Salvatore Magaraci & Estate Prot. Planning Corp. v. Eduardo S. Espinosa in His Capacity Value, LLC
| Decision Date | 04 March 2016 |
| Docket Number | NO. 03-14-00518-CV,NO. 03-14-00515-CV,03-14-00515-CV,03-14-00518-CV |
| Parties | Salvatore Magaraci and Estate Protection Planning Corporation, Appellants v. Eduardo S. Espinosa in his Capacity as Receiver of Retirement Value, LLC, Appellee James Poe and Senior Retirement Planners, LLC, Appellants v. Eduardo S. Espinosa in his Capacity as Receiver of Retirement Value, LLC, Appellee |
| Court | Texas Court of Appeals |
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 419TH JUDICIAL DISTRICT
NO. D-1-GN-14-001581, HONORABLE GISELA D. TRIANA, JUDGE PRESIDING
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT
NO. D-1-GN-14-001582, HONORABLE GISELA D. TRIANA, JUDGE PRESIDING
Appellants Estate Protection Planning Corporation; Estate Protection Planning's principal, Salvatore Magaraci; Senior Retirement Planners, LLC; and Senior Retirement Planners' principal, James Poe1 filed these appeals complaining of the judgments entered against them in the underlying receivership proceeding, in which the trial court refused to apply a settlement credit to the damages awarded against them. We affirm the trial court's judgments.
Factual and Procedural Background
According to the pleadings filed in the underlying proceeding, from April 2009 through March 2010, Retirement Value, LLC ("RV") sold securities based on life insurance policies, seeking investors to fund the purchase of the life insurance policies. In each case, the person insured was not the policy's beneficiary; instead, RV was the "policy owner purchasing the death benefit" at a discount. An investor loaned funds to RV that were used to purchase a particular life insurance policy; pay administrative costs, fees, and commissions; and maintain a premium reserve to pay premiums until the insured's death.2 As a return on investment, the investor was to receive the original loan proceeds plus 16.5% interest per year for the insured's life expectancy; for example, an investor who provided $10,000 would receive back $18,800 if the insured's life expectancy was sixty-four months. If the insured died earlier than the projected life expectancy, the investor was also to receive back unpaid premiums. If the insured outlived the life expectancy by more than twenty-four months, however, the investor would have to pay future premiums or forfeit all of his past investments in the policy. The investments were obtained through sales agents who sold the securitiesor recruited other agents to sell the securities to investors ("the Licensees"). In total, more than 900 investors loaned about $77 million to RV.
In 2010, the State sued RV, alleging that RV's investment scheme violated the Texas Securities Act.3 The trial court appointed appellee Eduardo S. Espinosa as receiver for RV. Espinosa was given the authority and responsibility of gathering RV's assets and liquidating all assets other than the life insurance policies; Espinosa was to maintain the policies through the deaths of the insureds to the extent that assets were available and to maintain "adequate reserves" to pay anticipated premiums in the future. The State eventually obtained a partial summary judgment finding that RV had engaged in fraud and ordering it to repay $77.6 million to its investors.
Acting on behalf of RV, Espinosa filed third-party claims against James Settlement Services, LLC and three individuals associated with James Settlement Services ("the James Defendants"),4 and the Licensees, who sold the securities or recruited other sales agents; appellants were among the Licensees sued by Espinosa. He alleged that the Licensees had knowingly participated in the fraudulent scheme or, at best, ignored signs that the scheme was fraudulent and that, in returnfor their work selling the securities, the Licensees were paid "extraordinarily high" commissions. Espinosa asserted the following claims against the James Defendants and the Licensees jointly and severally: breach of fiduciary duty, conspiracy to breach fiduciary duty, aiding and abetting breach of fiduciary duty, breach of the licensee agreement, and various violations of state securities law. Espinosa also alleged claims for fraudulent transfer under the Uniform Fraudulent Transfer Act ("UFTA"), specifying the commissions paid to each Licensee and asking to have the various commission payments voided. See Tex. Bus. & Com. Code §§ 24.001-.013. The James Defendants eventually settled with Espinosa for $5.5 million ("the James Settlement").5
Espinosa moved for partial summary judgment against the Licensees on his claims of fraudulent transfer, and appellants filed no-evidence motions as to all of Espinosa's claims. The trial court granted Espinosa's motion as to his UFTA claims and granted appellants' motions as to the rest of Espinosa's claims. Appellants then asked the trial court to apply a settlement credit to any sums that would be assessed against them on the UFTA claims, noting that the James Settlement did not allocate the settlement funds to claims brought against the James Defendants alone. Because the James Settlement funds exceeded the commissions received by appellants, they argued, the court should enter take-nothing judgments against them. The trial court denied the requested settlement credit and entered judgments against appellants. Salvatore Magaraci and Estate Protection Planning were determined to be jointly and severally liable for $271,658.55, plus interest and attorney's fees; Estate Protection Planning was found individually liable for an additional $116,930.56, plus interestand attorney's fees; and James Poe and Senior Retirement Planners were found jointly and severally liable for $485,564.13, plus interest and attorney's fees.
General Receivership Principles
A receiver is an Security Trust Co. v. Lipscomb Cty., 180 S.W.2d 151, 158 (Tex. 1944). In asserting or suing for an entity's claims, the receiver essentially stands in the shoes of that entity and has no greater rights than if it were the entity itself. See El Paso Elec. Co. v. Texas Dep't of Ins., 937 S.W.2d 432, 436 (Tex. 1996); Forex Capital Mkts., LLC v. Crawford, No. 05-14-00341-CV, 2014 WL 7498051, at *3 (Tex. App.—Dallas Dec. 31, 2014, pet. denied) (mem. op.); Webb v. Reynolds Transp., Inc., 949 S.W.2d 364, 367 (Tex. App.—San Antonio 1997, no writ). "As a general rule, a receiver may sue only for claims of the entities in receivership, and may not assert claims for injuries directly suffered by the investors." Forex Capital Mkts., 2014 WL 7498051, at *3. In other words, "a receiver does not have an unfettered right to represent creditors and shareholders of a corporation" and "may represent creditors and shareholders only to the extent that the cause of action seeks to preserve or recover corporate assets." Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. E Court, Inc., No. 03-02-00714-CV, 2003 WL 21025030, at *5 (Tex. App.—Austin May 8, 2003, no pet.) (mem. op.) (citing Cotten v. Republic Nat'l Bank, 395 S.W.2d 930, 941 (Tex. Civ. App.—Dallas 1965, writ ref'd n.r.e.)).
Discussion
Appellants argue that they were entitled to settlement credits that should have resulted in take-nothing judgments against them. Poe additionally argues that the trial court erred in granting summary judgment on Espinosa's UFTA claims. He attacks the court's decision to overrule Poe's objections to Espinosa's summary judgment evidence, contends that there were genuine issues of material fact as to at least one element of each of the UFTA theories, and asserts that Espinosa lacked standing to bring the claims. Because the issue of settlement credits arises only if summary judgment was properly granted on the UFTA claims, we address Poe's individual arguments first.
Poe's objections to Espinosa's summary judgment evidence
Poe objected to portions of two affidavits by Espinosa and the affidavit by S. Todd Burchett, a certified public accountant hired by Espinosa to provide litigation consulting services and to conduct analyses related to RV. Poe asserted that Espinosa and Burchett did not establish their qualifications to offer expert opinions; used incorrect calculations of RV's assets and liabilities; used a different discount rate to value RV's liabilities than to value its insurance-policy assets, thus violating accounting principles; relied on inadequate and untested information provided by Lewis & Ellis, Inc., the actuarial firm hired by Espinosa to conduct an independent valuation of RV's policies and portfolio; parroted the work of others or applied calculations to work done by others; and set out opinions that were impermissible conclusions. Poe also asserted that Lewis & Ellis relied on unverified data. The trial court overruled Poe's objections. We will review the trial court's decision to overrule Poe's objections for an abuse of discretion. See Allbritton v. Gillespie, Rozen,Tanner & Watsky, P.C., 180 S.W.3d 889, 892 (Tex. App.—Dallas 2005, pet. denied); Perez v. Blue Cross Blue Shield of Tex., Inc., 127 S.W.3d 826, 830-31 (Tex. App.—Austin 2003, pet. denied).
Summary of the affidavits
In his July 2011 affidavit, Espinosa explained that he had been licensed to practice law since 1996 and had in the past worked as an Enforcement Attorney for the federal Securities and Exchange Commission, handling cases involving anti-fraud provisions of federal securities law. He stated that after his appointment as receiver, he investigated and concluded that RV was insolvent. He explained that RV owed $125 million in debt, mostly to its investors, who were owed $77.6 million in principal and $47.2 million in interest. As far as its assets, RV had $29 million in cash, a portfolio of policies with an estimated liquidation value of $5.7 million, and claims against various...
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