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

6708789

THIRD COURT OF APPEALS

AUSTIN, TEXAS

8/28/2015 4:18:06 PM

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 8/28/2015 4:18:06 PM

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’ REPLY 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

TABLE OF CONTENTS

I. INDEX OF AUTHORITIES ................................................................ iv

II. STATEMENT OF FACTS .................................................................. 1

III. ARGUMENT ...................................................................................... 1

Issue One: Proper application 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 .................................................................. 1

B. Espinosa Did Not Meet His Burden under Ellender................... 2

C. The Settlement Agreement Does Not Allocate.......................... 4

D. Espinosa Sued the James Defendants for All Damages ........... 7

E. James Defendants’ Liability Never Adjudicated ........................ 8

F. Espinosa’s Capacity Argument ............................................... 10

G. Conclusion .............................................................................. 11

Issue Two: The trial court abused its discretion by overruling

Appellants’ objections to Espinosa’s summary judgment

Evidence. ......................................................................................... 13

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. Espinosa’s Summary Judgment Evidence .............................. 14

B. Creditor Claims ....................................................................... 15

C. Actual Intent ........................................................................... 18

D. Insolvency and Remaining Assets .......................................... 20

IV. PRAYER .......................................................................................... 23

ii

V. CERTIFICATE OF COMPLIANCE ................................................... 25

VI. CERTIFICATE OF SERVICE ........................................................... 25

VII. APPELLANTS’ APPENDIX .............................................................. 26

iii

INDEX OF AUTHORITITES

Cases

1. B.T. Healthcare, Inc. v. Honeycutt,

196 S.W.3d 296 (Tex.App.—Amarillo 2006, no pet.) ................ 6

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

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

pet.) .......................................................................................... 8

3. Camden Machine & Tool, Inc. v. Cascade Co.,

870 S.W.2d 304 (Tex.App.—Fort Worth 1993, no writ) ........... 15

4. Christus Health v. Dorriety,

345 S.W.3d 104 (Tex. App.—Houston [14th Dist.] 2011,

pet. denied) ............................................................................ 11

5. Cohen v. Arthur Anderson, L.L.P.,

106 S.W.3d 304 (Tex. App.—Houston [1st Dist.] 2003, no

pet.) ...................................................................................... 2, 8

6. Crown Life Ins. Co. v. Casteel,

22 S.W.3d 378 (Tex. 2000) ................................................... 2, 9

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

433 S.W.3d 773 (Tex. App.—Fort Worth 2014, pet.

dism’d) .................................................................... 8, 10, 11, 12

8. Flores v. Robinson Roofing & Constr. Co.,

161 S.W.3d 750 (Tex.App.—Fort Worth 2005, pet. denied) .... 16

9. Galle, Inc. v. Pool,

262 S.W.3d 564 (Tex. App.—Austin 2008, pet.

denied) ............................................................. 1, 3, 4, 9, 11, 12

10. Genie Indus. v. Matak,

462 S.W.3d 80 (Tex.App.—Corpus Christi 2012)...................... 6

11. Goose Creek Consol. Indep. Sch. Dist. of Chambers v. Jarrar’s

Plumbing, 74 S.W.3d 486 (Tex. App.—Texarkana 2002,

pet. denied) ....................................................................... 9, 12

iv

12. Great AM. Reserve Ins. Co. v. San Antonio Plumbing Supply

Co., 391 S.W.2d 41 (Tex. 1965) ............................................. 21

13. Howard v. Rayco Steel, Ltd.,

No. 04-11-00521-CV, 2012 Tex. App. LEXIS 8174

(Tex.App.—San Antonio Oct. 3, 2012, no pet.) (mem. op.) ..... 16

14. Imperial Lofts, Ltd. v. Imerial Woodworks, Inc.,

245 S.W.3d 1 (Tex.App.—Waco 2007, pet. denied) ............. 4, 5

15. LJ Charter, L.L.C. v. Air Am. Jet Charter, Inc.,

No. 14-08-00534-CV, 2009 Tex. App. LEXIS 9469

(Tex.App.—Houston [14th Dist.] Dec. 15,2009, pet.

denied) (mem. op.) ............................................................... 2, 5

16. Lundstrom v. United Servs. Auto. Ass’n,

192 S.W.3d 78 Tex.App.—Houston [14th Dist.] 2006, pet.

denied) ................................................................................. 5, 6

17. Mobil Oil Corp. v. Ellender,

968 S.W.2d 917 (Tex. 1998) ..................................... 2, 3, 11, 12

18. Osborne v. Jauregui, Inc.,

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

on reh’g) (en banc) ................................................................... 8

19. Ramsey v. Spray,

No. 02-08-00129-CV, 2009 Tex. App. LEXIS 9737

(Tex.App.—Fort Worth Dec. 23, 2009, pet. denied) (mem.

op.) ........................................................................................... 4

20. Renfro v. Cavazos,

No. 04-10-00617-CV, 2012 Tex. App. LEXIS 1230

(Tex.App.—San Antonio Feb. 15, 2012, pet. denied)

(mem. op.) .............................................................................. 15

21. Reservoir Sys. v. TGS-NOPEC,

335 S.W.3d 297 (Tex. App.—Houston [14th Dist.] 2010,

pet. denied) ........................................................................... 11

22. Rhone-Poulenc, Inc. v. Steel,

997 S.W.2d 217 (Tex. 1999) ................................................... 23

v

23. Rogers v. Ricane Enterprises, Inc.,

772 S.W.2d 76 (Tex. 1989) ..................................................... 15

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

858 S.W.2d 374 (Tex. 1993) ............................................. 18, 19

25. Stiles v. Resolution Trust Corp.,

867 S.W.2d 24 (Tex. 1993) .................................................... 16

26. United Blood Servs. v. Longoria,

938 S.W.2d 29 (Tex. 1997) ..................................................... 13

27. Walker v. Packer,

827 S.W.2d 833 (Tex.1992) ...................................................... 2

28. Waller v. Pidgeon,

No. 3:06-CV-0506-D, 2008 U.S. Dist. LEXIS 44238 (N.D.

Tex. June 5, 2008) (mem. op.)................................................ 22

29. Wein v. Sherman,

No. 03-10-00499-CV, 2013 Tex. App. 10666 (Tex. App.—

Austin Aug. 23, 2013, no pet.) (mem. op.) ................................ 1

30. Williams v. Performance Diesel,

No. 14-00063-CV, 2002 Tex. App. LEXIS 2735

(Tex.App.—Houston [14th Dist.] Apr. 18, 2002, no pet.) ......... 17

Statutes

1. Tex. Bus. & Com. Code Ann. § 24.005 ......................... 16, 17, 19, 20

2. Tex. Bus. & Com. Code Ann. § 24.006 ............................... 16, 17, 20

Rules

1. Tex. R. Civ. P. 166a......................................................................... 15

vi

Appellants James Poe and Senior Retirement Planners, LLC

(collectively, “Poe”) respond to Appellee Eduardo Espinosa’s Brief as

follows:

STATEMENT OF FACTS

Poe disputes that Espinosa’s statement of facts accurately represents

the factual matters before the trial court in the summary judgment record,

particularly because of the applicable summary judgment standard of

review and Espinosa’s failure to rely on that evidence in the trial court.

ARGUMENT

Issue One: Proper application 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

When there are no disputed fact questions affecting the settlement

credit analysis, this Court applies a de novo standard of review. See Galle,

Inc. v. Pool, 262 S.W.3d 564, 571 n.3 (Tex. App.—Austin 2008, pet.

denied); 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.).

Espinosa did not identify any factual disputes that would require application

1

of an abuse of discretion standard. Regardless, a “trial court has no

‘discretion’ in determining what the law is or applying the law to the facts.”

Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992).

B. Espinosa Did Not Meet His Burden under Ellender

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 show that it will not

receive a double recovery. Id. at 928. To meet this burden, the plaintiff

must “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.”

Cohen v. Arthur Anderson, L.L.P., 106 S.W.3d 304, 310 (Tex. App.—

Houston [1st Dist.] 2003, no pet.) (citing Crown Life Ins. Co. v. Casteel, 22

S.W.3d 378, 392 (Tex. 2000)). If the settlement covers damages for which

no other defendant could be liable and the settlement agreement allocates

the proceeds to apply only to the sole liability damages, the trial court

should not apply a settlement credit. See LJ Charter, L.L.C. v. Air Am. Jet

Charter, Inc., No. 14-08-00534-CV, 2009 Tex. App. LEXIS 9469, at *27-28

2

(Tex. App.—Houston [14th Dist.] Dec. 15, 2009, pet. denied) (mem. op.).

On the other hand, if there is no allocation within the settlement agreement,

the nonsettling defendant is entitled, as a matter of law, to a credit for the

entire settlement amount. Ellender, 968 S.W.2d at 928; Galle, 262 S.W.3d

at 573.

Espinosa does not dispute the applicability of this burden-shifting

framework, nor does Espinosa contend that Poe failed to meet his initial

burden. Moreover, Espinosa readily admits, as he must, that he sought

joint liability against the James Defendants for some claims but not others.

[Appellee’s Brief pp. 13-14] Despite this concession, Espinosa contends

that the “James settlement was credited against and extinguished [the

TUFTA] claim for separate damages against James.” [Appellee’s Brief p.

19] As discussed below, nothing within the James Settlement Agreement

supports this statement. [CR 2023-29] 1

Because Espinosa sued the James Defendants for both joint liability

and sole liability damages, the law required that Espinosa allocate the

James Settlement proceeds within the four corners of the James

Settlement Agreement to avoid a credit for nonsettling defendants. “[I]f

1

“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.

3

settlement monies were also paid on claims for which there is no joint and

several liability, it is the plaintiff’s burden to establish any reduction in a

settlement agreement by tendering a settlement agreement that allocates

the settlement amount between sole and joint liability claims.” Ramsey v.

Spray, No. 02-08-00129-CV, 2009 Tex. App. LEXIS 9737, at *9 (Tex.

App.—Fort Worth Dec. 23, 2009, pet. denied) (mem. op.); see Galle, 262

S.W.3d at 573 (noting “theoretic possibility” that settlement agreement

covered only settling defendant’s sole liability damages but holding

plaintiffs had burden to allocate settlement proceeds). Espinosa failed to

do so, entitling Poe to a credit for the entire James Settlement.

C. The Settlement Agreement Does Not Allocate

Espinosa incorrectly contends that the following language in the

James Settlement Agreement allocated settlement proceeds:

Nothing in this release language nor any other provision of this

Agreement is intended to release any claims Plaintiffs have

against the Licensees, Wells Fargo, or any other party to the

Lawsuit. Those claims are expressly and specifically reserved.

Except as expressly provided herein, there are no third party

beneficiaries to this Agreement.

[Appellee’s Brief p. 21; CR 2027]

Very similar language was held not to allocate settlement proceeds.

See Imperial Lofts, Ltd. v. Imperial Woodworks, Inc., 245 S.W.3d 1, 6 (Tex.

4

App.—Waco 2007, pet. denied). There, the settlement agreement between

Lofts and Travelers stated:

IMPERIAL LOFTS and TRAVELERS expressly agree that the

Release only extends to the above-described policy and the

first-party property claim asserted by IMPERIAL LOFTS. It

shall not apply to any third-party claims asserted by IMPERIAL

LOFTS in the [lawsuit].

Id. at 6 n.4. The court expressly held that this settlement agreement “does

not allocate the $600,000 settlement payment” and noted that the plaintiff

apparently confused a release with a settlement credit. Id. at 6 & n.4.

Allocation is different than clarifying that the settlement agreement does not

release other parties.

Espinosa could have allocated had he chosen to do so. In LJ

Charter, the settlement agreement stated that the settlement was for “fuel

and storage” and that it resolved a quantum meruit claim lodged only

against the settling party. See 2009 Tex. App. LEXIS 9469 at *27. The

court held that because the settlement proceeds were for the sole liability of

the settling party and because the settlement agreement allocated the

proceeds to the sole liability damages, settlement credits would not apply to

those separate damages. Id. at *27-28. Although not decided on one-

satisfaction grounds, the settlement agreement in Lundstrom v. United

Services Automobile Association specified that the $400,000 settlement

5

was apportioned as follows: $95,000 for a townhome purchase, $30,000 for

damages to contents of the townhome, and $275,000 for physical injuries

to the plaintiffs. See 192 S.W.3d 78, 82 (Tex. App.—Houston [14th Dist.]

2006, pet. denied); see also Genie Indus. v. Matak, 462 S.W.3d 80, 92

(Tex. App.—Corpus Christi 2012) (noting settlement agreement allocated

settlement proceeds only to payment of actual damages, not punitive

damages), rev’d on other grounds, 462 S.W.3d 1 (Tex. 2015).

Espinosa cites a case from the Amarillo Court of Appeals for the

proposition that allocation does not require any magic language. See B.T.

Healthcare, Inc. v. Honeycutt, 196 S.W.3d 296, 299 (Tex. App.—Amarillo

2006, no pet.). While true, the Honeycutt case actually supports Poe’s

position. The Honeycutt Court held that the settlement agreement did not

allocate between sole and joint liability damages because it released

“claims brought or that could have been brought, events described in and

issues related in any way to the lawsuit” and because Honeycutt’s “live

pleading at the time of the settlement . . . expressly sought to hold all the

defendants jointly and severally liable for his injuries.” Id. Much like

Honeycutt, in which the trial court erred by not applying the settlement

credit, Espinosa sought joint liability against the James Defendants for all

damages and released the James Defendants from “any and all claims”

6

that Espinosa brought or could have brought against the James

Defendants in the lawsuit. [CR 2025]

The James Settlement Agreement does not allocate settlement

proceeds to apply only to the James Defendants’ sole liability. [CR 2023-

29] A settlement credit was therefore required.

D. Espinosa Sued the James Defendants for All Damages

Espinosa boldly asserts in his brief that “[a]t no point did the Receiver

seek to hold James jointly liable with Poe for his commissions.” [Appellee’s

Brief p. 14] To the contrary, Espinosa devoted thirty pages of his petition to

allege that the James Defendants orchestrated everything Retirement

Value did, including the recruitment and payment of Licensees such as

Poe, and that the James Defendants were therefore liable for the entire

$77.6 million invested in Retirement Value by the participants. [CR 613,

639-669] As Espinosa asserted in his petition, the commission payments to

Licensees were made from the participants’ initial loan proceeds. [CR 681]

Review of Espinosa’s live pleading indisputably establishes that

Espinosa sued the James Defendants for all damages alleged in the case,

including the commissions paid to Licensees such as Poe. Espinosa

alleged that the participants loaned over $77 million to Retirement Value,

[CR 680] that Retirement Value paid commissions to Licensees from the

7

participants’ $77 million in loan proceeds, [CR 681] that Retirement Value

had been ordered to make restitution to participants for the $77 million, [CR

691] and that Espinosa sued the James Defendants for recovery of the

entire $77 million. [CR 680-81, 690-91; see also CR 641, 664, 687-89] It is

inaccurate to now claim that Espinosa never sued the James Defendants

for Poe’s commissions because Poe’s commissions were included within

the lump sum Espinosa sued the James Defendants to recover. 2

E. James Defendants’ Liability Never Adjudicated

Espinosa suggests that this Court should look only to the judgment

against Poe to determine whether there should be any settlement credit.

[Appellee’s Brief p. 17] This is an incomplete statement of the law. The

Court must look to both the judgment against Poe and Espinosa’s

pleadings against the James Defendants to determine whether Espinosa

sued both defendants for the same damages. See Dalworth Restoration,

Inc. v. Rife-Marshall, 433 S.W.3d 773, 785 (Tex. App.—Fort Worth 2014,

pet. dism’d) (noting that “the record confirms that some of the settled and

tried claims, as pled, overlapped to the extent that the claims commonly

2

That Espinosa did not assert a TUFTA claim against the James Defendants for

recovery of Poe’s commissions is irrelevant because application of the one-satisfaction

rule does not depend on the cause of action asserted and instead focuses on the injury.

See Osborne v. Jauregui, Inc., 252 S.W.3d 70, 75 (Tex. App.—Austin 2008, pet.

denied) (en banc); Cohen, 106 S.W.3d at 310; Buccaneer Homes of Alabama, Inc. v.

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

injury is the payment of commissions to Poe.

8

sought damages related to appellee’s personal possessions”); Galle, 262

S.W.3d at 571 (noting overlapping damage categories alleged in live

pleadings); Goose Creek Consol. Indep. Sch. Dist. of Chambers v. Jarrar’s

Plumbing, 74 S.W.3d 486, 503 (Tex. App.—Texarkana 2002, pet. denied)

(reviewing pleading allegations against settling defendant to determine

whether damages overlapped with those awarded against nonsettling

defendant). Espinosa unquestionably sued the James Defendants for all

damages, including the damages ultimately awarded against Poe.

Espinosa continues by arguing that there can be no settlement credit

because Poe was not found jointly liable with the James Defendants.

[Appellee’s Brief pp. 18] This too is wrong because the James Defendants’

liability was never adjudicated. 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 the James Defendants not settled,

the trial court may have ultimately adjudged them jointly liable for the entire

$77 million, just as Espinosa alleged in his petition.

Moreover, Espinosa’s contention that only the Poe judgment is

relevant does not withstand scrutiny. A judgment against a nonsettling

defendant will rarely if ever reflect that the nonsettling defendant was jointly

9

liable with a settling party. For example, the Dalworth Restoration Court

reversed and rendered judgment for the nonsettling defendant because an

unallocated, pretrial settlement exceeded the nonsettling defendant’s

liability as found by the jury. See 433 S.W.3d at 782-83, 788. The trial

court’s judgment in that case is in the appendix to this reply brief. [Reply

App. Tab 1] That judgment does not state that the nonsettling defendant

was jointly liable with any other party. 3 That the judgment against Poe

does not reflect joint liability with the James Defendants is not dispositive.

F. Espinosa’s Capacity Argument

Espinosa’s argument that he asserted different claims in separate

capacities is new and was not argued to the trial court. [CR 2081-86; 2 RR

13-38] If not waived, the argument is without merit because the James

Settlement Agreement says nothing about Espinosa having settled with the

James Defendants in only one capacity or another or about Espinosa

collecting settlement proceeds in only one capacity or another. [CR 2023-

29] Even if Espinosa sought damages in two capacities or for distinct

injuries, he sued the James Defendants for all damages without allocating

3

The Dalworth Court also held that the jury’s finding that Dalworth was “wholly

responsible for appellee’s injuries [did] not preclude the application of a settlement

credit that relates to the same injuries.” Id. at 787

10

the settlement proceeds. 4 Without language allocating the settlement

proceeds among the allegedly different capacities and injuries, the law

presumes that the settlement proceeds apply only to joint damages,

entitling Poe to a credit for the full amount of the unallocated settlement.

Ellender, 968 S.W.2d at 928; Dalworth Restoration, 433 S.W.3d at 782;

Galle, 262 S.W.3d at 573.

G. Conclusion

The Supreme Court of Texas decided Ellender in 1998 and

announced the burden-shifting framework that Poe asks this Court to apply

in this appeal. Since Ellender, Texas litigants have been on notice that it is

the plaintiff’s burden to present a settlement agreement allocating

settlement proceeds between joint liability and sole liability damages and

that the failure to do so entitles nonsettling defendants to a credit for the

entire amount of the unallocated settlement. See 968 S.W.2d at 928. The

Supreme Court placed this burden on the plaintiff, recognizing that the

plaintiff is in a better position than nonsettling defendants to allocate

damages within a settlement agreement and that “[n]onsettling parties

4

In addition, the cases upon which Espinosa relies are easily distinguished. One

involved a birth-injury settlement 22 years before the wrongful death lawsuit involving

the child’s mother. See Christus Health v. Dorriety, 345 S.W.3d 104, 114 (Tex. App.—

Houston [14th Dist.] 2011, pet. denied). The other held that the appellant waived his

argument under the one-satisfaction rule. Reservoir Sys. v. TGS-NOPEC Geophysical

Co., L.P., 335 S.W.3d 297, 308 (Tex. App.—Houston [14th Dist.] 2010, pet. denied).

11

should not be penalized for events over which they have no control.” Id.

Applying the law and rendering judgment for Poe does not lead to an

absurd result; it leads to the result required by the law.

Poe met his burden under Ellender and its progeny by advising the

trial court of the amount of the James Defendants’ settlement and asking

the trial court to apply a settlement credit prior to entry of judgment.

Espinosa could have avoided application of settlement credits for the

nonsettling defendants by clarifying within the James Settlement

Agreement that the proceeds applied only for the profits that the James

Defendants allegedly received, only for the return of money paid to the

James Defendants for the purchase of insurance policies, or only for

punitive damages. Espinosa did not do so. Espinosa therefore failed to

meet his burden under Ellender, and Poe was entitled to a credit for the

entire $5.5 million James settlement and entry of a take-nothing judgment

in his favor. See Ellender, 968 S.W.2d at 928; Dalworth Restoration, 433

S.W.3d at 782-83; Galle, 262 S.W.3d at 573; Goose Creek, 74 S.W.3d 486,

503-04. The trial court erred by failing to render judgment that Espinosa

take nothing against Poe.

12

Issue Two: The trial court abused its discretion by overruling

Appellants’ objections to Espinosa’s summary judgment evidence.

Espinosa contends that Burchett was qualified to offer the opinions

stated in his summary judgment affidavit solely because Burchett is a CPA.

[Appellee’s Brief p. 27] Burchett’s affidavit states only that he is “a certified

public accountant and ha[s] been since 1992.” [2nd Supp CR 233] This is

not enough. The summary judgment affidavit must establish the expert’s

qualifications to testify, and the burden of proving qualifications is on the

party proffering the expert as a witness. See United Blood Servs. v.

Longoria, 938 S.W.2d 29, 30-31 (Tex. 1997). Burchett’s affidavit does not

satisfy this standard by affirmatively establishing his qualifications to testify,

and the trial court thus abused its discretion by overruling Poe’s objection

to Burchett’s affidavit testimony.

Espinosa also contends that he was qualified to testify about the

value of Retirement Value’s assets because he, as receiver, was the owner

of the assets. [Appellee’s Brief p. 22] Neither of the cases cited by

Espinosa addresses testimony of a receiver about the value of receivership

assets. Because Espinosa’s summary judgment affidavit did not establish

his qualifications to testify, the trial court abused its discretion by overruling

Poe’s objections.

13

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. Espinosa’s Summary Judgment Evidence

Most of the evidence Espinosa relies on in his Appellee’s Brief was

never cited to the trial court in support of his motion for summary judgment.

[2nd Supp CR 3-22] For example, in the TUFTA section of his motion for

summary judgment (the only ground upon which the trial court granted

summary judgment), Espinosa cited only a few paragraphs in the Espinosa

and Burchett affidavits and made reference to only two individual pages of

the exhibits attached to the Espinosa and Burchett affidavits. [2nd Supp CR

17, 13-18] Despite having not pointed the trial court or the parties to any of

the other hundreds of pages attached to his motion for summary judgment

or to another almost 450 pages of documents he purportedly incorporated

by reference into his motion for summary judgment, [2nd Supp CR 4; see

CR 170-610] Espinosa now relies primarily on that unreferenced evidence

in arguing that the summary judgment against Poe should be affirmed.

The summary judgment cannot be affirmed based on the

unreferenced evidence because Espinosa did not rely on it in the trial court

and because his general references to summary judgment evidence are

14

insufficient to sustain a motion for summary judgment. Tex. R. Civ. P.

166a(c) (“The motion for summary judgment shall state the specific

grounds therefor.”); see Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76,

81 (Tex. 1989) (“[A] general reference to a voluminous record which does

not direct the trial court and parties to the evidence on which the movant

relies is insufficient.”); Camden Machine & Tool, Inc. v. Cascade Co., 870

S.W.2d 304, 310 (Tex. App.—Fort Worth 1993, no writ) (disallowing

adoption of a co-defendant’s motion for summary judgment by reference

because the motion itself did not set forth sufficient grounds to support

summary judgment); see also Renfro v. Cavazos, No. 04-10-00617-CV,

2012 Tex. App. LEXIS 1230, at *14-16 (Tex. App.—San Antonio Feb. 15,

2012, pet. denied) (mem. op.) (rejecting nonmovant’s attempt to

incorporate her prior motion for summary judgment into her summary

judgment response). This Court should not consider the evidence on which

Espinosa did not rely in the trial court.

B. Creditor Claims – TUFTA § 24.005(a) & § 24.006(a)5

Commission payments to Licensees were made shortly after

Retirement Value’s receipt of the participants’ loan proceeds. [2nd Supp CR

205-06] Poe presented evidence in his summary judgment response that

5

See Appellants’ Brief, pp. 41-44.

15

the participants in this case would have claims only once the life insurance

policies matured. [Appellant’s Brief, pp. 41-44; see, e.g., 2nd Supp CR 642-

62, 720] Those claims thus did not arise “before or within a reasonable time

after the transfer was made or the obligation was incurred” or “before the

transfer was made or the obligation was incurred.” Tex. Bus. & Com. Code

Ann. §§ 24.005(a), .006(a).

Espinosa does not dispute Poe’s evidence but now contends that the

participants always had a claim against Retirement Value because of

Retirement Value’s securities fraud. [Appellee’s Brief, p. 38] Espinosa did

not make this argument to the trial court, [2nd Supp CR 13-18, CR 1947-50]

and it cannot be a ground on which this Court affirms summary judgment in

Espinosa’s favor. 6 See, e.g., Stiles v. Resolution Trust Corp., 867 S.W.2d

24, 26 (Tex. 1993).

At minimum, though, there are fact issues as to when those claims

arose in relation to commission payments to Poe. See generally Howard v.

Rayco Steel, Ltd., No. 04-11-00521-CV, 2012 Tex. App. LEXIS 8174, at *7

(Tex. App.—San Antonio Oct. 3, 2012, no pet.) (mem. op.) (noting that trial

court found that the plaintiff’s claim arose on the date it filed its lawsuit);

Flores v. Robinson Roofing & Constr. Co., 161 S.W.3d 750, 757 (Tex.

6

Espinosa argued in his reply brief only that the “investors were indisputably

creditors since they loaned RV money.” [CR 1948-49]

16

App.—Fort Worth 2005, pet. denied) (noting fact questions in summary

judgment proceeding when alleged transfer occurred after a lawsuit was

filed). A claim need not be reduced to judgment to allow for relief under

TUFTA, but the summary judgment evidence must still establish the

existence of qualifying claims as a matter of law. See Williams v.

Performance Diesel, No. 14-00063-CV, 2002 Tex. App. LEXIS 2735, at *9-

14 (Tex. App.—Houston [14th Dist.] Apr. 18, 2002, no pet.) (mem. op.)

(holding plaintiff failed to prove claim arising at time of or within reasonable

time of transfers as a matter of law).

This lawsuit was filed on May 5, 2010, and the transfers to Poe

necessarily occurred prior to that date. [2nd Supp CR 72, 319] Espinosa

references the trial court’s order requiring Retirement Value to make

restitution to participants in February 2013, but Espinosa did not reference

any other evidence in his motion for summary judgment to show that there

were claims that arose before or within a reasonable time after any

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

There are thus genuine issues of material fact as to whether any

participants had qualifying claims under TUFTA. Because this element is

common to each of Espinosa’s TUFTA theories against Poe, the summary

judgment must be reversed in its entirety.

17

C. Actual Intent – TUFTA § 24.005(a)(1)7

Espinosa again relies on Ponzi scheme and fraudulent scheme cases

in an effort to meet his burden of proving actual intent as a matter of law,

arguing in his brief that “[p]roving that a debtor operated as a Ponzi scheme

proves actual intent to hinder, delay, or defraud any creditor or debtor

required by TUFTA § 24.005(a)(1).” [Appellee Brief, p. 34-35; pp. 32-38]

The trial court did not, however, grant summary judgment for Espinosa on

this theory, meaning Espinosa cannot now rely on it as a basis for this

Court to affirm the summary judgment. [CR 1973-74] See State Farm Fire

& Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993).

Espinosa attempts to sidestep this hurdle by claiming that there is no

difference between a Ponzi scheme and a fraudulent scheme. [Appellee

Brief, p. 34] Distinction or not, the trial court denied summary judgment on

Espinosa’s theory that Retirement Value operated as a Ponzi scheme or

fraudulent scam. Espinosa’s motion for summary judgment included seven

pages of argument that the Licensees were participants in a Ponzi scheme

or fraudulent scam, that “agents in a fraudulent investment scam are

required to return the income derived from the scam,” and that the

Licensees “have to return their commissions as a matter of law. [2nd CR

7

See Appellants’ Brief, pp. 60-64.

18

Supp 7-13] In a separate section of his motion, Espinosa asserted an

alternative TUFTA argument. [2nd Supp CR 13] The trial court granted

summary judgment only on Espinosa’s alternative TUFTA claim. [CR 1973-

74] In other words, Espinosa expressly asked the trial court to grant

summary judgment on the ground that Retirement Value operated as a

Ponzi scheme or fraudulent scam—the same argument he now relies on as

proof of an alleged fraudulent intent for transfers to Poe—but the trial court

denied summary judgment on that theory of liability. The trial court’s order

is specific to the TUFTA claim only, meaning this Court cannot affirm

summary judgment on a ground on which the trial court denied summary

judgment. See id.

This is significant here because Espinosa points to no other evidence

of fraudulent intent for any transfer to Poe under Tex. Bus. & Com. Code

Ann. § 24.005(a)(1). The statute clearly requires that the debtor make “the

transfer” with fraudulent intent, 8 but Espinosa’s only argument is that all

transfers were fraudulent because Retirement Value operated as a Ponzi

scheme or fraudulent scam, the theory on which the trial court denied

summary judgment. Nowhere in his briefing to the trial court or to this

8

In relevant part, section 24.005(a)(1) states that “[a] transfer made . . . by a

debtor is fraudulent . . . if the debtor made the transfer . . . with actual intent to hinder,

delay, or defraud any creditor of the debtor.” Tex. Bus. & Com. Code Ann. §

24.005(a)(1) (emphasis added).

19

Court does Espinosa attempt to show evidence of fraudulent intent with

regard to a commission transfer to Poe. Because section 24.005(a)(1)

requires proof that a specific transfer was made with fraudulent intent and

because the trial court denied summary judgment on Espinosa’s theory that

all transfers to Licensees were fraudulent, Espinosa failed to prove as a

matter of law that Retirement Value transferred commissions to Poe in

violation of section 24.005(a)(1).

D. Insolvency and Remaining Assets – TUFTA § 24.005(a)(2) & §

24.006(a) 9

Espinosa clarified that he does not contend that a commission

payment to Poe rendered Retirement Value insolvent. [Appellee’s Brief, p.

48] Rather, Espinosa contends that Retirement Value was insolvent from

its inception, [Appellee Brief p. 48] but the summary judgment evidence is

conflicting on that issue in many respects.

Retirement Value had $154 million in life insurance policies and $25

million in cash and securities at the time of the receivership and gained

another $4 million in cash by August 2011. [2nd Supp CR 92-93, 734-38]

Retirement Value’s liabilities are alleged to be approximately $77 million,

far less than its assets. Retirement Value never had an obligation to

9

See Appellants’ Brief, pp. 44-60.

20

reserve premiums sufficient to cover all insurance policies through maturity

because the participants were obligated to contribute once the initial

premium reserves were exhausted, which would fund the policies to

maturity. [2nd Supp CR 645, 642-62] The maturing policies then funded the

payments back to the participants. [2nd Supp CR 720, 645] The cash and

insurance policies on hand exceeded the amount of Retirement Value’s

liabilities.

Espinosa told the bankruptcy court that Retirement Value had forty-

eight life insurance policies and about $30 million in cash, that Retirement

Value needed about $19 million in cash to pay for all of the policies through

maturity, and that there was 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] This evidence, much of it from Espinosa

himself, contradicts Espinosa’s contentions that Retirement Value was

insolvent from its inception.

There were also issues with Espinosa’s summary judgment evidence,

including qualifications, methodology, and credibility determinations that

should have been reserved for a jury. It is well settled that all inferences,

including credibility and weight-of-the-evidence determinations, must be

resolved in favor of the nonmovant. See, e.g., Great Am. Reserve Ins. Co.

21

v. San Antonio Plumbing Supply Co., 391 S.W.2d 41, 47 (Tex. 1965).

Among other things, Burchett admitted that at policy maturity, Retirement

Value would receive the face amount of the policy and would have more

than enough money to pay the $77 million in liability to the participants. [2nd

Supp CR 758] 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. [2nd

Supp CR 761] See Waller v. Pidgeon, No. 3:06-CV-0506-D, 2008 U.S. Dist.

LEXIS 44238, at *16-22 (N. D. Tex. June 5, 2008) (mem. op.) (holding that

plaintiff receiver failed to prove insolvency as a matter of law because

TUFTA does not require book value for liabilities and that the adjusted fair

value of defendant’s liabilities was less than the fair value of the assets).

The law thus contemplates the adjustment of liabilities to represent their fair

value, a calculation Burchett did not perform. There are also fact issues as

to whether Espinosa and his experts credibly testified to the fair value of

Retirement Value’s assets. Fact questions thus remain as to the fair value

of Retirement Value’s liabilities and assets.

22

Espinosa also contends that Poe presented no expert testimony to

contradict Espinosa’s evidence of the fair value of Retirement Value’s

assets. [Appellee Brief p. 30, 50] But the law does not impose a burden on

Poe to present expert testimony in opposition to a motion for summary

judgment when the movant’s own summary judgment evidence fails to

establish entitlement to judgment as a matter of law. Rhone-Poulenc, Inc.

v. Steel, 997 S.W.2d 217, 222-23 (Tex. 1999) (“The nonmovant has no

burden to respond to a summary judgment motion unless the movant

conclusively establishes its cause of action or defense.”). Regardless, Poe

presented substantial evidence in response to the motion for summary

judgment, including excerpts from the depositions of Espinosa and Burchett

that called their opinions into question. All conflicts in the summary

judgment evidence must be resolved in Poe’s favor, including the

inconsistencies within Espinosa’s own evidence and the controverting

evidence presented through Poe’s response, and the trial court erred by

granting Espinosa’s motion for summary judgment.

PRAYER

Appellants Poe and Senior Retirement Planners, LLC respectfully

request that the Court reverse the trial court’s judgment in its entirety and

render a take-nothing judgment against Espinosa for all of his claims

23

against Appellants. Alternatively, Appellants pray that the Court reverse

the trial court's judgment and remand for a new trial. Appellants also

generally pray for rendition of judgment in their favor, or alternatively, for

remand for a new trial on any ground this Court deems 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

24

CERTIFICATE OF COMPLIANCE

I certify that this brief was produced on a computer using Microsoft

Word and contains 5,171 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 21 a, Tex. R. Civ. P., to all

counsel or parties of record as shown below.

Dated this 281h day of August, 2015.

Via electronic service and e-mail:

John W. Thomas

jthomas@gbkh.com

George, Brothers, Kincaid & Horton, L.L.P.

114 W. Seventh, Suite 1100

Austin, TX 78701-3015

ATTORNEY FOR APPELLEE

Scott Lindsey

25

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’ REPLY APPENDIX

I. Final Judgment – Cause No. 17-237012-09,

Rife-Marshall v. Dalworth Restoration, Inc. ................................. Tab 1

26

CAUSE NO. 17-237012-09

MRS. ANGIE § IN THE DISTRICT COURT

RIFE-MARSHALL §

§

Plaintiff, §

§

vs. § TARRANT COUNTY, TEXAS

§

DALWORTH RESTORATION, INC. §

(LIBERTY MUTUAL) §

Defendant. §

§

§ 17T11 JUDICIAL DISTRICT

FINAL JUDGMENT

BE IT REMEMBERED THAT this case came on for trial by jury at 9:00a.m. on Monday,

16 April 2012, and the parties were present and had with them their counsel, and all did at that time

announce ready, and a jury was selected and seated, and then the presentation of the case to the jury

did begin, and it continued thereafter from day to day until the jury returned a verdict; and during J

that time period and prior to the time when jury argument was completed and the jury retired to

deliberate no party requested and received leave of Court to file any late filed pleading; but after the

jury did retire to deliberate one party, being Plaintiff, did request permission pursuant to Rule 66 for

the filing of a Trial Amendment, which said request was Denied; and the jury did continue its

deliberations and on the afternoon of Friday, 20 April2012, did return its verdict in open court; and

at that time, upon request of counsel for Plaintiff, and with no objection made, the jury was polled,

and it appearing that there was in fact a verdict of the jury with no indication to the contrary when

the jury was polled by the Court, the verdict of the jury was then received and filed, on the afternoon

FINAL JUDGMENT Page I

Copy mailed to each Pro Se

AndAttomey..of~ecord · Court's Minutes - \\

~-\\.~T-\'~ . Transaction#~

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I

of Friday, 20 Apri120 12, and at that time the jury was dismissed, no party objecting to the dismissal

of the jury; and the jury by its verdict having found fault (negligence) on the part of one party only,

that being defendant, Dalworth Restoration, Inc., and having made findings that this negligence

caused harm to Plaintiff for "damage related to personal property" in the amount of $I 0 I ,000.00,

and caused "mental anguish sustained by Plaintiff in the past" in the amount of $50,000.00, which

totals $151,000.00; and the Court finding from the record of the case that claims in this case were

first filed by Plaintiff against the defendant, Dalworth Restoration, Inc., on or about I1 January

20 I 0; and the Court having confirmed that there is no evidence in the record of any offer of

settlement or other activity which would impact the calculation of pre-judgment interest under the ·

statutes of the State of Texas, and it appearing therefore that the amount of pre-judgment interest to

be due and owing in this case through the date of the signature of this judgment 1 is $12,080.00; it

is, therefore,

ORDERED, ADJUDGED AND DECREED, that PLAINTIFF, MRS. ANGIE RIFE-

MARSHALL, to have and recover against DEFENDANT, DALWORTH RESTORATION, INC.,

as damages, including pre-judgment interest, the total amount of $163 ,080.00; and, it is, further,

ORDERED, ADJUDGED AND DECREED, that, from the date of the signing of this

judgment until the date of satisfaction in full of this judgment, post-judgment interest shall accrue

at the highest lawful and statutory rate as provided by the laws of the State of Texas; and, it is,

Actually, this calculation is based on a rate of 5% per annum, and assumes this judgment had been

signed on the date (20 April 2012) when the jury returned its verdict; and also, since the claim ·

against Dalworth was filed [see: Court EXHIBIT "2"] on 11 January 2010, and the 18P1 day

thereafter is 11 July 2010, and the length oftime from 11 July 2010 to 20 April2012 is in excess of

21 months, the total interest rate for this period has been "rounded down" to 8%; and $151,000.00

X 8% = $12,080.00.

FINAL JUDGMENT Page2

further,

ORDERED, ADJUDGED AND DECREED, that Plaintiff shall, and does, recover over and

against Defendant all taxable costs of court, which shall be established through the preparation of

a proper Bill of Costs by the Clerk of this Court in customary manner, should such Bill of Costs be

requested by Plaintiff; and, it is, further,

ORDERED, ADJUDGED AND DECREED, that, upon request of Plaintiff, execution shall ·

issue from this Court in connection with this judgment, and for enforcement and satisfaction of it,

there being no indication that any portion of the amount awarded to Plaintiff by this judgment, or

any portion of that amount, has been paid by DEFEND ANT, Dal worth Restoration, Inc., to Plaintiff.

Signed this the '2012.

FINAL JUDGMENT Page3