24, 2014.

1

settlement model to RV, “participated or had the right to participate in

control of [RV],” and “played a key role in the organization and operation” of

RV. [CR 615, 665]

Appellants James Poe and Senior Retirement Planners, LLC

(“SRP”),2 Poe’s business entity, were not original parties to the lawsuit.

Espinosa eventually named them as third party defendants. Poe’s role was

limited to serving as an agent (called “Licensee” in the RV program) who

solicited participants for RV’s life settlement product. [CR 614, 617; 2nd

Supp CR 1029-31]

The trial court determined by summary judgment that Poe was liable

under TUFTA3 for the return of $485,564.13 in commissions that he

received from RV. [1st Supp CR 3-5] However, the evidence relating to the

fair value of RV’s overall assets and liabilities, including the dates on which

participants’ loans had to be repaid following maturation of the life

insurance policies, are central to Espinosa’s TUFTA claims against Poe.

Discussed below, those claims required that Espinosa prove, among other

things, that commission payments to Poe rendered RV insolvent or caused

RV to be unable to pay its debts as they came due.

2

References herein to “Poe” include both appellants collectively.

3

See Tex. Bus. & Com. Code Ann. §§ 24.005(a), .006(a).

2

B. RV’s Life Settlement Program and RV’s Value

Espinosa described the RV life-settlement program as follows in his

initial report to the trial court:

From April 2009 through March 29, 2010, Retirement

Value raised approximately $77 million from more than 900

investors through the sale of investments in its Re-Sale Life

Insurance Policy Program.

Each of the investments was structured as a loan to

Retirement Value, whereby the investors provided Retirement

Value with funds in exchange for Retirement Value’s promise to

pay a fixed sum of money at an undetermined date in the

future. The amount that Retirement Value agreed to pay was

tied to the calculated life expectancy of insureds under life

insurance policies purportedly owned by Retirement Value. In

all instances, Retirement Value agreed to pay a return of 16.5%

simple interest per year for the insured's calculated life

expectancy. Thus, Retirement Value would pay $18,800 on a

$10,000 investment in a policy where the insured had a

calculated life expectancy of 64 months. The date on which the

insured under the policy died set the date that the investment

matured and when Retirement Value would be required to

repay the loan. The loan's maturity date did not affect the

amount of money that Retirement Value was obligated to pay

the investor, except that investors were entitled to a return of

unused premiums, if any. [2nd Supp CR 70, 75]

Espinosa’s description of the RV program is generally consistent with

the Loan Agreement that each participant signed when loaning money to

RV. [2nd Supp CR 642-62] On maturity of the life insurance policies, RV

would eventually owe the participants, collectively, approximately $125

million, which represented the principal loaned to RV by the participants

3

and the interest RV had agreed to pay the participants upon maturity of the

respective insurance policies. [2nd Supp CR 232] Espinosa acknowledged,

however, that the debts to participants were not due for quite some time

when he wrote that the “date on which the insured under the policy died set

the date that the investment matured and when Retirement Value would be

required to repay the loan.” [2nd Supp CR 75] In a related bankruptcy

proceeding, Espinosa testified, consistently, that “the documents speak for

themselves, but if you want me to put a voice to them, the documents say

that the notes mature upon the maturity of that policy.” [2nd Supp CR 75,

746]

In that same involuntary bankruptcy proceeding, Espinosa’s counsel

made several statements regarding RV’s alleged insolvency, its ability to

pay debts when due, and the proposed plan of distribution that would repay

the participants “in full.” Espinosa’s counsel identified the RV participants

as the creditors [2nd Supp CR 738] and represented to the bankruptcy court

that “there are real issues as to whether debts were paid when due, ‘due’

being the key word here” and that “there is a significant issue of whether

Retirement Value is paying debts as they come due, considering they’re

not really due.” [2nd Supp CR 734] Espinosa’s counsel also represented

that RV owned 48 life insurance policies and had $29 million in cash, and

4

he said that RV needed only about $19 million to keep all of the policies to

maturity. [2nd Supp CR 736] He also told the bankruptcy court that the plan

of distribution proposed to the trial court in this case would, in 97.5% of all

scenarios, pay back the participants-creditors “in full.” [2nd Supp CR 736-

37]

C. Plan of Distribution

In July 2012, the trial court in this case adopted the Plan of

Distribution that Espinosa’s counsel referred to in the bankruptcy

proceeding. [2nd Supp CR 613] That plan established a claims process by

which participants could make claims against RV and by which Espinosa

was obligated to make pro rata distributions to participants. [2nd Supp CR

614-19] The Plan ordered Espinosa to liquidate all RV’s assets other than

the life insurance policies, maintain the life insurance policies through

maturity, use the proceeds of maturing policies to pay premiums on

remaining policies, keep sufficient reserves to pay premiums on remaining

policies, and make pro rata distributions to participants. [2nd Supp CR 620-

24] Although the plan limited participants’ claims against RV to the amounts

loaned to RV (without interest), the plan simultaneously removed the

participants’ prior obligation to pay necessary premiums beyond the

estimated life expectancy of an insured (plus 24 months) in order to keep

5

insurance policies in effect through maturity. [2nd Supp CR 614, 620-21,

642-62] In short, the Plan of Distribution ordered Espinosa to hold all life

insurance policies to maturity and then return the participants’ initial loan

proceeds to them, with discretion to Espinosa to make interim distributions

from receivership assets. [2nd Supp CR 618-21]

D. Espinosa as Litigation Plaintiff

In addition to proposing and gaining approval of the Plan of

Distribution, Espinosa initiated litigation against the James Defendants and

others, who he claimed were responsible for RV’s downfall. [CR 613]

Espinosa also added claims against Poe and the other Licensees who

solicited participants for the RV program. [see, e.g., CR 613]

Espinosa’s live pleading was his Eighth Amended Cross-Claim and

Third-Party Claim, filed on March 18, 2013. [CR 613] In that pleading,

Espinosa asserted claims against the James Defendants, Poe, and many

others for breach of fiduciary duty, conspiracy to breach fiduciary duty, and

aiding and abetting breach of fiduciary duty, and Espinosa alleged that

these parties were jointly and severally liable for $77 million, which included

the return of all commissions paid by RV to Poe and the other Licensees.

[CR 613, 615, 617, 640, 681, 685, 687-91] Espinosa alleged that the

James Defendants “promoted the scheme to Retirement Value” and

6

“participated or had the right to participate in control of Retirement Value.”

[CR 615] Espinosa alleged that the defendants, including the James

Defendants, “caused [RV] to operate a fraudulent investment scheme,” [CR

642] that RV sold the securities “through a group of agents which it called

‘Licensees,’” and that “the James Defendants assisted in the recruitment of

licensees by identifying potential targets for recruitment and working with

Gray to convince the potential licensees to sell Retirement Value’s

investment product.” [CR 641]

Other allegations in Espinosa’s live pleading include:

 The scheme took in approximately $77 million from over 900

investor-victims and promised to pay them approximately $130

million. [CR 646]

 All of the Third-Party Defendants also conspired to breach the

fiduciary duties they and the officers of Retirement Value owed

to Retirement Value by using Retirement Value to pay

themselves exorbitant and unconscionable fees and

commissions in violation of the Texas Securities Act. [CR 663]

 The Conspiring Defendants – as identified below, and which

includes the James Defendants and Beste – are jointly and

severally liable for the full amount that Retirement Value has

been ordered to pay in restitution to investors. All Licensee

Defendants who are not also Conspiring Defendants are liable

for the total amount of commissions they received. [CR 681]

 The James Defendants and Beste also owed Retirement Value

a fiduciary duty by virtue of their special relationship with

Retirement Value. [CR 687]

7

 The Conspiring Defendants engaged in affirmative acts to

further the goals of the conspiracy. The Conspiring

Defendants, therefore, are jointly and severally liable for all

losses that were proximately caused by any member of the

conspiracy as well as losses incurred after Defendants left the

conspiracy – assuming such withdrawal from the civil

conspiracy actually occurred. [CR 690]

 Retirement Value is now liable to the investor victims for

damages, attorneys’ fees and for having to return to them all of

the money they invested in Retirement Value. The Conspiring

Defendants are thus jointly and severally liable for all of those

damages, without regard to whether such Defendants

participated in all aspects of the conspiracy. [CR 691]

Espinosa thus sued Poe for the return of Poe’s commissions and sued the

James Defendants for all $77 million, which included Poe’s commissions,

alleging that the James Defendants were jointly and severally liable with

Poe for the return of Poe’s commissions.

Espinosa also asserted claims against the James Defendants that

related solely to amounts the James Defendants received from RV (i.e., for

the James Defendants’ sole liability). Under a money had and received

theory, Espinosa sued the James Defendants for the return of

approximately $20 million, [CR 704-05] and Espinosa sued the James

Defendants under TUFTA for the return of $28,902,092, which Espinosa

alleged had been paid to the James Defendants to purchase life insurance

policies. [CR 705-06]

8

E. Espinosa Collects Unallocated Settlement Proceeds

About a month after filing his Eighth Amended Cross-Claim and

Third-Party Claim, Espinosa entered into a Settlement Agreement and

Release of All Claims with the James Defendants (the “James Settlement

Agreement”). [CR 2023; Appx Tab 3] The James Defendants paid

Espinosa $5.5 million in unallocated funds to settle all claims against them.

[CR 2024; Appx Tab 3] The James Settlement Agreement did not release

Espinosa’s claims against Poe, but it also did not allocate any of the

settlement proceeds by stating that the James Defendants were paying

damages for which only they were solely liable or that the James

Defendants were not paying damages for which Espinosa had alleged the

James Defendants and Poe were jointly and severally liable. [CR 2027,

2023-29; Appx Tab 3]

F. Espinosa’s Motion for Summary Judgment Against Poe

On May 1, 2013, soon after settling with the James Defendants,

Espinosa filed his Motion for Partial Summary Judgment as to Licensee

Defendants (including Poe). [2nd Supp CR 3] Poe filed his response to the

motion on October 1, 2013 and asserted objections to Espinosa’s summary

judgment evidence. [2nd Supp CR 479, 571] The trial court overruled Poe’s

evidentiary objections by written order. [CR 1964] Judge Triana also

9

indicated at the hearing on the motion for summary judgment that she

intended to grant summary judgment for Espinosa on his TUFTA claims

against Poe. [CR 1966] On December 10, 2013, the trial court signed an

order granting partial summary judgment to Espinosa on his TUFTA claim

against Poe. The order contained a liability finding only against Poe, but it

was granted as to liability and damages against SRP. [CR 1973-74] The

order is not a general order; it is limited only to the TUFTA claim, does not

include a finding that RV operated as a Ponzi scheme, and does not rule

on Espinosa’s money had and received claim.4

Given Judge Triana’s indication that she would grant summary

judgment against Poe based on the amount of commissions he received,

Espinosa and Poe entered into a stipulation that Poe had received

$485,564.13 in commissions from RV but not that those commissions were

properly recoverable as TUFTA damages or that Espinosa had proven his

entitlement to recovery of those damages. [CR 1966] The stipulation further

reserved all of Poe’s appellate arguments. [CR 1966-67]

4

Espinosa subsequently nonsuited his money had and received claim, [CR

1983] leaving only the TUFTA claim against Poe. The trial court had granted summary

judgment for Poe on Espinosa’s other causes of action against him. [CR 1974]

10

G. Poe Sought Credit for Unallocated James Settlement Proceeds

After the trial court adjudicated Poe’s liability, but before the trial court

signed the judgment, Poe moved the trial court for a take-nothing judgment

under the one-satisfaction rule because Espinosa sued both the James

Defendants and Poe for recovery of Poe’s commissions and collected

unallocated settlement proceeds from the James Defendants, entitling Poe

to a credit for the $5.5 million, unallocated James Settlement. [CR 1989]

Judge Triana conducted a hearing on the motion but denied it. [2 RR 2-38]

H. Judgment and Appeal

On May 28, 2014, the trial court severed Espinosa’s claims against

the various licensee defendants into separate lawsuits. [CR 2133] Also on

May 28, 2014, the trial court signed a judgment in the severed cause

against Poe and SRP for $485,564.13 in actual damages, $182,086.55 in

attorney’s fees, $7,142.86 in conditional appellate attorney’s fees, and

interest. [1st Supp CR 3-5] Poe and SRP timely filed their Motion to Modify,

Reform, or Correct Judgment and Alternative Motion for New Trial on June

26, 2014, which was overruled by operation of law. [CR 2136] On August

20, 2014, Poe and SRP timely filed notice of this appeal. [1st Supp CR 64]

11

SUMMARY OF THE ARGUMENT

The trial court, as a matter of law, erred by failing to grant Poe a

settlement credit for the unallocated settlement proceeds of $5.5 million

from the James Defendants. The one-satisfaction rule precludes a plaintiff

from recovering twice for the same injury. Espinosa sued the James

Defendants and Poe, asserting joint and several liability, for the recovery of

commissions Poe received from RV. Espinosa collected $5.5 million in

unallocated settlement proceeds from the James Defendants and did not

state within the settlement agreement that the settlement proceeds

represented payment for damages that were the sole liability of the James

Defendants. Espinosa could have so allocated, but he did not. Settled law

from this and other courts throughout Texas required that the trial court

grant Poe a settlement credit in the entire amount of the James

Defendants’ $5.5 million, unallocated settlement. Because Poe’s

adjudicated liability was for an amount less than the applicable settlement

credit, the trial court erred by refusing to render a take-nothing judgment in

Poe’s favor.

Alternatively, the trial court erred by granting summary judgment for

Espinosa on his TUFTA claims against Poe. Espinosa lacks standing to

pursue these claims. In addition, Espinosa’s summary judgment evidence

12

was inadmissible, lacked credibility, and contained internal inconsistencies

that should have precluded summary judgment. Among other things,

Espinosa’s evidence regarding the fair value of RV’s assets and liabilities,

the values of which are necessary to determine whether RV was insolvent

and whether RV had sufficient remaining assets to pay its debts as they

came due, was shown through the summary judgment response to be little

more than mathematic gamesmanship in violation of applicable accounting

principles. Espinosa and his retained expert applied no discount rate to

RV’s liabilities in order to keep them as high as possible while applying

huge discount rates to RV’s assets, dropping the alleged value of the

insurance policies from more than $130 million to approximately $5 million

so that RV’s assets would purportedly be worth less than the liabilities. The

retained expert, however, admitted in his deposition that he should have

also applied a discount rate to RV’s liabilities and that a reduction in the

value of RV’s liabilities similar to his reduction of RV’s assets would mean

that RV was not insolvent. Moreover, Espinosa and his attorney

represented to a bankruptcy court that RV had sufficient assets and

premium reserves to pay all life insurance policies through maturation and

to repay all participant investors “in full.” Genuine issues of material fact

13

precluded summary judgment, and the trial court erred by granting

Espinosa’s motion.

ARGUMENT

Issue One: Proper allocation of the one-satisfaction rule required that

the trial court grant Appellants a settlement credit for unallocated

settlement proceeds of $5.5 million. Because Appellants were found

liable for an amount less than the unallocated settlement proceeds,

the trial court erred, as a matter of law, by failing to render a take-

nothing judgment in Appellants’ favor.

A. Standard of Review

The trial court’s settlement credit ruling should be reviewed de novo

because there are no disputed fact issues. See Galle, Inc. v. Pool, 262

S.W.3d 564, 571 n.3 (Tex. App.—Austin 2008, pet. denied) (applying de

novo standard of review in the absence of disputed fact questions). If there

are disputed fact questions, the review is for an abuse of discretion. See

Dalworth Restoration, Inc. v. Rife-Marshall, 433 S.W.3d 773, 781 (Tex.

App.—Fort Worth 2014, pet. dism’d w.o.j.); see also Wein v. Sherman, No.

03-10-00499-CV, 2013 Tex. App. 10666, at *37-38 (Tex. App.—Austin Aug.

23, 2013, no pet.) (mem. op.) (discussing de novo and abuse of discretion

standards of review in settlement credit context).

B. Applicable Law

“The one satisfaction rule prohibits a plaintiff from recovering twice for

a single injury.” Cohen v. Arthur Anderson, L.L.P., 106 S.W.3d 304, 308

14

(Tex. App.—Houston [1st Dist.] 2003, no pet.) (citing Crown Life Ins. Co. v.

Casteel, 22 S.W.3d 378, 390 (Tex. 2000)). The rule applies “when multiple

defendants commit the same act or when multiple defendants commit

technically different acts that result in a single injury.” Id. (citing Crown, 22

S.W.3d at 390). As this Court has recognized, the one-satisfaction rule “is

not limited to tort claims, and whether the rule may be applied depends not

on the cause of action asserted but rather the injury sustained.” Osborne v.

Jauregui, Inc., 252 S.W.3d 70, 75 (Tex. App.—Austin 2008, pet. denied)

(op. on reh’g) (en banc). “Thus, if the plaintiff has suffered only one injury,

even if based on ‘overlapping and varied theories of liability,’ the plaintiff

may only recover once.” Id. (quoting Buccaneer Homes of Alabama, Inc. v.

Pelis, 43 S.W.3d 586, 590 (Tex. App.—Houston [1st Dist.] 2001, no pet.)).

Under the common law, the nonsettling defendant has the initial

burden of proving his entitlement to a settlement credit, which the

nonsettling defendant meets by “placing the settlement agreement or some

evidence of the settlement amount in the record.” Mobil Oil Corp. v.

Ellender, 968 S.W.2d 917, 927 (Tex. 1998). The burden then shifts to the

plaintiff “to tender a valid settlement agreement allocating the settlement

between (1) damages for which the settling and nonsettling defendant are

jointly liable, and (2) damages for which only the settling party was liable.”

15

Cohen, 106 S.W.3d at 310 (citing Crown, 22 S.W.3d at 392). The Supreme

Court of Texas established this burden-shifting framework in part because

the plaintiff, as one of the settling parties, is “in a better position than

nonsettling defendants to ensure that the settlement awards are properly

allocated.” Utts v. Short, 81 S.W.3d 822, 828 (Tex. 2002) (citing Ellender,

968 S.W. 2d at 928).5

“[T]he plaintiff cannot rely on evidence that is extrinsic to the

settlement agreement” in meeting his burden to prove allocation of

settlement proceeds. Dalworth Restoration, 433 S.W.3d at 781 (citing

Ellender, 968 S.W.2d at 928-29). If there is no allocation within the

settlement agreement itself, the nonsettling defendant must receive a credit

for the full amount of the settlement. Cohen, 106 S.W.3d at 310 (citing

Ellender, 968 S.W.2d at 928).

C. Applicable Facts

In his March 18, 2013 Eighth Amended Cross-Claim and Third-Party

Claim, Espinosa asserted claims against the James Defendants, Poe, and

many others for breach of fiduciary duty, conspiracy to breach fiduciary

5

This burden-shifting framework applies equally in cases involving application of

the common law one-satisfaction rule and cases applying Chapter 33 of the Texas Civil

Practice and Remedies Code. See Ellender, 938 S.W.2d at 927-28 (applying rule to

Chapter 33 analysis); see also Utts, 81 S.W.3d at 832; Dalworth Restoration, 433

S.W.3d at 781 (“[S]ection 33.012(b) ‘upholds’ the common-law’s one-satisfaction rule.”).

16

duty, and aiding and abetting breach of fiduciary duty, and Espinosa

alleged that these parties were jointly and severally liable for $77 million,

which included the return of all commissions paid by RV to Poe and the

other Licensees. [CR 613, 615, 617, 640, 681, 685, 687-91] Espinosa

alleged in part as follows:

The Conspiring Defendants – as identified below, and which

includes the James Defendants and Beste – are jointly and

severally liable for the full amount that Retirement Value has

been ordered to pay in restitution to investors [$77 million]. All

Licensee Defendants who are not also Conspiring Defendants

are liable for the total amount of commission they received.”6

[CR 681]

Thus, Espinosa sued Poe for the return of Poe’s commissions and sued the

James Defendants for all $77 million, which included Poe’s commissions,

and Espinosa asserted that the James Defendants were jointly and

severally liable with Poe for the return of Poe’s commissions.

About a month after filing his Eighth Amended Cross-Claim and

Third-Party Claim, Espinosa entered into a Settlement Agreement and

Release of All Claims with the James Defendants (the “James Settlement

Agreement”). [CR 2023; Appx Tab 3] The James Defendants paid

Espinosa $5.5 million in unallocated funds to settle all claims against them.

[CR 2024; Appx Tab 3] The James Settlement Agreement states that it did

6

Some of Espinosa’s other allegations of joint and several liability are quoted in

the fact section, above.

17

not release Espinosa’s claims against the Licensees (including Poe), but it

also did not allocate the settlement proceeds to any particular claim, theory

of recovery, or element of damages. Nor did the James Settlement

Agreement state that the James Defendants were not paying damages for

which the James Defendants and Poe were alleged to be jointly and

severally liable. [CR 2027, 2023-29; Appx Tab 3] The release language is

very broad and releases “any and all claims” and “causes of action of any

nature” between the parties. [CR 2025-26; Appx Tab 3] Nowhere within the

James Settlement Agreement is there any language stating or implying that

the James Defendants were paying only damages for which the James

Defendants were solely liable or that the James Defendants were paying

only for punitive damages. [CR 2023-29; Appx Tab 3]

On December 10, 2013, Judge Triana signed an order granting

Espinosa’s Motion for Partial Summary Judgment as to Certain Licensees

on Espinosa’s TUFTA claim.7 [CR 1973-74] As to Poe, the summary

judgment order adjudicated his alleged liability for $485,564.13, the amount

of commissions he and SRP collectively received. [CR 1973-74, 1966-67,

2142-43] After the summary judgment order, Poe filed his Supplement to

7

See Tex. Bus. & Com. Code Ann. §§ 24.005, .006.

18

Certain Licensees’ Motion for Application of Settlement Credits.8 [CR 1989]

The trial court conducted a hearing on the motion on February 18, 2014,

but denied the motion. [2 RR 2, 38] Poe again raised the settlement credit

issue in his motion to modify the judgment, which was overruled by

operation of law. [CR 2136-38]

D. Application of Law to Fact

Poe clearly met his burden for application of settlement credits under

the one-satisfaction rule. Poe asked the trial court, prior to judgment and

after Poe’s liability had been adjudicated by the trial court, to apply the

settlement credit and render a take-nothing judgment in his favor. [CR

1989, 1995] Poe’s motion established that Espinosa had sought joint and

several liability against both Poe and James Settlement Services for the

commissions that Poe received from RV, and Poe put the James

Settlement Agreement into the record, thereby advising the trial court of

both the amount of Espinosa’s settlement with the James Defendants and

the terms of that settlement. [CR 1989-95, 2023] See Ellender, 968 S.W.2d

at 927; Buccaneer Homes, 43 S.W.3d at 589. The burden then shifted to

Espinosa to show the trial court—by using only the James Settlement

8

Poe and other Licensee Defendants had filed other, earlier motions to

determine the applicability of settlement credits, but those motions were filed and heard

before the trial court had adjudicated the Licensee Defendants’ alleged liability for

returning their commissions under TUFTA. [CR 1113, 1164]

19

Agreement—that the James Settlement Agreement allocated the

settlement proceeds to include payment only for the James Defendants’

sole liability. See Dalworth Restoration, 433 S.W.3d at 781 (holding that

“the plaintiff cannot rely on evidence that is extrinsic to the settlement

agreement” in meeting his burden to prove allocation of settlement

proceeds). Espinosa did not meet his burden, and the trial court erred, as

a matter of law, by failing to grant Poe a credit for at least the $5.5 million,

unallocated settlement.

As the Texas Supreme Court has recognized, Espinosa was in the

best position to allocate the James Defendants’ settlement payment. See

Utts, 81 S.W.3d at 828; Ellender, 968 S.W.2d at 928. Espinosa could have

allocated had he chosen to do so. For example, Espinosa asserted claims

against the James Defendants for which Poe and the James Defendants

would not have had joint and several liability, including a claim against the

James Defendants under a money had and received theory for the return of

approximately $20 million in profits [CR 704-05] and a claim against the

James Defendants under TUFTA for the return of $28,902,092, which

Espinosa alleged had been paid from RV to the James Defendants to

purchase life insurance policies. [CR 705-06] The James Settlement

Agreement could have allocated the settlement proceedings by stating that

20

the James Defendants were settling only for punitive damages, only for the

profits that they allegedly received from RV, or only for the return of money

paid to the James Defendants by RV for the purchase of insurance policies.

There is no such allocation language in the James Settlement Agreement.

[CR 2023-29; Appx Tab 3]

This Court has explained a similar situation as follows:

Although it is theoretically possible that some of the

damages the [plaintiffs] sought to recover against Allstate and

for which they were compensated in the settlement agreement

may have been separate rather than joint, it was the [plaintiffs’]

burden to offer evidence allocating the settlement between

actual damages for which only Allstate was liable and those for

which Allstate and Galle were jointly liable, in order to limit the

credit to the former. They failed to do so.

Galle, 262 S.W.3d at 573 (citation omitted). As in Galle, it is theoretically

possible that some of the damages Espinosa sought from the James

Defendants—and for which Espinosa was compensated by the unallocated

settlement proceeds—may have been separate rather than joint damages,

but Espinosa had the burden and duty to include allocation of separate

damages within the James Settlement Agreement. He failed to do so.

Because there is no allocation for separate, as opposed to joint,

damages within the James Settlement Agreement, the trial court was

required to give Poe a credit for the entire amount of the James

Defendants’ $5.5 million settlement and render a take-nothing judgment

21

against Espinosa on his claims against Poe. See, e.g., Crown, 22 S.W.3d

at 392 (finding nonsettling insurance agent entitled to offset of damages

paid in settlement by insurance company); Dalworth Restoration, 433

S.W.3d at 785; Galle, 262 S.W.3d at 573. As a matter of law, the trial court

erred by failing to do so.

E. Espinosa’s Trial Court Arguments Missed the Point

Espinosa argued to the trial court that settlement credits cannot apply

to the damages awarded against Poe because Poe was found, via no-

evidence summary judgment, not to have engaged in a civil conspiracy as

Espinosa had alleged. [CR 2085] This is wrong because application of the

one-satisfaction rule does not hinge on the existence of a conspiracy, nor

does the rule depend on the cause of action asserted. Instead, the rule is

applied by looking to the specific injury at issue. Osborne, 252 S.W.3d at

75 (“The application of the [one-satisfaction] rule is not limited to tort

claims, and whether the rule may be applied depends not on the cause of

action asserted but rather the injury sustained.”).9 In fact, appellate courts

have routinely applied settlement credits in favor of nonsettling defendants

9

See also Cohen, 106 S.W.3d at 310 (“Although the causes of action alleged are

technically different, they resulted in a single injury, loss of trust assets.”); Buccaneer

Homes, 43 S.W.3d at 590 (“If there is only one injury, even if it is based on several

overlapping and varied theories of liability, a plaintiff will be permitted only one

recovery.”).

22

when there was no allegation of conspiracy. See, e.g., Dalworth

Restoration, 433 S.W.3d at 776, 782-83; Goose Creek Consol. Indep. Sch.

Dist. of Chambers v. Jarrar’s Plumbing, 74 S.W.3d 486, 504 (Tex. App.—

Texarkana 2002, pet. denied); Buccaneer Homes, 43 S.W.3d at 588-91.

The question is whether Espinosa sued both Poe and the James

Defendants to recover for the same injury—the commissions paid to Poe.

There can be no legitimate dispute that, at the time of the unallocated

James Defendants’ settlement, the allegations in Espinosa’s live pleading

sought joint and several liability against the James Defendants and Poe for

the return of Poe’s commissions.

Moreover, while Poe did prevail on the conspiracy claim against him

individually, the conspiracy and other claims against the James Defendants

were never adjudicated because of the James Defendants’ settlement.

See Crown, 22 S.W.3d at 391 (“Normally, claims against the settling party

are dropped before the jury returns a verdict, so the amount of sole

damages that the settling party is potentially liable for is rarely

determined.”). Had those claims been adjudicated, the trial court may have

rendered judgment against the James Defendants for the entire $77 million

that Espinosa had sued the James Defendants to recover, including Poe’s

commissions.

23

Espinosa also argued to the trial court that “settlement credits do not

apply to any other licensee on the TUFTA claims because no licensee is

jointly and severally liable under TUFTA for any commissions that were

paid to other licensees.” [CR 2082] [Emphasis added.] To support his

argument, Espinosa analogized the current situation to one in which ABC

Investments paid commissions of $10,000 to Licensee X and ninety-nine

other licensees and in which the plaintiff asserted commission claw-back

claims against all 100 licensees. [CR 2083] Espinosa then asserted that

Licensee X would not be entitled to a settlement credit based on another

licensee’s settlement for $10,000 because doing so would leave $990,000

in unrecovered commissions from the other ninety-nine licensees. [CR

2083] Espinosa’s analogy is fatally flawed because it makes no mention of

a claim against, and an unallocated settlement from, ABC Investments

exceeding $10,000. Espinosa incorrectly focused only on credits from one

licensee to another and completely omitted the only relevant settlement.

Poe does not seek a credit for another licensee’s settlement. Rather,

if Poe were Licensee X, he would be entitled to a credit for an unallocated

settlement with ABC Investments because of an allegation of joint and

several liability between ABC Investments and Licensee X. ABC

Investments in the analogy is similar to the James Defendants in this case.

24

Poe is entitled to a credit for the unallocated James Defendants’ settlement

because Espinosa sued both the James Defendants and Poe for the return

of Poe’s commissions and settled with the James Defendants without

allocating the settlement proceeds. The single injury at issue, and for

which Espinosa already recovered unallocated settlement funds from the

James Defendants, is the amount of Poe’s commission.

A better analogy for application of the one-satisfaction rule in this

case is that of a construction defect lawsuit against the general contractor

and numerous subcontractors for unrelated defects in the completed

building. See Goose Creek, 74 S.W.3d at 502-04. In Goose Creek, Goose

Creek sued the general contractor and the architects for defects in three

newly-constructed schools. Id. at 491. The general contractor filed third-

party actions against other parties responsible for the design or installation

of various defective systems, including the plumbing contractor. Id. Goose

Creek then added a direct claim against the plumbing contractor. Id. at

491-92. Goose Creek settled with the general contractor and other parties

for $1.9 million. Id. at 502. The settlement agreement released the general

contractor and all subcontractors but did not release the plumbing

contractor. Id. at 492. The jury ultimately determined that Goose Creek

had suffered $405,000 in plumbing-related damages. Id. at 502. At the

25

time of Goose Creek’s settlement with the general contractor and others,

Goose Creek’s live pleading “included allegations against the settling

defendants for plumbing damages and negligence similar to those retained

in Goose Creek’s amended pleadings” against the plumbing contractor. Id.

at 503.

After trial, the plumbing contractor asked the trial court to apply a

settlement credit and render a take-nothing judgment in its favor because

Goose Creek’s settlement with the general contractor and others exceeded

the plumbing contractor’s liability as determined by the jury. Id. at 502.

The trial court reviewed the settlement agreements, “found that there was

no allocation within the agreements stating the amount allocated for the

plumbing problems,” applied a settlement credit for the full amount of the

settlement proceeds, and rendered a take-nothing judgment in favor of the

plumbing contractor because the unallocated settlement proceeds

exceeded the plumbing contractor’s liability as determined by the jury. Id.

at 502, 502-04. The appellate court affirmed the trial court’s correct

application of settlement credits. Id. at 504.

The general contractor and subcontractor scenario in the Goose

Creek opinion is a better illustration of how the trial court should have

applied the one-satisfaction rule in this case. Just as the plumbing defects

26

in Goose Creek were a single injury for which Goose Creek sought

recovery from both the general contractor and the plumbing contractor, the

commissions paid to Poe in this case were the single injury for which

Espinosa sought recovery, jointly and severally, from both the James

Defendants and Poe. Had Goose Creek also sued for electrical defects in

the buildings, the electrical defects would have been a separate injury for

which the plumbing contractor would not have shared joint liability.

The licensees in this case are similar to subcontractors on a

construction project who worked on different aspects of the building. One

subcontractor does not have joint liability with another subcontractor, but

the subcontractor and general contractor do have joint and several liability

for common damages. If the plaintiff settles with the general contractor

after having sued both the general contractor and the plumbing

subcontractor for plumbing damages, the plaintiff must ensure that the

settlement agreement allocates damages to clarify that the general

contractor was not paying for plumbing damages. The failure to do so

entitles the subcontractor to a settlement credit equal to the full amount of

the general contractor’s settlement with the plaintiff. See id. at 502-04; see

also Crown, 22 S.W.3d at 392 (finding nonsettling insurance agent entitled

to offset of damages paid in settlement by insurance company); Dalworth

27

Restoration, 433 S.W.3d at 785 (noting overlap of settled and tried claims

and rendering judgment for home restoration company based on settlement

between plaintiff and her insurance company in a related federal court suit);

Galle, 262 S.W.3d at 573 (reversing and rendering judgment for

remediation contractor in mold suit based on plaintiffs’ settlement with

insurance company); Tex. Capital Securities, Inc. v. Sandefer, 108 S.W.3d

923, 926-27 (Tex. App.—Texarkana 2003, pet. denied) (in securities fraud

case, discharging brokerage firm defendant from further liability because of

settlement between plaintiff and a stock promoter); Cohen, 106 S.W.3d at

310-11 (rendering judgment for accounting firm because plaintiffs’

settlement with other defendants for common damages of loss of trust

assets exceeded accounting firm’s liability); Buccaneer Homes, 43 S.W.3d

at 589-91 (reversing and rendering judgment for mobile home manufacturer

based on plaintiff’s settlement with mobile home seller in suit alleging

defects in mobile home).

The single injury for which the trial court found Poe liable is the

$485,564.13 in commissions he received. Espinosa sued Poe and the

James Defendants for that same $485,564.13, alleging that they were

jointly and severally liable for those commissions. But Espinosa already

recovered more than that amount in unallocated settlement proceeds from

28

the James Defendants (who paid Espinosa $5.5 million). Poe is entitled to

a settlement credit for the entire $5.5 million, unallocated settlement, which

exceeds Poe’s alleged liability to Espinosa. The trial court therefore erred,

as a matter of law, by failing to render a take-nothing judgment against

Espinosa on his claims against Poe.

F. TUFTA Attorney Fee Award and Harmful Error

Poe is entitled to rendition of judgment in his favor on the damage

award against him as determined by the trial court. Because the damage

award against Poe must be reversed, the attorneys’ fee award must also

be reversed and rendered in Poe’s favor. See Osborne, 252 S.W.3d at 76-

77 (holding plaintiffs could not recover attorneys’ fees from nonsettling

defendant when application of one-satisfaction rule barred plaintiffs’

damage recovery against the nonsettling defendant); Buccaneer Homes,

43 S.W.3d at 590-91 (applying one-satisfaction rule, reversing and

rendering judgment in nonsettling defendant’s favor, and holding that

because the one-satisfaction rule prevented the plaintiff’s recovery against

the nonsettling defendant on the liability theory, attorney fee award also

could not stand).

Finally, the trial court’s error was obviously harmful and reversible.

The trial court’s failure to properly apply settlement credits led to rendition

29

of judgment for $667,650.68 plus interest and appellate attorneys’ fees

rather than a take-nothing judgment in Poe’s favor. [CR 2142-44] See Tex.

R. App. P. 44.1(a).

Issue Two: The trial court abused its discretion by overruling

Appellants’ objections to Espinosa’s summary judgment evidence.

A. Standard of Review

This Court reviews the trial court’s rulings on objections to summary

judgment evidence under an abuse of discretion standard. See Fairfield

Fin. Group, Inc. v. Synnott, 300 S.W.3d 316, 319 (Tex. App.—Austin 2009,

no pet.). A trial court abuses its discretion when it acts without regard for

guiding rules or principles. Owens-Corning Fiberglas Corp. v. Malone, 972

S.W.2d 35, 43 (Tex. 1998).10

B. Argument

Testimonial evidence from an interested witness or expert must be

“clear, positive and direct, otherwise credible and free from contradictions

and inconsistencies” and readily controvertible. Tex. R. Civ. P. 166a(e).

“Texas Rule of Civil Procedure 166a(f) requires that in summary judgment

10

Poe preserved error on his objections by filing written objections and getting

express rulings from the trial court on each objection. [2nd Supp CR 571-72; CR 1964-

65] See Neely v. Comm’n for Lawyer Discipline, 302 S.W.3d 331, 344 (Tex. App.—

Houston [14th Dist.] 2009, pet. denied); Parker Barber & Beauty Supply, Inc. v. Wella

Corp., No. 03-04-00623-CV, 2006 Tex. App. LEXIS 8841 at *32-34 (Tex. App.—Austin

Oct. 11, 2006, no pet.) (mem. op.).

30

proceedings, supporting and opposing affidavits ‘shall set forth such facts

as would be admissible in evidence, and shall show affirmatively that the

affiant is competent to testify to the matters stated therein.’” United Blood

Servs. v. Longoria, 938 S.W.2d 29, 30 (Tex. 1997)

(quoting Tex. R. Civ. P. 166a(f)). “When a party relies on expert testimony,

this requirement includes proof of the expert’s qualifications.” Id.

Poe objected to certain paragraphs within Espinosa’s July 29, 2011

Affidavit, Espinosa’s May 1, 2013 Affidavit, and Burchett’s May 1, 2013

Affidavit because the affidavits did not establish the affiants’ qualifications

to offer the expert opinions within them (phrased as competence in the

written objections). [2nd Supp CR 496, 500-01] See Longoria, 938 S.W.2d

at 30; Tex. R. Civ. P. 166a(f) (requiring affidavit to set forth affiant’s

“competence” to testify). None of the matters within these paragraphs is

within the common knowledge of a layperson.

Poe also objected to the Espinosa and Burchett affidavits on the

following grounds: (1) the opinions asserted in the affidavits are not

reliable in that they (a) contain an incorrect calculation of the fair value of

RV’s assets and liabilities; (b) violate accounting principles by failing to

apply the same discount rate to value RV’s liabilities that was applied to

value RV’s insurance policy assets; (c) rely on inadequate information from

31

Lewis & Ellis which the affiants did not test, and Lewis & Ellis itself relied on

unverified data; and (d) merely parrot the work of others or apply

mathematical calculations to work performed by others; and (2) the

opinions in the affidavits are merely impermissible conclusions. [CR 571-

72]

1. Espinosa’s July 29, 2011 Affidavit [2nd Supp CR 53]

Poe objected to Paragraph 7 of Espinosa’s July 29, 2011 Affidavit, in

which Espinosa opined that RV was insolvent because the market value of

its assets ($29 million in cash and insurance policies “with an estimated

liquidation value of $5.7 million”) was far less than its alleged debts of

$125.1 million.11 [2nd CR Supp 571-72, 55] The trial court abused its

discretion by overruling objections to this paragraph because Espinosa’s

affidavit does not establish his qualifications to render these expert

opinions (such as market value of assets or present-value of debts). See

Longoria, 938 S.W.2d at 30; Tex. R. Civ. P. 166a(f). The proffered

opinions are also conclusory because the affidavit does not set forth the

underlying facts that allegedly support the conclusions. See Burrow v.

Arce, 997 S.W. 2d 229 (Tex. 1998) (“[I]t is the basis of the witness’s

11

RV’s debt number is no longer $125 million, if it ever was, because the trial

court limited participant claims to the amount of their initial investment. [2nd Supp CR

614] The sum of all participant loans was approximately $77 million.

32

opinion, and not the witness’s qualifications or his bare opinions alone, that

can settle an issue as a matter of law; a claim will not stand or fall on the

mere ipse dixit of a credentialed witness.”). In other words, Espinosa does

not explain how or why the insurance policy assets (with $130 million in

face value) are valued at only $5 million or why debts that are not due for

years are kept at face value. Also, even if Espinosa were somehow

qualified as a valuation expert, his asserted opinions are inherently

unreliable because they violate accounting principles by failing to apply the

same (or any) discount rate to RV’s debts that was applied to RV’s assets.

Espinosa applied a huge discount rate to RV’s assets but applied no

discount rate to RV’s liabilities. See E.I. du Pont de Nemours & Co. v.

Robinson, 923 S.W.2d 549, 557 (Tex. 1995) (“Unreliable evidence is of no

assistance to the trier of fact and is therefore inadmissible under Rule

702.”). By way of illustration, Espinosa put forward other summary

judgment evidence that RV’s portfolio of policies had a “total face amount

of $134,835,000 at the time of the receivership,” an amount that exceeds

the alleged debts of $125.1 million. [2nd Supp CR 257, 55] It is only through

unexplained manipulation of discount rates to RV’s $135 million in assets

that Espinosa proffers in his affidavit that the $135 million in insurance

policies is supposedly worth only $5.7 million. [2nd CR Supp 55] Despite

33

this mysterious application of an enormous discount rate, Espinosa’s

affidavit contains a purported estimate of RV’s liabilities that does not have

any discount rate applied.12 [2nd Supp CR 55] The trial court abused its

discretion by overruling Poe’s objection to Paragraph 7 of Espinosa’s July

29, 2011 Affidavit.

Poe also objected to Paragraphs 34 through 37 of Espinosa’s July

29, 2011 Affidavit on the same grounds. [2nd Supp CR 571-72; 2nd Supp CR

65-67] In those paragraphs, Espinosa discusses alleged premium reserve

deficiencies in RV’s accounts and discusses the alleged unreasonableness

of the life expectancy calculations performed by Midwest Medical.

Espinosa’s Affidavit contains no discussion of his qualifications to render

these expert opinions, and all opinions in Paragraphs 34 through 37 should

have therefore been stricken. See Longoria, 938 S.W.2d at 30 (expert

affidavit must contain qualifications); Tex. R. Civ. P. 166a(f). Moreover, the

opinions are conclusory and are simply wrong and therefore unreliable.

For example, Espinosa opines that RV reserved too little money to pay

premiums because the life expectancy estimates were too short, but RV

was never responsible for paying additional premiums once a certain policy

12

To further illustrate the unreliability of Espinosa’s opinion, his own expert,

Burchett, admitted in his deposition that a fair valuation of Retirement Value’s debts

required application of the same or a similar discount rate as was applied to the assets.

[2nd Supp CR 762]

34

reached the estimated life expectancy plus 24 months. Under the contract

each participant signed, the participant had the responsibility to pay policy

premiums beyond the estimated life expectancy (plus 24 months). [2nd

Supp CR 642, 645] Espinosa’s opinion to the contrary is unexplained (and

therefore conclusory) and is directly contradicted by the applicable

contracts (and therefore unreliable). See Burrow, 997 S.W.2d at 235

(conclusory opinions prohibited); Robinson, 923 S.W.2d at 557 (unreliable

expert opinions inadmissible). The trial court abused its discretion by

overruling Poe’s objections to Paragraphs 34 through 37 of Espinosa’s July

29, 2011 Affidavit.

2. Espinosa’s May 1, 2013 Affidavit [2nd Supp CR 231]

Poe objected to Paragraph 7 of Espinosa’s May 1, 2013 Affidavit. [2nd

Supp CR 571-72] In that paragraph, Espinosa asserted various opinions

about shortfalls in RV’s premium reserves. [2nd Supp CR 232] However,

Espinosa’s Affidavit contains no discussion of his qualifications to render

expert opinions, and the trial court abused its discretion by overruling Poe’s

objection to Paragraph 7 of Espinosa’s May 1, 2013 Affidavit. See

Longoria, 938 S.W.2d at 30 (expert affidavit must contain qualifications);

Tex. R. Civ. P. 166a(f).

35

3. Burchett May 1, 2013 Affidavit [2nd Supp CR 233]

Poe objected to Paragraphs 5 through 14 of Burchett’s May 1, 2013

Affidavit. [2nd Supp CR 571-72; see 2nd Supp CR 233] First, the trial court

abused its discretion by overruling Poe’s objection to Burchett’s affidavit

because his affidavit does not establish his qualifications to render opinions

about the value of life insurance policies or the application of discount rates

to assets and liabilities, yet all of Burchett’s opinions in Paragraphs 5

through 12 are beyond the common knowledge of a layperson. See

Longoria, 938 S.W.2d at 30 (expert affidavit must contain qualifications);

Tex. R. Civ. P. 166a(f).

In addition, the assertions in paragraphs 5 through 14 of the Burchett

Affidavit are inherently unreliable. Similar to the Espinosa affidavit

assertions regarding the alleged “fair” value of RV’s assets and liabilities,

Burchett parroted an enormous 20% discount rate to drop the alleged value

of RV’s insurance policies from $135 million to about $5 million. He then

opined that RV’s debts are “fairly” valued at about $80 million, but that

value is without any discount rate even though the obligations do not arise

for years in the future in many instances. [2nd Supp CR 758] Despite the

assertions in his affidavit and attached expert report that do not include

discount rates for RV’s liabilities, Burchett admitted in his deposition that a

36

fair valuation of RV’s debts required application of the same or a similar

discount rate as was applied to the assets. [2nd Supp CR 762] See

Robinson, 923 S.W.2d at 557 (unreliable expert opinions inadmissible).

The Burchett valuation opinions are unreliable and inadmissible, and the

trial court abused its discretion by overruling Poe’s objections.

4. Reversible Error

The trial court abused its discretion by overruling Poe’s objections to

the Espinosa and Burchett affidavits. Had the trial court sustained the

objections, the trial court would have been compelled to deny Espinosa’s

motion for partial summary judgment against Poe because, without the

inadmissible evidence, Espinosa did not meet his summary judgment

burden. See Tex. R. App. P. 44.1(a). All of Espinosa’s TUFTA claims

against Poe required that Espinosa prove, as a matter of law, the fair value

of RV’s assets, liabilities, and remaining assets following transfers to Poe,

and these affidavits were central to Espinosa’s attempt to do so. See Tex.

Bus. & Com. Code Ann. §§ 24.005(a), .006(a).

37

Issue Three: The trial court erred by rendering summary judgment

for Espinosa on his TUFTA claim against Appellants because

Espinosa lacked standing and because genuine issues of material

fact existed for at least one element of each of Espinosa’s TUFTA

theories.

A. Standard of Review

This court reviews a traditional summary judgment de novo. Valence

Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). To obtain

summary judgment, the movant must establish that there are no issues of

material fact and that he is entitled to judgment as a matter of law. Tex. R.

Civ. P. 166a(c); Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842,

846 (Tex. 2005); Nixon v. Mr. Prop. Mgmt., 690 S.W.2d 546, 548

(Tex.1985). “An appellate court reviewing a summary judgment must

consider all the evidence in the light most favorable to the nonmovant,

indulging every reasonable inference in favor of the nonmovant and

resolving any doubts against the motion.” Goodyear Tire & Rubber Co. v.

Mayes, 236 S.W.3d 754, 756 (Tex. 2007). The reviewing court “must

consider whether reasonable and fair-minded jurors could differ in their

conclusions in light of all the evidence presented.” Id. at 755.

B. Espinosa’s Grounds for Summary Judgment under TUFTA

Espinosa’s motion sought judgment as a matter of law against Poe

under sections 24.005(a)(1), 24.005(a)(2)(A), 24.005(a)(2)(B), and

38

24.006(a) of the Texas Uniform Fraudulent Transfers Act. [2nd Supp CR 15-

17] See Tex. Bus. & Com. Code Ann. §§ 24.005, .006. Because there are

several common elements to Espinosa’s various theories, the common

elements (and the fact issues remaining on those elements) are discussed

together.

C. Espinosa Lacks Standing to Recover Investor Money

The summary judgment cannot stand because Espinosa does not

have standing to recover the “investor money” he seeks. Espinosa stated

unequivocally in his motion for summary judgment that “[t]o date, the

investors have received only $5.2 million of their own money back, while

the Licensees collectively continue to hold more than $12 million of

investor’s money.” [2nd Supp CR 3] Espinosa repeated this assertion in

various forms throughout his motion and his live pleading.

Espinosa lacks standing to recover “investor money.” RV does not

have an ownership interest in “investor money.” “Investor money” is not a

corporate asset of RV that Espinosa has standing to recover in his capacity

as receiver. As this court held in Akin, Gump, Strauss, Hauer and Feld,

L.L.P. v. E-Court, No. 03-02-00714-CV, 2003 Tex. App. LEXIS 3966 (Tex.

App.—Austin May 8, 2003, no pet.) (mem. op.), a case relied upon heavily

by the Receiver:

39

But a receiver does not have an unfettered right to represent

creditors and shareholders of a corporation. A receiver may

represent creditors and shareholders only to the extent that

the cause of action seeks to preserve or recover corporate

assets.

Id. at *13.

Whatever the status of the receiver’s claims on behalf of

“innocent investors,” the law is clear that a receiver may

represent creditors and shareholders only to the extent that

the cause of action seeks to preserve or recover corporate

assets, not individual assets.

Id. at *20.

Espinosa’s repeated admissions that he seeks to recover “investor

money” constitute judicial admissions that he lacks standing with regard to

all of the claims on which he seeks summary judgment. “Assertions of fact

in live pleadings are formal judicial admissions and summary judgment may

be rendered on the pleadings when they contain judicial admissions.”

White v. Cole, 880 S.W. 2d 292 (Tex. App.—Beaumont 1994, writ denied)

(citing Manaham v. Meyer, 862 S.W. 2d 130 (Tex. App.—Houston [1st Dist.]

1993, writ denied)). Espinosa’s admissions destroy his standing and the

trial court’s subject matter jurisdiction. “Without standing, a court lacks

jurisdictions to hear a case.” Austin Nursing Center, Inc. v. Lovato, 171

S.W. 3d 845, 849. (Tex. 2005) (citing Tex. Ass’n of Bus. v. Tex. Air Control

Bd., 852 S.W. 2d 440, 443 (Tex. 1993)).

40

All of Espinosa’s claw-back claims seek recovery of what Espinosa

admits is “investor money.” The trial court erred by granting summary

judgment on claims over which it had no jurisdiction.

D. No Creditor has a Qualifying Claim under TUFTA

Section 24.005(a) requires that there be a creditor whose “claim

arose before or within a reasonable time after the transfer was made or the

obligation was incurred,” and section 24.006(a) requires that there be “a

creditor whose claim arose before the transfer was made or the obligation

was incurred.” Tex. Bus. & Com. Code Ann. §§ 24.005(a), .006(a). TUFTA

defines “creditor” to mean “a person . . . who has a claim.” Id. § 24.002(4).

“Claim” is defined as “a right to payment or property, whether or not the

right is reduced to judgment, liquidated, unliquidated, fixed, contingent,

matured, unmatured, disputed, undisputed, legal, equitable, secured, or

unsecured.” Id. § 24.002(3). This element is common to all TUFTA

grounds asserted by Espinosa.

The “creditors” in this case are the participants who loaned money to

RV for the purchase of life insurance policies. [2nd Supp CR 738-39] In his

initial report to the trial court in this case, Espinosa defined the date on

which RV participant-creditors had claims against RV, writing as follows:

Each of the investments was structured as a loan to Retirement

Value, whereby the investors provided Retirement Value with

41

funds in exchange for Retirement Value’s promise to pay a

fixed sum of money at an undetermined date in the future. . . .

The date on which the insured under the policy died set the

date that the investment matured and when Retirement Value

would be required to repay the loan. [2nd Supp CR 720]

[Emphasis added.]

Espinosa repeated the italicized sentence in the fact section of his motion

for summary judgment, [2nd Supp CR 4] and his description generally tracks

the terms of the Loan Agreements signed by the participants. [2nd Supp CR

642-62] Espinosa has thus admitted, and the Loan Agreements provide,

that the participants did not have a claim until the life insurance policies

matured. [2nd Supp CR 720] Only if a life insurance policy matures and RV

failed to pay a participant could there be a creditor claim by one of the

participants. [2nd Supp CR 720, 642-62]

Espinosa and his attorneys made similar admissions that are

reflected in other parts of the summary judgment record. At a September

27, 2011 bankruptcy hearing related to this case, Espinosa testified, “I think

the documents speak for themselves, but if you want me to put a voice to

them, the documents say that the notes mature upon the maturity of that

policy.” [2nd Supp CR 746] At an August 22, 2011 bankruptcy hearing,

Espinosa’s attorney stated both that “I think there are real issues as to

whether debts were paid when due, ‘due’ being the key word here” and that

“there is a significant issue as to whether Retirement Value is paying debts

42

as they come due, considering that they’re not really due.” [2nd Supp CR

734] Similarly, Poe’s affidavit in opposition to Espinosa’s motion for

summary judgment stated, in part, that his “clients were to receive their

share of death benefits when these policies matured. Retirement Value

would always be able to pay [his] clients their money back because the

death benefits would be available when the policies matured.” [2nd CR

Supp 1031] [Emphasis added.]

Other evidence proffered by Espinosa showed that commissions

were paid from the initial loan money given to RV by the participants, long

before participant claims could arise. Wendy Rogers testified in her

deposition that commission payments to licensees were made from the

participants’ initial loan proceeds to RV. [2nd Supp CR 205] Commission

payments to Poe (i.e., the allegedly fraudulent transfers) were thus made at

or shortly after the time that the participant transferred the initial loan

proceeds to RV. [2nd Supp CR 3, 6] As described above, however,

participants do not have “claims” against RV until a policy matures and RV

fails to pay the promised return under the Loan Agreements. [2nd Supp CR

642-62, 720, 734, 746] Therefore, there are no creditors whose “claim

arose before or within a reasonable time after the transfer was made or the

obligation was incurred” or creditors “whose claim arose before the transfer

43

was made or the obligation was incurred” because creditor claims arise

long after Poe’s commissions were paid to him by RV. Tex. Bus. & Com.

Code Ann. §§ 24.005(a), .006(a) (emphasis added).

Viewed in the light most favorable to Poe, the evidence presented a

genuine issue of material fact on an element common to each of

Espinosa’s TUFTA claims against Poe under sections 24.005(a) and

24.006(a) of the Texas Business and Commerce Code. Because all four

grounds for summary judgment rely on this element, the trial court erred by

granting summary judgment for Espinosa on his TUFTA claims against

Poe.

E. Insufficient Evidence of Insolvency

1. Insolvency

Espinosa’s claim under section 24.006(a) required Espinosa to prove

as a matter of law that the transfer of commissions to Poe occurred when

RV was insolvent or that RV “became insolvent as a result of the transfer or

obligation.” Tex. Bus. & Com. Code Ann. § 24.006(a). TUFTA provides

that a “debtor is insolvent if the sum of the debtor’s debts is greater than all

of the debtor’s assets at a fair valuation.” Id. § 24.003(a) (emphasis

added).

44

To put Espinosa’s insolvency argument into perspective, Poe

received commissions totaling $485,564.13. However, Espinosa told the

trial court that RV had, at the time of the receivership, assets totaling more

than $179 million ($154 million in life insurance policies and $25 million in

cash and securities) and had obtained loans totaling $77 million from

participants. [2nd Supp CR 92-93] The receivership estate had about $29

million in cash in August 2011. [2nd Supp CR 734-38] Payment of

commissions to Poe did not render RV insolvent.

Poe’s affidavit presented genuine issues of material fact on this

element of Espinosa’s TUFTA claim. Poe’s affidavit provided, in relevant

part, that his “clients were to receive their share of death benefits when [the

life insurance] policies matured. Retirement Value would always be able to

pay [his] clients their money back because the death benefits would be

available when the policies matured.” [2nd Supp CR 1031] Poe also

explained that “[l]inking the obligation to pay participants to the maturity

date of the policies ensured that Retirement Value would always be able to

pay its debts as they came due” and that “the value of Retirement Value’s

assets were equal to or greater than its liabilities because the life

settlement program assets and liabilities offset each other, at worst, and

Retirement Value always had other assets.” [2nd CR Supp 1031]

45

In addition, Espinosa’s summary judgment evidence was internally

inconsistent, not credible, and insufficient to establish his entitlement to

judgment as a matter of law. For example, he argued that paying

commissions affected RV’s ability to deliver the promised return to the

participants and that paying the commissions rendered RV incapable of

paying the participants as promised. [2nd Supp CR 17] This is wrong. RV

promised to purchase life insurance policies and to pay the participants the

death benefits on the policies when they matured. [2nd Supp CR 720, 642-

62] Payment of commissions did not affect RV’s promise to the participants

or its ability to satisfy its obligation to the participants to pay them the death

benefits when the policies matured because RV never had an obligation to

reserve premiums sufficient to cover all insurance policies through maturity.

[2nd Supp CR 642-62] The participants were obligated to contribute once

the initial premium reserves were exhausted, and the participants’

additional premiums would keep the policies in effect. [2nd Supp CR 645]

Then, and only then, the death benefits on the policies themselves (with

face value of $130 million) provided the funds to pay the participants as the

policies matured. [2nd Supp CR 720, 645] That framework existed

independent of any commission payment to Poe, and payment of

commissions to Poe did not render RV insolvent. The trial court therefore

46

erred by granting summary judgment against Poe on the ground that

commission payments to him rendered RV insolvent. See Tex. Bus. &

Com. Code Ann. § 24.006(a).

There are also genuine issues of material fact as to whether RV was

ever insolvent. Espinosa’s insolvency evidence is legally insufficient (or

sufficiently controverted to avoid summary judgment) for several reasons.

First, as argued above, the trial court should have excluded several parts of

the Espinosa and Burchett affidavits, without which Espinosa failed to meet

his burden as the summary judgment movant.

Second, Espinosa’s summary judgment evidence on insolvency is

internally inconsistent and is contradicted by Poe’s summary judgment

evidence. Espinosa has testified by affidavit that RV had $29 million on

deposit and current trade payables of less than $100,000. [2nd Supp CR 55]

Moreover, Espinosa and his counsel made representations to the

bankruptcy court about RV’s solvency and ability to pay its debts when due.

At a September 27, 2011 hearing, Espinosa testified that “the documents

say that the notes mature upon the maturity of that policy.” [2nd Supp CR

746] Espinosa’s counsel made several statements regarding RV’s solvency

at an August 22, 2011 bankruptcy hearing:

• I think there are real issues as to whether debts were paid

when due, “due” being the key word here. [2nd Supp CR 734]

47

• [T]here is a significant issue of whether Retirement Value

is paying debts as they come due, considering they’re not really

due. [2nd Supp CR 734]

• When we’re talking about the creditors, by and large, 99.9

percent are these note holders. There are a couple out there.

There’s a lease, there’s a couple things. All told, not $100,000.

[2nd Supp CR 738]

• There are 48 policies. We’ve got about $30 million in

cash. [2nd Supp CR 736]

• We’ve got a plan of payment that was proposed on the

eve of adoption. It will pay somewhere between 80 cents and

120 cents of [the participants’] investment amount, which is

unheard of. [2nd Supp CR 735]

• They’ve determined that in 97-1/2 of all likely scenarios –

actually, of all scenarios – it will take $19 million in reserves to

carry us to the end of the policies. Now, that involves using

maturities from earlier policies to pay premiums on other

policies. And we have $29 million, so that leaves a fair amount

of excess money, which we were planning to distribute this

year. [2nd Supp CR 736]

• So we were on the cusp of approving a plan that would

get everyone paid, we think, in full. [2nd Supp CR 737]

• And frankly, had the plan been adopted, we’d be done,

largely. Once the plan is adopted, what we would be left with

doing is supervising contingency counsel who are off suing a

bunch of people, collecting on these insurance claims and

cutting checks, once we got through a very quick and I think

relatively painless proof of claim process. [2nd Supp CR 735]

Espinosa’s counsel thus represented to the bankruptcy court that RV

had forty-eight life insurance policies and about $30 million in cash, that

48

Espinosa needed about $19 million in cash to pay for all of the policies

through maturity, that the creditor’s claims are not yet due, and that there is

sufficient cash in reserve to hold all life insurance policies to maturity and

pay all participants their money back “in full.” [2nd Supp CR 734-38] Yet, the

trial court granted summary judgment on the ground that RV was insolvent.

Viewed in the light most favorable to Poe, there are fact issues regarding

RV’s insolvency because RV had sufficient reserves to allow participants to

be repaid in full in 97.5% of all scenarios. [2nd Supp CR 736]

Espinosa also failed to establish insolvency based on the fair value of

RV’s assets and liabilities. Espinosa presented no evidence of the fair

value of RV’s assets or the fair value of RV’s liabilities, particularly since

many of the liabilities are not yet due. As argued above, neither Espinosa

nor his retained expert, Burchett, are qualified to testify about fair valuation

of RV’s assets and liabilities. Moreover, as Espinosa admitted in his

bankruptcy court testimony, the receivership changed everything. [2nd Supp

CR 744-46] The face value of RV’s debts dropped to about $77 million

because the participants are limited to the return of their investments. [2nd

Supp CR 614, 608-625] Participants have no other claims against RV

beyond a pro rata claim to the combined death benefits of all policies. [2nd

Supp CR 614, 608-25] Espinosa and his counsel have stated that the

49

participants will recover “in full” what they invested and it is more than likely

that they will receive additional sums, depending on the obvious element

that was always the predominate element – the dates on which the

insureds pass. [2nd Supp CR 736-37, 746] The participants are better off

than they were prior to the receivership because they will not have to meet

any premium calls despite the language of their Loan Agreements that

required as much. [2nd Supp CR 645]

Even if this Court considers it, Burchett’s affidavit lacks credibility and

was insufficient to sustain Espinosa’s burden as summary judgment

movement. Burchett testified in his deposition that he has no prior

experience with life settlements or viaticals; [2nd Supp CR 750] that he has

no experience calculating life expectancies; [2nd Supp CR 750] that he is

not familiar with the methodology used to calculate life expectancy; [2nd

Supp CR 751] that he would not be able to vouch for and state that

someone else’s life expectancy calculation is accurate because this is not

his area of knowledge, experience, or expertise; [2nd Supp CR 751] that he

relied on the value of the life insurance policies as provided by the firm of

Lewis & Ellis; [2nd Supp CR 752] that he did not verify the work they did;

[2nd Supp CR 753] that he is aware that Lewis & Ellis obtained life

expectancy estimates from another firm; [2nd Supp CR 754] and that he

50

does not know what, if anything, Lewis & Ellis did to verify this information.

[2nd Supp CR 754]

In order to perform a solvency analysis, Burchett was required to

determine the fair value of the assets and liabilities of RV. His valuation

analysis did not comply with the AICPA Statement of Standards for

Valuation Services No. 1. [2nd Supp CR 755] Whereas a true solvency

opinion (according to the AICPA Standards) “does not mention the word

value and does not conclude a number of any kind,” Burchett’s Report

includes numbers and uses the word “value” many times. [2nd Supp CR

756] Contrary to AICPA Standards, Burchett’s Report lists what he claimed

to be RV’s monthly net asset value. [2nd Supp CR 756]

Despite minimal testing and verification of Lewis & Ellis’s work,

Burchett integrated Lewis & Ellis’s decision to apply the enormous 20%

discount rate to the face amounts of RV’s insurance policies while applying

no discount rate whatsoever to RV’s liabilities. Burchett conceded that he

relied on Lewis & Ellis’s work substantially and that the 20% discount rate

he used was Lewis & Ellis’s decision. [2nd Supp CR 757, 753] Lewis & Ellis,

in turn, conceded that “[t]he discount rate is an assumption that drastically

affects the result of the actuarial value in [its] analysis.” [2nd Supp CR 730]

Use of this discount rate purportedly reduced the value of the RV insurance

51

portfolio from $130 million to around $5 million. [2nd Supp CR 758] Applying

the gargantuan 20% discount rate reduced the purported value of RV’s

assets by more than 95%, yet Burchett applied no discount rate to RV’s

stated $77 million obligation to the participants, despite the fact that these

amounts are not payable until the death of the insureds, which is projected

to occur years in the future. [2nd Supp CR 758]

In light of these obvious discrepancies, Burchett admitted in his

deposition that he likely should have applied the same discount rate to

RV’s liabilities as he applied to the face amount of the insurance policies.

[2nd Supp CR 762] Burchett also conceded in his deposition that in order to

determine fair value, one must determine what a willing buyer would pay

and what a willing seller would accept for an asset or liability. [2nd Supp CR

761] Burchett admitted that, on the open market, the liability represented by

the obligation to the participants would be discounted and that the fair value

of the liability was different from what he represented in his report.13 [2nd

Supp CR 761] He admitted that under the Policy Participation Agreements,

no amounts would be due to the participants until the policies matured

upon the death of the insured. [2nd Supp CR 758-60] He admitted that at

policy maturity, RV would receive the face amount of the policy and would

13

This concession alone created a fact question regarding the value of RV’s

liabilities, which in turn leaves a fact question about whether RV was insolvent.

52

have more than enough money to pay his stated liability to the participants

($77 million). [2nd Supp CR 758] Burchett agreed that at policy maturity,

there would be equal cash flow in (to RV from the policy) and out (to the

participants for payment based on the same event). [2nd Supp CR 761-62]

Burchett also acknowledged that he did not perform any calculation to

see if applying a 20% discount rate to RV’s liabilities would render RV

solvent under his analysis. [2nd Supp CR 763] He admitted that if

application of the discount rate reduced the liability by more than $50

million, the company would be solvent (even applying the 20% discount

rate to RV’s assets). [2nd Supp CR 763-64] He also admitted that if no

discount rate were applied to the cash flow from the policies, which would

be consistent with his failing to apply a discount rate to the cash flow of

payments to the participants, RV would be solvent. [2nd Supp CR 765]

Similarly, had Burchett reduced RV’s liabilities by 95% as he had done with

the 95% reduction in RV’s assets, the liabilities would equal $3.8 million,

less than RV’s assets (even at Burchett’s steeply-discounted value),

meaning RV was not insolvent.

Burchett’s affidavit is incompetent summary judgment evidence and

should have been stricken. Even so, Poe’s response controverted the

affidavit testimony and revealed, through Burchett’s own deposition

53

testimony, the credibility issues that must only be resolved by a jury, not the

trial court on summary judgment. See Huckabee v. Time Warner

Entertainment Co. L.P., 19 S.W.3d 413, 422 (Tex. 2000) (“Texas law has

always emphasized that trial courts must not weigh the evidence at the

summary judgment stage. Instead, a trial court’s only duty at the summary

judgment stage is to determine if a material question of fact exists.”); Casso

v. Brand, 776 S.W.2d 551, 558 (Tex. 1989) (“If the credibility of the affiant

or deponent is likely to be a dispositive factor in the resolution of the case,

then summary judgment is inappropriate.”). Viewing the evidence in the

light most favorable to Poe, Burchett’s unexplained conclusions, deposition

concessions, and internal inconsistencies (which raise serious credibility

issues) presented genuine issues of material fact as to the alleged fair

value of RV’s assets and liabilities.

Espinosa’s affidavit opinion is similarly problematic. The affidavit fails

to establish any expert witness qualifications, and it is conclusory.

Espinosa starts with the assertion that: “Retirement Value is insolvent.” [2nd

Supp CR 55] This is a conclusory statement that is not probative. Espinosa

then states: “The market value of the assets [RV] holds is far less than its

debts.” [2nd Supp CR 55] This statement, too, is an unsupported and

impermissible conclusion. It is also wrong. Because the primary assets

54

consist of the life insurance policies (with face value of more than $130

million) that will be held to maturity and used to fund the Plan of Distribution

that will make the participants whole, the enormously discounted present

value of these policies is irrelevant. [see 2nd Supp CR 608-25] The Plan of

Distribution adopted by the trial court provides that all of the policies will be

held to maturity. [2nd Supp CR 608-25] There is no intention to sell these

policies, and their market value has no bearing on the implementation of

the Plan of Distribution. Thus, any purported analysis of the value of the

policies if sold to “bottom feeders” on the open market is irrelevant.

Espinosa’s affidavit testimony regarding market value also contradicts

his own reports to the trial court:

Unfortunately, there is no easily available market price for life

settlement insurance policies. Unlike stocks, bonds and

commodities, there is no public exchange for insurance

policies. Each sale takes place in private between a single

buyer and a single seller. The sales price is generally

confidential and, in any event, there is no centralized database

for sales of life insurance policies, such as there is for real

estate. Accordingly, it is not generally possible to determine the

market price for an insurance policy based on sales of

comparable policies. [2nd Supp CR 728]

On the next page of the same Report, after summarizing the figures

provided to him by others (portfolio market value between $5.3 and $8.3

million), Espinosa admits that: [T]he Receiver is not faced with a ‘buy’

decision, but rather whether to sell or to hold. Accordingly, the value of

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these policies to the estate is potentially much higher.” [2nd Supp CR 728]

[Emphasis added.] This evidence alone creates a genuine issue of material

fact on the value of RV’s assets because it contradicts Espinosa’s asserted

value of RV’s assets.

Espinosa, in his affidavit, continued: “Retirement Value owes $125.1

million in debt. Almost all of this debt is owed to the investors -- $77.6

million in principal and $47.2 million in interest.” [2nd Supp CR 55] These

statements are no longer true, if they ever were. The Plan of Distribution

provides for the participants’ sole remedy against RV through the “hold to

maturity” process. [2nd Supp CR 608-25] RV does not owe $125.1 million in

debt. Again, there are fact issues as to RV’s alleged debt.

Finally, Espinosa states: “To pay these debts Retirement Value has

approximately $29 million in cash and a portfolio of policies with an

estimated liquidation value of $5.7 million.” [2nd Supp CR 55] These

statements, too, are no longer true, if they ever were. The death benefits

from the policies will fund the Plan of Distribution. [2nd Supp CR 608-25]

The cash on hand at any point in the receivership was more than sufficient

to pay the incidental debts of the receivership. Espinosa’s counsel said as

much to the bankruptcy court in 2011, representing to the bankruptcy judge

that RV had cash of about $29 million and that RV needed only $19 million

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in policy reserves to hold all insurance policies to maturity and repay the

participants “in full.” [2nd Supp CR 734-38] These representations are

material evidence that RV’s debts do not exceed its assets.

Espinosa’s evidence is insufficient to establish that RV was insolvent

at the time the commissions were paid to Poe or that RV was ever

insolvent. The evidence was also contradicted in all material aspects.

Viewing the evidence in the summary judgment record in the light most

favorable to Poe, as this Court is required to do, there are genuine issues

of material fact on the insolvency element of Espinosa’s TUFTA claim

under section 24.006(a). The trial court therefore erred by granting

summary judgment for Espinosa on his TUFTA claim against Poe.

2. Value of Remaining Assets

Espinosa’s claims under sections 24.005(a)(2)(A) and (B) required

Espinosa to prove as a matter of law that, as a result of the commission

transfers to Poe, “the remaining assets of [RV] were unreasonably small in

relation to [RV’s] business or transaction” or that RV, as a result of the

commission transfers to Poe, incurred or would incur “debts beyond [RV]’s

ability to pay as they became due.” Id. § 24.005(a)(2)(A) and (B). These

grounds for summary judgment fail for many of the same reasons that

Espinosa’s insolvency argument fails, and Poe incorporates the insolvency

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arguments above as if set forth fully herein. The record in this case

conclusively establishes that RV had $29 million in cash, millions of dollars

in insurance policies, and sufficient reserves to pay policy premiums on all

policies through maturation. [2nd Supp CR 734-38]

In addition, Poe’s affidavit presented genuine issues of material fact

on this common element of Espinosa’s claims. That affidavit provided, in

relevant part, that

Retirement Value paid for the policies that my clients

participated in. My clients were to receive their share of death

benefits when these policies matured. Retirement Value would

always be able to pay my clients their money back because the

death benefits would be available when the policies matured.

Linking the obligation to pay participants to the maturity

date of the policies ensured that Retirement Value would

always be able to pay its debts as they came due. This linking

also ensured that the value of Retirement Value's assets were

equal to or greater than its liabilities because the life settlement

program assets and liabilities offset each other, at worst, and

Retirement Value always had other assets. [2nd CR Supp 1031]

This evidence, and the evidence discussed above relating to RV’s

alleged insolvency and the fair value of RV’s assets and liabilities, when

viewed in the light most favorable to Poe, presented genuine issues of

material fact as to whether RV had, as a result of paying commissions to

Poe, insufficient remaining assets or debts beyond RV’s ability to pay. See

Tex. Bus. & Com. Code Ann. §§ 24.005(a)(2)(A), (B), .006(a). The trial

58

court therefore erred by granting summary judgment for Espinosa on his

TUFTA claims against Poe.

F. Reasonably Equivalent Value

There are also fact issues on an element common to Espinosa’s

claims under TUFTA sections 24.005(a)(2)(A) and (B) and section

24.006(a) because those claims require that RV did not receive

“reasonably equivalent value in exchange for the transfer or obligation.”

Tex. Bus. & Com. Code Ann. §§ 24.005(a)(2)(A), .006(a). “Reasonably

equivalent value” is defined in section 24.004 to “include[] without limitation,

a transfer or obligation that is within the range of values for which the

transferor would have sold the assets in an arm’s length transaction.” Id. §

24.004(d).

Poe’s affidavit, attached to his summary judgment response stated,

The commissions on the Retirement Value products (in

my case 10%) were not unusual because the nature of the

product as an illiquid product meant that my client’s funds

would not be available for reinvestment for several years.

Based on my experience, illiquid products tend to pay higher

commissions compared to managed funds, for example, which

typically pay lower commissions on an annual basis. The 10%

commission would be comparable to receiving a lower fee on

an annual basis for the period of illiquidity of the life settlement

product. Also, the payment of the commissions did not affect in

any way the outcome of the transaction for my clients because

they would receive their share of the death benefit when the

policies in which they participated matured. [2nd CR Supp 1030]

59

Poe’s affidavit also provided,

I earned the commissions I was paid because I identified

potential participants, I presented the Retirement Value product

to them as I had been instructed by Retirement Value, I

answered their questions, I helped them fill out the paperwork, I

submitted their paperwork to Retirement Value for approval,

and I served as a liaison between my clients and Retirement

Value. These efforts were valuable and their value was

equivalent to the commissions I received. If I had sold other life

settlement products to my clients who participated in the

Retirement Value program, I would have received similar

commissions. My Licensee Agreement provided that I would

receive the commissions I received. Retirement Value paid

these commissions voluntarily with knowledge of all material

facts because it was Retirement Value’s product and

Retirement Value’s life settlement program. [2nd CR Supp 1030-

31]

Viewed in the light most favorable to Poe, this evidence presented

genuine issues of material fact on the reasonably equivalent value element

of Espinosa’s TUFTA claims under sections 24.005(a)(2)(A) and (B) and

24.006(a). The trial court erred by granting Espinosa’s motion for summary

judgment under sections 24.005(a)(2)(A) and (B). See Tex. Bus. & Com.

Code Ann. §§ 24.005(a)(2)(A), (B), .006(a).

G. Actual Intent

Espinosa’s final argument for summary judgment against Poe is

under section 24.005(a)(1). Espinosa’s only “evidence” to support this

argument is the summary judgment order in favor of the State and against

RV (which Espinosa did not contest) in which the trial court determined that

60

RV committed securities fraud. [2nd Supp CR 15] Espinosa relied only on a

Ponzi scheme case to argue that every transfer made by RV was therefore

fraudulent under TUFTA. [2nd CR Supp 15] The trial court did not, however,

grant summary judgment for Espinosa on his Ponzi scheme allegation for

the automatic return of commissions. The summary judgment order is

limited to Espinosa’s TUFTA claims and does not include the affirmative

Ponzi scheme finding that Espinosa sought in his motion. [2nd Supp CR 13]

The summary judgment cannot be affirmed on that ground. See State

Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993) (declining

to consider a ground for summary judgment not contained in trial court’s

order granting summary judgment on specific grounds).

In addition, as discussed above, this claim fails because there are no

“creditors” with “claims” that “arose before or within a reasonable time after

the transfer was made or the obligation was incurred” since the participants

do not have claims against RV until the insurance policies mature. Tex.

Bus. Com. Code Ann. § 24.005(a)(1). It also fails because Espinosa wholly

failed to show that a transfer to Poe was made with intent to defraud.

Under Espinosa’s steamroller approach, even the receptionist at RV must

return all of her salary payments because every single transfer from RV

was made with intent to defraud. Texas law requires more. To be entitled

61

to judgment against Poe, Espinosa must prove that a transfer to Poe was

made with intent to defraud, and Espinosa did not even attempt to do so.

The trial court erred to the extent it granted summary judgment for

Espinosa under section 24.005(a)(1).

H. Ponzi Scheme Allegations

The trial court did not include a finding in the summary judgment

order that RV was operated as a Ponzi Scheme and that Poe was therefore

required to return his commissions as a matter of law. [CR 1973-74] In

relevant part, Espinosa’s motion for summary judgment stated:

In the present case, Retirement Value was either a Ponzi

scheme or, at the very least, quickly on its way to becoming

one. Therefore, the Licensees have to return their commissions

as a matter of law. In the alternative, even if it was not

technically a Ponzi scheme, the elements of fraudulent transfer

and money had and received are met as a matter of law. [2nd

CR Supp 13] [Emphasis added.]

Espinosa clearly requested, independent of his TUFTA claim, a Ponzi-

scheme finding from the trial court, but there is no such finding within the

trial court’s order granting summary judgment on only the TUFTA-specific

grounds, a ground upon which Espinosa sought relief in the alternative to

his Ponzi scheme allegation. [CR 1973] See State Farm Fire & Cas. Co.,

858 S.W.2d at 380 (“[I]n this case, the trial court’s order explicitly specifies

the ground relied on for the summary judgment ruling; thus, the summary

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judgment can only be affirmed if the theory relied on by the trial court is

meritorious, otherwise the case must be remanded.”). The Ponzi scheme

arguments in Espinosa’s motion are therefore not a ground on which this

Court can affirm the summary judgment.

In an abundance of caution, however, Poe also challenges

Espinosa’s Ponzi scheme argument and contends that fact issues

prevented the trial court from granting summary judgment on that ground.

Ponzi schemes, named after their infamous creator Charles Ponzi,

have as their defining characteristics the complete absence of underlying

assets and the use of subsequent investor’s funds to pay prior investors.

“A ‘Ponzi scheme’ is an investment fraud wherein investors are enticed with

the promise of extremely high returns or dividends over a short period of

time.” Goldstein v. Morrison, 113 S.W. 3d 769, 773 (Tex. App.—Austin

2003, no pet.) (citing Gutierrez v. Cayman Is. Firm of Delloitte & Touche,

100 S.W. 3d 261, 266 (Tex. App.—San Antonio 2002, no pet.). “Investors

are paid ‘from monies obtained from later investors rather than from profits

of the underlying business venture.” Id. at 773 (citing Caldwell v. State, 95

S.W. 3d 563, 566 (Tex. App.—Houston [1st Dist.] 2002, no pet.).

That is not the case here, and Espinosa’s reports to the trial court

(and the other summary judgment evidence in the record) shows that RV

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was not operated as a Ponzi scheme because RV used participant funds to

purchase life insurance policies, and the participants were repaid on their

investments from the proceeds of those investment funds, not from other

investors’ money. [2nd Supp CR 75] Espinosa himself testified that he had

never referred to RV as a Ponzi scheme. [2nd Supp CR 583]

To the extent it is relevant to this appeal, and to the extent the trial

court ordered via summary judgment that Poe must return his commission

payments from RV because RV operated as a Ponzi scheme, the trial court

erred by granting summary judgment on that ground.

PRAYER

Appellants Poe and SRP respectfully request that the Court, after

properly applying the one-satisfaction rule as the trial court failed to do,

reverse the trial court’s judgment in its entirety and render a take-nothing

judgment against Espinosa for all of his claims against Poe and SRP.

Alternatively, Appellants Poe and SRP pray that the Court reverse the trial

court’s judgment and remand for a new trial in light of the genuine issues of

material fact that should have precluded the trial court from granting

Espinosa’s motion for summary judgment. Finally, Appellants Poe and

SRP generally pray for rendition of judgment in their favor, or alternatively,

64

for remand for a new trial, based on any ground asserted within this brief

should this Court deem a remand necessary or appropriate.

Respectfully submitted,

ALDRICH PLLC

_______________________

Scott Lindsey

State Bar No. 24036969

slindsey@aldrichpllc.com

1130 Fort Worth Club Tower

777 Taylor Street

Fort Worth, Texas 76102

Telephone: 817-336-5601

Telecopier: 817-336-5297

ATTORNEYS FOR

APPELLANTS JAMES POE

AND SENIOR RETIREMENT

PLANNERS, LLC

65

CERTIFICATE OF COMPLIANCE

I certify that this brief was produced on a computer using Microsoft

Word and contains 14,621 words, as determined by the computer

software’s word-count function, excluding the sections of the brief listed in

Texas Rule of Appellate Procedure 9.4(i)(1).

__________________________

Scott Lindsey

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing

document was delivered pursuant to Rule 21a, Tex. R. Civ. P., to all

counsel or parties of record as shown below.

Dated this 11th day of March, 2015.

Via electronic service and e-mail:

John W. Thomas

jthomas@gbkh.com

John R. McConnell

jmcconnell@gbkh.com

George, Brothers, Kincaid & Horton, L.L.P.

114 W. Seventh, Suite 1100

Austin, TX 78701-3015

ATTORNEYS FOR APPELLEE

__________________________

Scott Lindsey

66

NO. 03-14-00518-CV

IN THE COURT OF APPEALS

THIRD DISTRICT OF TEXAS

AUSTIN, TEXAS

JAMES POE AND SENIOR RETIREMENT PLANNERS, LLC, Appellants

vs.

EDUARDO S. ESPINOSA, IN HIS CAPACITY AS RECEIVER OF

RETIREMENT VALUE, LLC, Appellee

APPELLANTS’ APPENDIX

I. Summary judgment order [CR 1973] ........................................... Tab 1

II. Final Judgment [1st Supp CR 3-5] ................................................ Tab 2

III. James Settlement Agreement [CR 2023-2037] ........................... Tab 3

IV. Stipulation [CR 1966-67] .............................................................. Tab 4

V. TUFTA Statutes ........................................................................... Tab 5

Tex. Bus. & Com. Code Ann. § 24.005 ...............................................A

Tex. Bus. & Com. Code Ann. § 24.006 ...............................................B

Tex. Bus. & Com. Code Ann. § 24.002 .............................................. C

Tex. Bus. & Com. Code Ann. § 24.003 .............................................. D

Tex. Bus. & Com. Code Ann. § 24.004 ...............................................E

67