Salvatore Magaraci and Estate Protection Planning Corporation v. Eduardo S. Espinosa in His Capacity as Receiver of Retirement Value, LLC

Opinion

ACCEPTED 03-14-00515-CV 4682316 THIRD COURT OF APPEALS AUSTIN, TEXAS 3/27/2015 6:08:15 PM JEFFREY D. KYLE CLERK

No. 03-14-00515-CV FILED IN 3rd COURT OF APPEALS IN THE COURT OF APPEALS AUSTIN, TEXAS FOR THE THIRD DISTRICT OF TEXAS 3/30/2015 3:30:00 PM JEFFREY D. KYLE Clerk

Salvatore Magaraci and Estate Protection Planning Corporation, appellants v.

Eduardo S. Espinosa in his Capacity as Receiver of Retirement Value, LLC, appellee

On Appeal from the 419th District Court Travis County, Texas Tr. Ct. No. D-1-GN-14-001581

APPELLANTS’ BRIEF Timothy A. Hootman SBN 09965450 2402 Pease St Houston, TX 77003 713.247.9548 713.583.9523 (f) Email: thootman2000@yahoo.com ATTORNEY FOR APPELLANTS, SALVATORE MAGARACI AND ESTATE PROTECTION PLANNING CORPORATION

ORAL ARGUMENT REQUESTED

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LIST OF PARTIES AND COUNSEL This list of is broken into four Parts: (I) Summary of Parties and

Abbreviations Used in Brief; (II) Parties and Counsel in Trial Court; (III) Parties

and Counsel in This Appeal; and (IV) Parties and Counsel in Related Appeal.

I. SUMMARY OF PARTIES AND ABBREVIATIONS USED IN BRIEF

The following is a summary of the parties, their names, and the abbreviations used in this brief:

Plaintiff: State of Texas (“the State”)

Receiver: Edward S. Espinosa was appointed receiver of RETIREMENT VALUE LLC (“the Receiver”)

Primary defendants: RETIREMENT VALUE LLC is the subject of the receivership (“Retirement Value”)

Richard H. “Dick” Gary with Retirement Value (“Mr. Gary”) KIESLING, PORTER, KIESLING & FREE, PC (“Kiesling- Porter”) Bruce Collins with Kiesling, Porter (“Mr. Collins”)

Licensee defendants: ESTATE PROTECTION PLANNING CORPORATION (“Estate Protection”)

Salvatore Magaraci with Estate Protection (“Mr. Magaraci”) SENIOR RETIREMENT PLANNERS, LLC (“Senior Retirement”) James Poe with Senior Retirement (called “Mr. Poe”) Approximately 88 additional “licensees” were listed as defendants but their cases have been resolved and are not pending on appeal (called “other Licensees”).

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II. PARTIES AND COUNSEL IN TRIAL COURT

Plaintiff: The State of Texas Counsel for plaintiff in Kara L. Kennedy, SBN 00787454 trial court: Jennifer S. Jackson, SBN 240600004 Assistant Attorneys General OFFICE OF THE ATTORNEY GENERAL Financial Litigation Division 300 W. 15th St, 6th Fl, P.O. Box 12548 Austin, TX 78711-2548 512.475.2540; 512.477.2348 (f)

***

Receiver of Retirement Eduardo S. Espinosa Value, LLC: Counsel for receiver in Michael D. Napoli, SBN 14803400 trial court: K & L GATES LLP 1717 Main St, Ste 2800 Dallas, TX 75201 214.939.4927; 214.939.5849 (f) R. James George, Jr., SBN 07810000 John W. Thomas, SBN 19856425 GEORGE & BROTHERS, LLP 114 W. Seventh, Ste 1100 Austin, TX 78701-3015 512.495.1400; 512.499.0094 (f)

***

Primary defendants: RETIREMENT VALUE, LLC Richard H. “Dick” Gary KIESLING, PORTER, KIESLING & FREE, PC Bruce Collins Counsel for primary Kevin F. Lee, SBN 12128350 defendants in trial court: THOMPSON, COE, COUSINS & IRONS 701 Brazos, Ste 1500 Austin, TX 78701 512.708.8200; 512.708.8777 (f) (for Richard H. “Dick” Gray)

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Randy Howry, SBN 10121690 HOWRY BREEN, LLP 1900 Pearl St Austin, TX 78705 512.474.7300; 512.474.8557 (f) (for Bruce Collins) Spencer C. Barasch, SBN 00789075 Matthew G. Nielsen, SBN 24032792 Ted Gilman, SBN 24002140 ANDREWS KURTH, LLP 1717 Main St, Ste 3700 Dallas, TX 75201 214.659.4614; 214.659.4794 (f) (for KIESLING, PORTER, KIESLING & FREE, PC)

***

“Licensee” defendants: Salvatore Magaraci (“Mr. Magaraci”) and his company ESTATE PROTECTION PLANNING CORPORATION (“Retirement Value”) James Poe (“Mr. Poe”) and his company SENIOR RETIREMENT PLANNERS, LLC 88 additional “licensees” defendants were sued but their cases were resolved. (CR 1311-1331).

Counsel for “licensee” R. James George, Jr., SBN 07810000 defendants in trial court: John W. Thomas, SBN 19856425 GEORGE & BROTHERS, LLP 114 W. Seventh, Ste 1100 Austin, TX 78701-3105 512.495.1400; 512.499.0094 (f) Bogdan Rentea, SBN 16781000 Nathan Leake, SBN 24046277 REATEA & ASSOCIATES 505 West 12th St, Ste 206 Austin, TX 78701 512.472.6291 512.472.6278 (f) (for Salvatore Magaraci and his company ESTATE PROTECTION PLANNING CORPORATION)

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Robert L. Wright, SBN 22054300 4501 Blue Lake Ct. Fort Worth, TX 76103 817.688.2846 (for James Poe and his company SENIOR RETIREMENT PLANNERS, LLC)

***

III. PARTIES AND COUNSEL IN THIS APPEAL

Appellants: Salvatore Magaraci (“Mr. Magaraci”) and his company ESTATE PROTECTION PLANNING CORPORATION (“Retirement Value”)

Counsel for appellants on Timothy A. Hootman, SBN 09965450 appeal: 2402 Pease St Houston, TX 77003 713.247.9548; 713.583.9523 (f) Email: thootman2000@yahoo.com

Appellee: Eduardo S. Espinosa in his Capacity as RECEIVER OF RETIREMENT VALUE, LLC Counsel for appellee on R. James George, Jr., SBN 07810000 on appeal: John W. Thomas, SBN 19856425 John R. McConnell, SBN 24053351 GEORGE, BROTHERS, KINCAID & HORTON, L.L.P. 114 W. Seventh, Ste 1100 Austin, TX 78701-3105 512.495.1400; 512.499.0094 (f)

***

IV. PARTIES AND COUNSEL IN RELATED APPEAL

There is currently pending in this Court cause number 03-14-00518-CV

which is related to this appeal and raises one issue that is the same as the sole

issue raised in this appeal. The parties and lawyers in that appeal are as follows:

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Appellants: James Poe (“Mr. Poe”) and his company SENIOR RETIREMENT PLANNERS, LLC Counsel for appellants on Scott Lindsey, SBN 24036969 on appeal in related case: ALDRICH PLLC 1130 Fort Worth Club Tower 777 Taylor St Fort Worth, TX 76102 817.336.5601; 817.336.5297 (f) Email: slindsey@aldrichpllc.com

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RELATED APPEALS Currently pending in the Third Court of Appeals is cause number 03-14-

00518 which was originally part of this case in the trial court. The cases were

severed after the trial court made the substantive rulings that are challenged in

both appeals. The sole issue raised in this case regarding the propriety of not

allowing settlement credits is also raised in the related appeal. This Court’s

ruling in that regard would be dispositive of both appeals if the Court agrees with

the appellants’ arguments. The related appeal raises two additional fact-bound

issues that are not raised in this case.

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TABLE OF CONTENTS LIST OF PARTIES AND COUNSEL ............................................................................ 2 RELATED APPEAL ..................................................................................................... 7 TABLE OF CONTENTS .............................................................................................. 8 INDEX OF AUTHORITIES ......................................................................................... 9 STATEMENT OF CASE ............................................................................................ 10 ISSUE PRESENTED ................................................................................................. 11 STATEMENT OF FACTS .......................................................................................... 12 SUMMARY OF ARGUMENT .................................................................................... 17 ARGUMENT AND AUTHORITIES ........................................................................... 18 PRAYER .................................................................................................................. 25 CERTIFICATE OF WORD COUNT ........................................................................... 26 CERTIFICATE OF SERVICE .................................................................................... 27 APPENDIX 1 ... Order granting partial summary judgment as to Retirement Value APPENDIX 2 ................ Order granting partial summary judgment as to Appellants APPENDIX 3 .......................................................................................Final Judgment APPENDIX 4............................................................................ Settlement Agreement

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INDEX OF AUTHORITIES Cases: AMX Enterprises, Inc. v. Bank One, N.A., 196 S.W.3d 202 (Tex.

App.—Houston [1st Dist.] 2006, pet. denied) ...............................................22 Crown Life Is. Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000) ....................................22 Dalworth Restoration, Inc. v. Rife-Marshall, 433 S.W.3d 773 (Tex.

App.—Fort Worth 2014, pet. denied) ............................................... 18, 22, 23 Drilex Systems, Inc. v. Flores, 1 S.W.3d 112 (Tex. 1999) ...................................... 24 Galle, Inc. v. Pool, 262 S.W.3d 564 (Tex. App.—Austin 2008, pet.

denied) ........................................................................................................... 18 JCW Elecs., Inc. v. Garza, 257 S.W.3d 701 (Tex. 2008) ........................................22 LaFreniere v. Fitzgerald, 669 S.W.2d 117 (Tex. 1984) ..........................................25 Martin v. First Republic Bank, Fort Worth, N.S., 799 S.W.2d 482 (Tex. App.—Fort Worth 1990, writ denied) ................................................. 19 Mobile Oil Corp. v. Ellender, 968 S.W.2d 917 (Tex. 1998) ....................... 23, 24, 25 Osborne v. Jauregui, Inc., 252 S.W.3d 70 (Tex. App.—Austin 2008, pet. denied) .................................................................................................... 21 Paschall v. Peevey, 813 S.W.2d 710 (Tex. App.—Austin 1991, writ denied) .......................................................................................................... 24 Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991) ............................. 20 Utts v. Short, 81 S.W.3d 822 (Tex. 2002) ..............................................................23

Statutes: TEX. CIV. PRAC. & REM. CODE § 33.001 ....................................................................22 TEX. CIV. PRAC. & REM. CODE § 33.002 ...................................................... 23, 24, 25 TEX. CIV. PRAC. & REM. CODE § 33.003 ...................................................................23 TEX. CIV. PRAC. & REM. CODE § 33.012 ....................................................................23 TEX. CIV. PRAC. & REM. CODE § 33.013 ....................................................................23

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STATEMENT OF THE CASE The State sued to have Retirement Value placed into receivership

(CR 30-67, 1540). The appointed receiver sued the founders of Retirement

Value for violation of the Texas Securities Act seeking injunctive and

monetary relief (CR 9, 30-67).

The Receiver filed a motion for summary judgment against

Retirement Value and its founders regarding the Securities Act allegations

(CR 319-481, 820-1260), which was granted (CR 1307).

The Receiver sued Retirement Value’s independent sales agents—

including appellants—under the Fraudulent Transfer Act to recover

judgment for the commissions they had received from the sale of securities

made on behalf of Retirement Value (CR 1309-1411).

The Receiver filed a motion for summary judgment arguing

Appellants are liable as a matter of law under the Fraudulent Transfer Act

(CR 1429-1762, 1814-2367). Appellants filed a no-evidence motion for

summary judgment arguing the Receiver’s non-Fraudulent Transfer Act

claims fail as a matter of law (CR 788-819). The trial court granted the

Receiver’s motion and Appellants’ motion (CR 3217-3218).

A bench trial regarding the remaining damages issues was conducted

(RR Vols. 1-4) after which final judgment was entered in favor of the

Receiver (CR 3317-3320).

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ISSUE PRESENTED

Did the trial court properly determine settlement credits?

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STATEMENT OF FACTS Retirement Value 1 sold millions of dollars in securities to over 900

investors (CR 30-67, 1540). The State believed that those sales violated the

Texas Securities Act and therefore sued Retirement Value and various

other defendants that operated Retirement Value (all of which are referred

to herein jointly as Retirement Value) to place it into receivership, enjoin it

from selling securities, and for a money judgment in the amount of $77

million to reimburse the investors for monies spent purchasing the

securities (CR 31-67).

Mr. Espinosa was appointed receiver 2 (CR 9). In addition to alleging

violations of the Securities Act, the pleadings assert theories of breach of

fiduciary duty, conspiracy to breach fiduciary duty, aiding and abetting

breach of fiduciary duty, and breach of contract (CR 1335-1360). Mr.

Espinoza filed a motion for partial summary judgment against Retirement

1 The complete names of the parties and an index to the abbreviations used in this brief are contained under the portion of this brief entitled “List of Parties and Counsel.”

2 More specifically, the order of appointment states: “[Mr. Espinosa] is authorized to serve as Temporary Receiver for the company, assets, monies, securities, claims in action, and properties, real and personal, tangible and intangible, of whatever kind and description … of Retirement Value … and for assets, monies, securities, claims in action, and properties, real and personal, tangible and intangible, of whatever kind and description … of [Mr. Gray or Mr. Collins] as appear to the Receiver to contain or be derived from proceeds of Defendants’ sale of securities or used in furtherance thereof.” (CR 9, 48-52).

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Value (CR 319-481, 820-1260) and responses were filed (CR 1261-1270,

1271-1294). The trial court granted the motion in part, stating:

The court grants the motion in part concluding that Retirement Value engaged in fraud or fraudulent practices in the course of selling unregistered securities, and thereby violated section 32(A) of the Texas Securities Act (the “Act”). Further, pursuant to section 32(B) of the Act, the court orders Retirement Value to make restitution in the amount of 77.6 million to persons who purchased the unregistered securities (CR 1307-1308).

In his “Eighth Amended Cross-Claim and Third-Party Claim,” the

Receiver sued the independent sales agents that had received commissions

from Retirement Value for sales of the securities to various investors 3

alleging joint and several liability along with the other Retirement Value

defendants (CR 1309-1411). The pleadings alleged a common scheme to

commit securities violations and asserted theories as to all defendants of

breach of fiduciary duty, conspiracy to breach fiduciary duty, aiding and

abetting breach of fiduciary duty, and breach of contract (CR 1309-1411).

3 In this regard, the Receiver explained in his affidavit:

“My investigation has revealed that Retirement Value sold participations in its RSLIP program through a network of agents called “Licensees.” The Licensees received commissions of up to 18% on each sale they made. Some of the Licensees recruited “Sub-licensees” who worked under them in a pyramid-type sales organization. The Licensees received override commissions on the sales of the Sub-licensees below them. The Licensees played a vital role in the Retirement Value scheme, as they were the ones who convinced the victims to invest. There would be no victims, but for the acts of the Licensees.” (CR 1658).

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There were 90 or so sales agents made defendants to the secondary case,

including Mr. Magaraci and his company 4 (CR 1335-1360).

The Receiver filed a motion for partial summary judgment against

the licensee sales agents—including Mr. Magaraci—arguing they are liable

as a matter of law under the Fraudulent Transfer Act for damages and

attorney’s fees (CR 1429-1762, 1814-2367). Attached to the Receiver’s

motion for partial summary judgment are requests for admissions which

Mr. Magaraci and his company did not answer (CR 2333-2336). Mr.

Magaraci adopted the response filed by other licensee sales agents (CR

2368-2807, 2816) and filed a separate response (CR 2808-2835). Mr.

Magaraci also filed a no-evidence motion for summary judgment arguing

the Receiver’s theories of breach of fiduciary duty, conspiracy to breach

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

contract fail as a matter of law (CR 788-819). The Receiver filed a response

(CR 3197-3209).

On February 21, 2013, the trial court granted the Receiver’s motion

and the motion filed by Mr. Magaraci (CR 3217-3218). The order states:

The Court grants the Receiver’s Motion for Partial Summary Judgment as to Licensee Defendants on the Receiver’s claims under the Texas Uniform Fraudulent Transfer Act (“TUFTA”) as to liability, damages and attorney’s fees against … Estate Protection Planning Corp.…

4 When “Mr. Magaraci” is referred to herein the intent is to refer to both Mr. Magaraci and his company.

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The Court grants the Receiver’s Motion for Partial Summary Judgment as to Licensee Defendants on the Receiver’s claims under the Texas Uniform Fraudulent Transfer Act as to liability and attorney’s fees against … Salvatore Magaraci…. At the hearing, the court asked counsel for the parties to get together and attempt to reach a stipulation as to the amount of commissions these defendants directly or through their companies or employers relating to Retirement Value with the understanding that judgment would be entered against them as damages for the TUFTA claims. The Court grants the motions for summary judgment filed by Estate Planning & Protection Services [and Mr.] Magaraci … as to the Receiver’s claims of breach of fiduciary duty, conspiracy to breach fiduciary duty, aiding and abetting breach of fiduciary duty, and breach of contract (CR 1973-1974).

Thus the remaining issues to be resolved by trial or settlement were

damages and attorney’s fees. In this regard, the parties stipulated that Mr.

Magaraci received $271,658.55 in commissions (CR 3257). An accountant

retained by the Receiver testified that Estate Planning was paid

$388,589.11 in commissions (CR 1659-1662). Also, the Receiver and the

primary defendants reached a settlement whereby the Receiver would give

a release of all claims in exchange for $5.5 million in unallocated funds.

See Aplt. Appx. 4; (RR 2/11).

Mr. Magaraci, along with the other nonsettling defendants, filed a

motion arguing that under the one-satisfaction rule he should receive

credit for the settlement with the nonsettling defendants, which would

result in a take nothing judgment (CR 1763-1813, 3233, 3240; RR 2/18). In

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response, the Receiver argued the settlement should not be credited to Mr.

Magaraci or the other nonsettling defendants (CR 3247-3252). The trial

court addressed these arguments at trial, at which time additional

arguments were heard (RR 2/13-38). The trial court refused to give any

credit to the nonsettling defendants for the settlement by the settling

defendants (CR 3317-3320; RR 2/13-38).

The trial court signed a final judgment against Mr. Magaraci stating

(1) Mr. Magaraci and his company are jointly and severally liable to the

Receiver for $271,658.55 in actual damages, and $101,871.96 in attorney’s

fees, with interest and costs; (2) Estate Planning is individually liable to the

Receiver for an additional $116,930.56 in actual damages, and “reasonable

and necessary attorney’s fees of $43,848.96 which is 37.5% of actual

damages awarded,” with interest and costs; and (3) Mr. Magaraci and his

company are jointly and severally liable to the Receiver for appellate

attorney’s fees in the amount of $7,142.86 if an appeal is taken to the court

of appeals, $2,142.86 if a petition for review is filed in the Supreme Court,

and $4,285.71 if the a petition for review is granted by the Supreme Court

(CR 3317-3320).

The trial court also signed an order severing the Receiver’s claims

against Mr. Magaraci from the remaining parties (CR 3321-3324).

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SUMMARY OF ARGUMENT Mr. Magaraci (and his company), as nonsettling defendants, are

entitled to credit for the settling defendants $5.5 million settlement. When

Mr. Magaraci established that the settlement occurred, the burden shifted

to the Receiver to show that he will not receive a double recovery by a

judgment against Mr. Magaraci and his company. Because the Receiver

established only the amounts of commissions received by Mr. Magaraci

and his company (which were much lower than the settlement), he did not

to meet his burden of rebuttal.

A plaintiff must establish the amount of damages it suffered to meet

its burden of proving that it will not receive a double recovery from the

settlement with a settling defendant and a judgment against a nonsettling

defendant. Here, the Receiver did not establish its amount of damages and

therefore it is presumed that the settlement with the nonsettling

defendants made the Receiver whole. Thus, reversal and rendition is in

order.

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ARGUMENT AND AUTHORITIES The proper standard of review.

Where there are no factual disputes underlying a trial court’s

determinations on settlement credits, the review on appeal is de novo.

Galle, Inc. v. Pool, 262 S.W.3d 564, 570 n. 3 (Tex. App.—Austin 2008, pet.

denied); but see Dalworth Restoration, Inc. v. Rife-Marshall, 433 S.W.3d

773, 780 (Tex. App.—Fort Worth 2014, pet. denied) (stating that an abuse

of discretion standard of review is applied on appeal regarding a trial

court’s settlement credit determination).

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Issue: Did the trial court properly determine settlement credits?

The trial court granted a partial summary judgment against

Retirement Value (CR 1307-1308) and a separate partial summary

judgment against Mr. Magaraci and his company (CR 1973-1974). These

partial summary judgments were incorporated into the final judgment

after trial on the remaining issues of damages and settlement credits (CR

3317-3320). Of course, the partial summary judgment against Retirement

Value is not applicable to Mr. Magaraci because it is directed only at

Retirement Value. More to point, the partial summary judgment against

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Mr. Magaraci was only on the issue of liability under the Fraudulent

Transfer Act, not as to liability under the Securities Act, and not as to the

amount of damages (CR 1973-1974). After a partial summary judgment is

granted, the issues it decides cannot be litigated further in the trial.

Martin v. First Republic Bank, Fort Worth, N.S., 799 S.W.2d 482, 488-89

(Tex. App.—Fort Worth 1990, writ denied). Thus the Receiver was

required to present evidence at trial proving the remainder of the

allegations contained in his pleadings, including the amount of damages, to

be entitled to the final judgment that the trial court ultimately entered.

The Receiver’s pleadings assert the same legal theories of recovery

against all defendants, assert that all defendant’s engaged in factually the

same illegal scheme, and assert that all defendants are jointly and severally

liable for the same damages caused to the plaintiff in the amount of $77

million (CR 1309-1411). The partial summary judgment orders against

Retirement Value and the sales agents conclude that they are all liable

under the Fraudulent Transfer Act (CR 1307-1308; 1973-1974). After the

summary judgment orders were signed, the remaining issues were the

amount of damages and attorney’s fees. Because the Receiver settled with

Retirement Value for $5.5 million, the question also arose of what, if any,

credits the sales agent defendants receive for the settlement with the

primary defendants.

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At trial, the Receiver never established what amount of damages

were suffered by the State or the investors—the only damages that were

established by the Receiver were the amounts received as commissions by

the sales agent defendants. In Mr. Magaraci’s case the amount of

commissions established by stipulation was $271,658.55 (CR 3257). The

Receiver’s accountant testified that the total commission by Mr. Magaraci

and his company was $388,589.11 (CR 1659-1662) and from this the trial

court reasoned that the damages caused by Mr. Magaraci were $271,658.55

and the damages caused by his company were $101,871.96 (CR 3317-

3320). The trial court’s reasoning in this regard is obviated by looking at

the final judgment which awards these amounts to the Receiver;

271,658.55 + 101,871.96 = 388,589.11 (CR 3317-3320).

In the end, the trial court gave no settlement credits to the

nonsettling defendants for the $5.5 million paid by the settling defendants

even though the Receiver did not establish the damages beyond the

commissions paid (CR 3317-3320). This was error on the part of the trial

court for the following reasons.

Under the one-satisfaction rule, a trial court may not render a

judgment that would allow a double recovery. See Stewart Title Guar. Co.

v. Sterling, 822 S.W.2d 1, 8 (Tex. 1991) (“There can be but one recovery for

one injury, and the fact that more than one defendant may have caused the

injury or that there may be more than one theory of liability, does not

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modify this rule.”). Thus, a plaintiff is only entitled to one recovery for a

particular harm, and must elect a single remedy if the trier of fact has

awarded more than one; and any award must be reduced by the amount of

any settlements the plaintiff has received from other entities for the same

injury. This Court has said of the one-satisfaction rule and explained its

application as follows:

[It is] the longstanding proposition that a plaintiff should not be compensated twice for the same injury. The rule guards against a plaintiff receiving a windfall by recovering an amount in court that covers the plaintiff’s entire damages, but to which a settling defendant has already partially contributed. The plaintiff would otherwise be recovering an amount greater than the trier of fact has determined would fully compensate for the injury. The one-satisfaction rule applies both when several defendants commit the same act and when multiple defendants commit technically different acts that result in the same, single injury. The application of the 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. 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; this is especially true if the evidence supporting each cause of action is the same.

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

denied) (op. on reh’g) (en banc) (quotations marks and citations omitted).

The one-satisfaction rule applies when multiple defendants commit

the same act, or when multiple defendants commit “technically different

acts” that result in the same, single injury regardless of the absence of tort

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liability. AMX Enterprises, Inc. v. Bank One, N.A., 196 S.W.3d 202, 206

(Tex. App.—Houston [1st Dist.] 2006, pet. denied). Moreover, a nonsettling

defendant may only claim credit based on damages for which all tortfeasors

are jointly liable. Crown Life Is. Co. v. Casteel, 22 S.W.3d 378, 391 (Tex.

2000).

The Texas legislature has weighed in on the policy behind the one-

satisfaction rule with the Proportionate Responsibility Act. TEX. CIV. PRAC.

& REM. CODe § 33.001 et. seq. The Proportionate Responsibility Act

“applies to … any cause of action based on tort in which a defendant,

settling person, or responsible third party is found responsible for a

percentage of the harm for which relief is sought.” Id. at § 33.002(a)(1);

see also JCW Elecs., Inc. v. Garza, 257 S.W.3d 701, 704 (Tex. 2008);

Dalworth Restoration, Inc., 433 S.W.3d at 780. Under the Act, the trier of

fact must find causation as to a particular party so that it can then

apportion causation to that party. When a party is found to be responsible

as a matter of law, the Act is still applicable and the trial court should only

enter judgment according to the proportionate responsibility of each party

and according to their degree of causation. Under the Act, the question

begins with determining the exact amount of damage that was suffered by

the plaintiff. Next, a determination of whether the damage suffered by the

plaintiff is the same damage attributable to all defendants must be made.

If it is, proportionate responsibility of each defendant that caused the

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damage must be determined. TEX. CIV. PRAC. & REM. CODe § 33.003(a).

Next, settlement amounts must be ascertained. Id. at § 33.012(b). And

finally, entry of judgment is possible. Id. at § 33.013. 5

A burden-shifting framework is applied to determine if a nonsettling

defendant is entitled to a settlement credit under chapter 33. Mobile Oil

Corp. v. Ellender, 968 S.W.2d 917, 926-29 (Tex. 1998); see also Utts v.

Short, 81 S.W.3d 822, 829 (Tex. 2002). First, the defendant that seeks the

credit must prove the settlement’s amount by placing some evidence of the

settlement amount in the record. Mobile Oil Corp., 968 S.W.2d at 927.

Once the defendant meets its burden to prove the settlement’s amount, the

burden shifts to the plaintiff to show that it will not receive a double

recovery from the settlement and a judgment against the nonsettling

defendant. Id. at 928. The plaintiff must meet this burden by offering into

evidence a written settlement agreement allocating damages to each cause

of action, and in doing so may not rely on evidence extrinsic to the

settlement agreement. Id. at 928-29; see also Dalworth, 433 S.W.3d at

781. The rationale of this burden shifting procedure is that the plaintiff is

5 See also Utts, 81 S.W.3d at 829 (stating that it is the trial court’s duty at entry of judgment to determine how the settlement credits should be applied once the jury determines the damages and the apportionment on causation among the defendants); Mobile Oil Corp., 968 S.W.2d 917 at 928 (stating that where there is settlement covering some or all damages awarded in judgment, section 33.012 requires trial court to reduce judgment accordingly); Dalworth Restoration, 433 S.W.3d at 781 (stating trial court has mandatory duty to apply settlement credits).

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in the best position to provide proof of allocation of damages. Mobile Oil

Corp., 968 S.W.2d at 928. Chapter 33 applies to any scenario where a

plaintiff seeks joint and several liability. 6

Here, Mr. Magaraci met his initial burden by showing that a

settlement in the amount of $5.5 million was entered into by the settling

defendants and the Receiver. This shifted the burden to the Receiver to

show that he will not receive a double recovery by a judgment against Mr.

Magaraci and his company. Id. at 226-29. Because the Receiver only

established the amounts of commissions received by Mr. Magaraci and his

company, he has failed to meet his burden. Id. The amount of

commissions is, obviously, less than the amount of the settlement. There

was no evidence put on as to the amount of damages suffered by the

Receiver and therefore no basis upon which the trial court could apply

6 See, e.g., Drilex Systems, Inc. v. Flores, 1 S.W.3d 112, 122-23 (Tex. 1999) (In determining how to allocate settlement money as credit against claims of family members arising out of injury to one member of family, court must view entire family as one claimant for section 33.012(b) purposes. Total of all damages to be recovered by family must be reduced by total of all settlements received by family. Then, to give effect to jury verdict, remaining damages should be allocated among parties seeking recovery based on each party’s percentage of total verdict awarded to claimant by jury.); Paschall v. Peevey, 813 S.W.2d 710 (Tex. App.—Austin 1991, writ denied) (When plaintiff sues several defendants and alleges different types of damages, credit against verdict given to nonsettling defendant must be for those damages common to settling and nonsettling defendants. Personal injury plaintiff cannot prohibit nonsettling defendant from taking dollar-for-dollar credit against judgment in amount of joint tortfeasor’s settlement by designating settlement as for pain and suffering and then seeking damages at trial for physical impairment. All personal injury damages are common damages).

25

Chapter 33 of the Proportionate Responsibility Act. Because Chapter 33

applies to this case, establishing the amount of damages suffered by a

plaintiff is a precondition for the plaintiff to be able to meet its burden

under the Mobile Oil Corp. burden-shifting procedure. Therefore, the

Receiver has failed to show that it will not receive a double recovery from

the settlement and a judgment against Mr. Magaraci and his company, and

the trial court was in error concluding otherwise. The trial court should

have entered a take nothing judgment.

Additionally, because the attorney’s fee awards against Mr. Magaraci

and his company are based on the trial court’s erroneous conclusion that a

money judgment was proper, those awards should also be set aside.

LaFreniere v. Fitzgerald, 669 S.W.2d 117, 119 (Tex. 1984).

In short, this Court should reverse and render judgment in favor of

Mr. Magaraci and his company, Estate Protection Planning Corporation.

PRAYER Accordingly, appellants, Salvatore Magaraci and Estate Protection

Planning Corporation, pray that this Court reverse and render, or

alternatively, reverse and remand for a new trial or for entry of a different

judgment.

26

Respectfully submitted,

/s/Timothy A. Hootman Timothy A. Hootman SBN 09965450 2402 Pease St Houston, TX 77003 713.247.9548 713.583.9523 (fax) Email: thootman2000@yahoo.com ATTORNEY FOR APPELLANT, SALVATORE MAGARACI AND ESTATE PROTECTION PLANNING CORPORATION

CERTIFICATE OF WORD COUNT I hereby certify that, in accordance with Rule 9.4 of the Texas Rules

of Appellate Procedure, that the number of words contained in this

document are 4,989 according to the computer program used to prepare

this document.

Dated: March 27, 2015.

/s/Timothy A. Hootman Timothy A. Hootman

27

CERTIFICATE OF SERVICE I hereby certify that, in accordance with Rule 9.5 of the Texas Rules

of Appellate Procedure, I have served the forgoing document upon the

following attorneys by personal mail, by commercial delivery service, or by

fax:

John W. Thomas GEORGE, BROTHERS, KINCAID & HORTON, LLP 114 West 7th St, Ste 1100 Austin, TX 78701

Dated: March 27, 2015.

/s/Timothy A. Hootman Timothy A. Hootman

│ │ │ │ │ │ Appendix 1 (Order granting partial summary judgment as to Retirement Value)

│ 

1307

DC BK13057 PG878

Filed In The District Court of Travis County, Texas

FEB 21 2013 LAM At //· !:12 A M.

CAUSE NO. D-l-GV-10-000454 Amalia Rodrlguu-Mendoii, Clerk

STATE OF TEXAS § IN THE DISTRICT COURT OF § Plaintiff, § § v. § § RETIREMENT VALUE, LLC, § RICHARD H. "DICK" GRAY, lULL § COUNTRY FUNDING, LLC, HILL § COUNTRY FUNDING, and § WENDY ROGERS, § TRAVIS COUNTY, TEXAS § Defendants, § § and § § JAMES SETTLEMENT SERVICES, § LLC,etal., § § Third Party Defendant~. § 126™ JUDICIAL DISTRICT

ORDER ON PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AGAINST DEFENDANT RETIREMENT VALUE. LLC

CAME ON TO BE HEARD on this 7th day of January, 2013, Plaintiff's Motion for

Partial Summary Judgment against Defendant Retirement Value, LLC ("the Motion").

Having heard the arguments of counsel, reviewed the Motion and responses, and

considered the evidence, the Court GRANTS the Motion in part, and DENIES the Motion in

part.

The court GRANTS the motion in part upon concluding that Retirement Value engaged

in fraud or fraudulent practices in the course of selling unregistered securities, and thereby

violated section 32(A) of the Texas Securities Act (the "Act). Further, pursuant to section 32(8)

of the Act, the court orders Retirement Value to make restitution in the amount of $77.6 million

to persons who purchased the unregistered securities.

ORII£11 ONPIAINTI"'·' IiiOrtON roa PAit71At.SUMMAil'f Ju(J(;JIENT Ar&MNSr Dt::I"EI'IIMNTRET/Il£MI'.Nr VAI.UI>, LLC

1308

DC BK13057 PGI77

Any relief sought by the Motion that is not herein granted is DENIED.

Signed this )..\ day of 1~2013.

THE HONORABLE GISELA D. TRIANA JUDGE PRESIDING

ORI>U ON I'I.A/NT/f"f"'.Y MOTION F'OR I'AitT/111. SUNIJAilY }Uf)(i!IIENT AGAINST Dr:nN/JANT RET/Il£/IIENT JIAJ.Ue, LLC Pagel │ │ │ │ │ │ Appendix 2 (Order granting partial summary judgment as Appellants)

│ 

1973

....

• DC 8K13346 PG1739

NOTICE SENT: FII'JAL INTE:RLOCUTORY___, __ Filed in The District Court of Travis County, Texas DISP PARTIE.S:. _ _ _...,.......=----- DISP CODE: CVD - ~~ og~13 M. REDACT 2 · ·=------;"1----~..,..,.

.,.O<Lvt.A: CAUSE NO.D·l-GV..10..000454 Amalia Rodriguez-Mendoza, Clerk

STATE OF TEXAS, § IN THE DISTRICT COURT OF Plabrtiff, § § 'V. . § § RETIRE!VmNT VALUE, LLC,ET AL § D~/eltdtuJJs, § TRAVIS COUNTY, TEXA:S § AND § § JAMES SETTLEMENT SERVICES, LLC, § ET.AL. § Third-Party Defendants § !26th JUDICIAL DISTRICT

ORDER ON RECEIVER'S MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO LICENSEE DEFENDANTS ·

On the 30111 day of October, 2013, came on for consideration the Receiver's Motion for Partial S'UJDlDary Judgment as to LiceDsce Defendants and Supplement to his Motion for Partial

Summazy Judgment as to Third-Party Defendants• Deemed Admissions; and Licensees Estate

Planning &Protection Services, Salvatore Magaraci, Nicho Investments, Damien Pechacek.

Shawn Cornett, Grog Chick, Alternative Solutions lnsw'ance, Kenneth Franco, PC&S, James Poe, Senior Retitem.ent Planners, David Rice, Dan Levin and Scot1 Schroeder's Motiom for No-

Evidence Motions for Summary Judgment as to All Claims of the Receiver. Ha"Ying considered

the motions and responses, the Court orders as follows:

1. The Court grants the Receiver's Motion for Partial Swrunary Judgment as 1o Licensee

Defendants on the Receiver's claims under the Texas Unifonn Fraudulent Transfer Act

("TTJFTA") as to liability, damages and attomey's fees against Senior Retirement

Planners, LLC, Estate Protection Planning Cotp., Niche Tn.vestmtmt Group, LLC, PC&S,

LLC. David Rice, Kenneth Franco and Alternative Solutions Insurance Servi~. Inc.

1974

DC BK133-46 PQ17~0

2. The Court grantS the Receiver's Motion for Partial Summary Judgment as to Licensee

Defendants on 1he Receiver's claims under the Texas Uniform Fraudulent Transfer Act as

to liability and attomey's fees against Scott Schroeder, Dan Levin, James Poe, Salvatore

Magamci, Damien Pecllacek, Shawn Cornett, and Greg Chick. At the hearing, the court

asked counsel for the parties to get together and attempt to reach a stipulation as to the

amount of commissions these defendants received directly or through their companies or

employers relating to Retirement Value with the understanding that judgment would be

entered against them as damages for the TUFTA claims.

3. The Court grants the motions for summary judgment filed by Estate Planning &

Protection Services, Salvatore Magaraci, Niche Investments, Damien Pechacek, Sbawn

Cornett. Greg Chick, Alternative Solutions Insurance. Kenneth Fnnco, PC&S, James

Poe, Senior Retirement Planners, David Rice, Dan. Leviu and Scott Schroeder as to the

Receiver's claims ofbrea.ch offiduciacy duty, conspiracy to breach :fiduciary duty, aiding

and abetting breach of fiduciary duty, and br:each of contract.

4. All other relief requested in these motions fur summary judgment listed above is

DENIED. c) ~ Signed this ( day omovem'ber, 2013 -r

Honomble Gisela D. Triana.

Judge Presiding

-2~

│ │ │ │ │ │ Appendix 3 (Final Judgment)

│ 

3317

• J:i.otlce .sent:~ lnt!lrlocut<>cy None DC BK14155 PG1196 Filed in The District Court .·J~.··,s.p Parties: · ..::t .

A~~ . ·. ~:Hd• r - of Travis County, Texas t DISP code: CVD / CLS -~.:....u.t:...s.-.:.--

MAY 28 !014 'BH Redact P.gs:......

i:J \,... __...

• f:._-::1 Clerk _-l.:~::;o..--- N · 1:oof M.

Judge.OD~- - A!nalia Rddriguez-Mendoza1 Clerk CAUSE NO.-----~

EDUARDO S. ESPINOSA, § IN THE DISTRICT COURT IN HIS CAPACITY AS § RECEIVER OF RETIREMENT § VALUE, LLC, § flaintiff, § v. § OF'TRA VTS COUNTY, TEXAS § SALVA TORE MAGARACI, and § EST ATE PROTECTION PLANNING § CORPORATION § . t-h l)efendants. § Ji lq JUDICIAL DISTRICT JUDGMENT AS TO DEFENDANTS SALVATORE MAGARACl AND .E STATE PROTECTION PLANNING CORPORATION

On t:he 30ih day of October, 2013, came on to be htfard Rece iver's Motion for

Partial Summary Judgmentas·to Licensee Defendants, Receiver's Motion for Partlal

Summary Judgment as to Certain Licensee Defendants with Deemed Admissions, and

Receiver's Motion for Patti a! Summary Judgment as to Certain Licensee Defendants with

No Resp()llses Filed. The Court granted the Receiver's Motion for Partial Summary

Judgment in all respects as to Estate Protection Planning Corporation . The Court granted

the Motion for Partial Summary Jt!dgment as .to liahil.ity and attorney's fees on the

Receiver's claims asserted under the Texas Unifo rm Fraudulent Transfer Act (" Tl)FTA")

as to Salvatore Magaraci, and the amount of damages was determined at trial.

On the !81h and 191h of February, 2014 came on to be heai·d trial in Cause No. D-

1-GV I0-000454 Srate of Texas v. Retirement Value, eta/. in the I 26111 Judicial District

Court, Travis County Texas. The Court, having considered the· pleadings, the evidence,

and the arguin.ents of counsel, and noting the Court'K orders granting the motions for

3318

DC BK14155 PG11'97

partial summary judgment as described above, is of the opinion that judgment should be

rendered for Eduardo S, Espinosa, Receiver ofRetirement Value, LLC ("Receiver")

against Third-Party Defendants Estate Protection Planning Corporation and SaLvatore

Maga.raci. lt is, therefore ORDERED AND ADJUDGED as follows ;

The Cout1 hereby RENDERS judgment for Eduardo S. Espinosa, in his capacity

as Receiver of Retirement Value, LLC ("Receiver") against Third-Party Defendants

estate Protection Planning Corporation and Salvatore Magaraci (''Defendants").

The Court finds that the Receiver is entitled to actual damages, pre-and post-

judgment interest and court costs. In addition, the Receiver is entitled to reasonable

and necessary attorney's fees pursuant to Section 24.013 of the Texas Business &

Commerce Code.

Accordingly, the Court orders that the Receiver recover the following :

I. Ftom Estate Protection Planning Corporation and Salvatore Magaraci,

jointly and severally, $271,658.55 in actual damages, prejudgment interest from. August

12, 2011 at a rate 6f 5% until the date of this jt1dgrnent, comt costs, and post judgment

interest on the above from today until paid at a rate of 5% compounded annually. In

addition, the Receiver shall also recover from Estate Protection Planning Corporation and

Salvatore Maga.raci, jointly and severally, reasonable and necessary attorney'·s fees of

$101,871.96, which is 37.5% of act1,1al damages awatded. Post judgment interest shall

also accrue on the award of attorney's .

fees from ., . : .

to,day u.ntil paid at a rate of 5%

compounded annually.

2. In addition to the foregoing, the Receiver shall recover from Estate

. Protection Planning Corporation individually, an additional $11.6,930.56 in actual

3319

DC BKl4155 PG1198

damages, prejudgment interest from August 12, 201J at a rate of5% untifthe dateofthis

judgment, court ,costs, and post judgment interest on the above from today until paid at a

rate of 5% compounded annually; ln addition, the Receiver shall also recover from

Estate Protection Planning Corporation, individually, reasonable and necessary attorney's

fees of$43,848 .96 which is 37.5% of actual damages awarded. Postjudgment interest

shaH also ac.crue on the award of attorney' s fees from today until paid at a rate of 5%

compounded annually.

The Court further orders that ifone or more Defendants herein unsuccessfully

appeal thls judgni:ent to an intermediate court of appeals, the Receiver will additionally

recover tJ·om such Defendants, jointly and severally, the amount of$7,1 42.86,

tepresent'ing the anticipated reasonable and necessary fees and expenses that would be

incurred by the Receiver in defending the appeal .

The Court further orders that ifone or more Defendants here.in unsuccessfully

appeal this judgment to the Texas Supreme Court, the Receiver will additionally

recover from such Defendants, jointly and ~everally , the amount Of$2,142.86 in the

event a petition for discretionary review is filed but the Texas SJ.tpreine Court denies

review; or $4,285.71 in the event a petition for discretionary revieW is.filed and the

Texas Supreme Court grants review. Such amounts tepresent the anticipated

reasonable and necessary fees and expenses that would be incur1·ed. by the Receiver in

defending the appe<tL

This judgment in this newly-severed cause i-s final, disposes of all clain1s and aU

p<;~rties, and: is appealable.

All ,relief not expressly granted herein is denied.

3320

DC BK14155 PG1199

SIGNED on the _?-~ day of ~ • 2Jl14.

Jti..'n · 0 ~ ~e Gisela Triana APPROVED AS TO FORM ONLY:

Bogdan Rentea Attorney for Salvatore Magarci and Estate Protection PlMning Gorp.

│ │ │ │ │ │ Appendix 3 (Settlement Agreement)

│ 

CAUSE NO. D-1-GV-10-000454

STATE OF TEXAS, § IN THE DISTRICT COURT OF Plainliff, § v. § § RETIREMENT VALUE, LLC, § ET AL., § § TRAVIS COUNT~ TEXAS § JAMES SETTLEMENT SERVICESt LLC, § ET AL. § Third-Party Defendants § 1261h JUDICIAL DISTRICT

SE'ITLEMENT AGREEMENT AND RELEASE OF ALL CLAIMS

THIS SEITLEMENT AGREEMENT AND RELEASE OF ALL CLAIMS ("Agreement") is made and entered into by and between Retirement Value, LLC (..RV"), Hill Country Funding, LLC (Texas), Hill Country Funding, LLC (Nevada) (the two Hill Country Funding entities are collectively refen-ed to as ''HCF"), Eduardo S. Espinosa in his capacity as Receiver of RV («Espinosa"), Janet Mortenson in her capacity as the Special Receiver for RV (..Mortenson,), Don Taylor in his capacity as the Rece:fver for HCF ("Taylor"), and the State of Texas (collectively "Plaintiffs") and Third Party Defendants Ronald James, Donald James, and James Settlement Services, LLC (collectively, the "James Parties") and Michael Beste ("Beste").

WHEREAS, Plaintiffs (except for Mortensou) asserted various claims against the James Parties and Beste in a lawsuit styled State of Texas v. Retirement Value, LLC. et. al.~ Cause No. D-l~GV-10-000454, in the 1261h District Court, of Travis, County, Texas (the "Cause No. D-1- GV-1 0-000454");

WHEREAS, the James Parties and Beste deny having any liability for those claims; and

WHEREAS, the James Parties and Beste brought cross-claims and counter-claims against various parties; and-

WHEREAS, Plaintiffs, the James Parties and Beste desire to avoid further litigation, preparation and expense; to tenuinate all past> present and potential controversies between Plaintiffs, the James Parties and Beste that were brought and/or that could have been brought in Cause No. D-1-GV-10-000454, and that arise out of all operations and activities ofRV or HCF, against each other and all of their respective counsel, agents. etc. with prejudice; and

WHEREAS, Plaintiffs, the James Parties and Beste have agreed to resolve all claims that they have or may have against each other which were or could have been asserted in the Lawsuit, and that arise out of all operations and activities ofRV or HCF, without admission by any party of the merits of the claims, demands, charges, and/or contentions of the others; and

2024

.'

WHEREAS, Plaintiffs, the James Parties and Beste covenant and wan1mt that they have not ~signed, transfe1Ted, or subrogated any portion of any claim which they have against each other, other than to !heir attorneys of record, and further warrant that the undersigned are auth01ized to act in the capacities indicated:

NOW, THEREFORE, in consideration of the mutual promises and the covenants set forth herein, other good and valuable consideration. the receipt and sufficiency of which is hereby acknowledged, and in full compromise, release, settlement, accord and satisfaction, and discharge of all claims or causes of action, known or unknown, which were brought and/or that could have been brought in the Lawsuit, and that arise out of all operations and activities of RV or HCF, Plaintiffs, the James Parties and Beste covenant and agree as follows:

1. Monetary Consideration. Ronald James, Donald James, James Settlement Services, LLC (''JSS") and Michael Beste C'Beste") agree to pay Espinosa $3 .4 million on or before April 25, 2013, and an additional $1.1 million on o1· before July 31, 2013, and an · addi:t:ional $1 million on or before October 31, 2013. The James Parties and Beste wUl receive a $100.000.00 discount off of the October payment if the payment is made by July 31, 2013, to be applied pro-rata to any amount of early payment less than the full $1 million. The payments shall be made by wire transfer to the IOLTA trust account of George & Brothers, LLP. Wiring or routing :instructions will be provided to cmmsel for the James Parties'by counsel for the Receiver reasonably promptly after the execution of this Ag1-eement. Attorneys for Espinosa, George, Brothers Kincaid & Horton, LLP, agree to hold any payment in trust until the trial court judge approves this settlement This settlement is expressly conditioned on and subject to com't approval. In the event it is not approved, all payments will be returned to the James Parties and Beste. ·

2. Agreed Judgment: The parties will have an agreed judgment in the form· attached hereto as Exhibjt A signed by the judge, but 11ot flled, in the amount of $8 million against the James Parties and Beste jointly and severally to secure the payments set out above in paragraph L The original copy of the judgment signed by the Court will be held by Espinosa, one copy will be held by counsel for Espinosa, and one copy will be held by Taylor. Except as provided herein, no copies of the judgment will ever be made, and no copies of the judgment will ever be disseminated and/or provided to any other person(s) and/or entities. If any payment is not timely made, counsel for Espinosa shall provide notice via e~mail to counsel for the James Parties and Beste. The James Parties and Beste shall have nve (5) business days to cure the payment failure. If the payment failure is not timely cured, the judgment may be filed and abstracted immediately. The James Parties and Beste agree not to challenge the flling and enforcement of the judgment if peyments are not timely :tnade, notice has been. provided, and the payment failure has not been cured, but reserve their right to challenge the amount due under the judgment based on offsets or credits allowed by this Agreement The James Parties and· Beste shall receive a dollar for dollar credit against the $8 million agreed judgment for all settlement payments made (including the initial $3.4 million payment) if the judgment is ever filed for nonpayment. If all of the payments called for in Section 1 are made, all copies of 1he judgment in tbe possession of Taylor, Espinosa or counsel for Espinosa, including tile original copy signed by the Court, will be delivered to counsel for the

James Parties and Beste. At such time, the James Parties and/or Beste will be permitted to destroy any and all copies of the judgment The parties also agree to the agreed order of severance attached hereto as Exhibit B. That order of severance will be ftled immediately upon approval of the settlement by the trial court judge so that the agreed judgment can be filed in that cause, if appropriate 'Wlder the te1ms of this Agreement.

3. Permanent Injunction: The James Parties and Beste agree to the entry of the Permanent Injunction attached hereto as Exhibit C.

4. Agreement to Cooperate: If the James Parties discover any additional non~privileged records and/or documen1s that relate to RV and/or HCF that have not already been produced in this litigation, they agree to provide 'a copy to their counsel who will then provide a copy to counsel for the Receiver and the James Parties agree to maintain a copy of those records and/or documents until January 1, 2014. The James Parties agree to respond to w1itten questions or inquiries from Espinosa or Taylor related to policy maturity issues and/or problems either of them may have from time to time related to management or administration of the policies. TI1e written questions or inquires described above arc to be trdilsmitted to the James Parties through their counsel of record. Espinosa, Taylor, and counsel for Espmosa and/or Taylor are not to contact the.James Parties without prior permission from their respective counsel of record. If Espinosa, Taylor, and counsel for Espinosa and/or Taylor are unable, after a good faith searcl1, to locate Lany York, Carl Galant, or Nicholas Laurent to submit a written inquiry as provided herein, they may contact the James Parties directly in writing. In response to a direct inquiry from Espinosa or Taylor, the James Parties may refer Espinosa and/or Taylor to counsel for the James Pru:ties in. which case all further communications will be through counsel.

5. Releases.

A. In return for the Monetary Consideration to be paid as stated hereill, the Agreement to Cooperate, the James Parties' and Beste's releases, as set forth below, and other good and valuable consideration, Plaintiffs, for themselves and their respective legal representatives, successors, and assigns hereby agree to mutually, irrevocably, unconditionally and completely, RELEASE, ACQUIT AND FOREVER DISCHARGE the James Parties and Beste and aU of their agents, employees, servants and attorneys, of and :from any and all claims, demands, actions, debts, accounts, rights, liabilities, damages, judgments, liens, losses, costs, expenses, attorneys' fees and f?SUSes of action of any nature, both past, present and future. known and unknown, accrued and unaccrued, foreseen and unforeseen, asserted and nat asserted, discovered or not discovered, whether at law, in equity or otherwise, either direct or consequential, which Plaintiffs could have or have ever had or may now have against the James Parties and Beste that were brought and/or that could have been brought in Cause No. D~l~GV- 10-000454, and that arise out of all operations and activities of RV or HCF, against each other and all of their respective counsel, agents, ·etc. with prejudice. Plaintiffs' release is expressly conditioned upon the payment of the

Monetary Consideration as required by Section 1 hereof.

B. In return for Plaintiffs' release, as set forth in Section S.A heteof, and other good and valuable consideration, the James Parties and Beste, for themselves and their respective heirs~ executors, administrators, legal representatives, successors and assigns, hereby agree to mutually, irrevocably, unconditionally and completely, RELEASE, ACQUIT AND FOREVER DISCHARGE Plaintiffs, the State of Texas, Eduardo S. Espjnosa, individually, Janet Mortenson, individually, Michael D. Napoli, John Thomas, John M. McConnell, Jim George, Cox Smith Matthews, Inco:rporated, K&L Gates, ·LLP. George & Brothern, LLP, George, Brothers, Kincaid & Ho1ton, LLP, Donald R. Taylor, individually, Isabelle M . Antongiorgi, · and Taylor Dunham LLP, and all of their agents, employees, servants and attorneys of and from any and all claims, demands, actions, debts, accounts, rights, liabllities, datnages, jud~entq, liens, losses, costs, expenses, attorneys' fees and causes of action of any nature, both past, present and future, known and unknown, accrued and unaccrued, foreseen and unforeseen, asserted and not asserted, discovered or not discovered, whether at law, in equity or otherwise, either direct or consequential, which the James Parties and Beste could have or have ever had or may now have against Plaintiffs that were brought and/or that could have been brought in Cause No. D-1-GV-10-000454, and that arise out of all operations and activities of RV or HCF, against each other and all of their respective counsel, agents, etc. with prejudice. The James Parties' and Beste's release is expressly conditioned upon the Plaintiffs' mutual release contained in Section 5.A hereof.

C. The parties expressly waive the provisions of any law that might otherwise render the releases contained herein unenforceable with respect to unknown claims, including § 1542 of the California Civi1 Code, which provides as follows;

A general release does not extend to claims which the creditor does not know or- suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement v.rith the debtor.

D. Plaintiffs, the James Parties and Beste completely and unconditionally release and forever discharge each other, respectively, from any claim that this Agreement was induced by any fraudulent or negligent act or omission, and/or result from any actual or constructive fraud, negligent misrepresentation, conspiracy, breach of fiduciary duty, breach of confidential relationship, or the breach of any other duty under law or in equity. It is the Plaintiffs' and the James Parties' and Beste's intent that on and following the execution of this Agreement that tbey shall have no further relationship with each other, other than 1ights that are expressly created in 1his Agreement. Plaintiffs, the James Parties and Beste expressly understand and agree that the exchange of releases does not apply to actions brought by any of them to enforce the tem1s of this Agreement. The James Parties and Beste further understand and agree that the foregoing no-further-relationship clause

s!Iall not apply to the State of Texas or its agencies, except insofar as the claim, demand, action> debt, account, right, liability, damage, judgment, lien, loss, cost, expense, claim for attorneys' fees or cause of action has been released under Section 5 of this Agreement. Plaintiffs, the James Parties and Beste shall reserve and each has reserved all of their rights against the other to enforce the terms of this Agreement.

E. Noiliing 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.

6. Non" Admission .. Plruntiffs, the James Parties and Beste agree tJ1at this Agreement is a compromise settlement of a disputed claim or claims, and shall not be deemed or construed 'a t any time or for any purpose ro be an admissimt by any released party of a:ny violation of any right, contract) statute, or common law or of any wrongdoing. The James Parties and Beste vigorously dispute aH claims that have been. asserted against them and maintain that those claims have no basis in fact or law.

7. Defense And Indemnity. Plaintiffs further agree to DEFEND, INDEMNIFY AND HOLD HARMLESS the James Parties and Beste from any claim or cause of action of any kind filed or made against any of them whicl1 has been or may subsequently be .brought by, through, or on behalf of Plaintiffs and arising from any claim released under this Agreement. The James Parties and Beste, likewise, agree to DEFEND, INDEMNIFY AND HOLD HARMLESS the Plaintiffs from any claim or cause of action of any .kind hereafter filed or made against any of them which has been or may subsequently be brought by, through, or on behalf of the James Parties and Beste and arising ftom any claim released under this Agreement This right of indemnity is conditioned upon prompt notice by the party claiming a right to indemnity on any such claim to the party against whom indemnity is sought and the party against whom indemnity is sought being given the right to defend the claim on which indemnity is sought. Plaintiffs, the James Parties and Beste warrant they are not presently aware of any facts that would give rise to a claim for indemnity under this Section. The right to indemnity in this Section is limited to the James Parties, Beste and Plaintiffs, as herein defined, and shall not be construed as granting a right to indemnity jn favor of any other entities or persons related to or affiliated with the Plaintiffs or the James Parties and Beste. The pruties' indemnity oblig1ttioo under this provision is limited to the Monetary Consideration actually paid by the James Parties and Beste pursuant to Section 1 above. The Defense and Indemnity provisions set out in this Section 7 shall not apply to the State of Texas or its agencies; provided, however, that the absence of such obligation on the part of the State shall in no way limit or modify the scope the release given by the State of Texas in Section 5. Plaintiffs' indemnity obligation does.not encompass claims brought by any investors, including but not limited to the l:ICF Investors provided no investor claims have been or will be brought by, through, or on behalf of Plaintiffs.

-5"

8. Attorney's Fees. The James Parties, Beste and Plaintiffs will beat their own attorney's fees, expenses and costs in tlus Lawsuit.

9. Reasonable Steps. The James Parties, Beste and Plaintiffs further wan'3.Jlt and represent that they will cooperate fully and execute any and all supplementaty documents and take such additional actions which reasonably may be necessary or appropriate to give full force and effect to the terms and intent of this Agreement RV, by and through its Receiver, and HCF. by through its Receiver, agree to file a non-suit with prejudice of all claims against the James Parties and Beste within fourteen (14) days from the date the last settlement payment is made, if all settlement paymenlt;l are made as contemplated in this Agreement.

10. Severability and Governing Law. If any single section or clause of this Agreement should be found unenforceable, it shall be severed and the remaining sections and clauses shall be enforced in accordance with the intent of this Agreement. Texas law shall govern the validity and interpretation of this Agreement.

11. Waiver or Breach. The James Parties, Beste and Plaintiffs agree that one Ol" more waivers or breaches of any covenant, tenn, or provision of this Agreement by any party shall not be construed as a waiver of a subsequent breach of the same covenant, term, or provision, or as a waiver or breacb. of any other covenant, term, or provision.

12. Entire Agreement. This Agreement, including the exhibits hereto, contains the entire understanding between the James Parties, Beste and Plaintiffs and supersedes all prior agreements and understandings, oral or written, relating to the subject matter of this Agreement. The James Parties, Beste and Plaintiffs expressly acknowledge and agree that no provisions, representations, or warranties whatsoever were made, express or implied, other than those contained iu this Agreement and that they are not relyjng on any statement o1· communication from the other patty other than those expressly contained in this Agreement in deciding to execute this Agreement. This Agreement shall not be modified. amended, or terminated \lllless such modification, amendment, or termination is executed in writing and signed by authorized l-epresentatives of the affected parties. The Jan1es Parties, Beste arul Plaintiffs hereby waive their right to make future oral agreements covering the same subject as this Agreement.

13. Construction. The language of all parts of this Agreement shall in all cases be construed as a whole, accorcling to its fair meaning, and not strictly for or against either the James Parties, Beste or Plaintiffs. The James Parties, Beste and Plaintiffs agree that the waivers, releases, relinquishments and disavowals herein granted shall be with respect to claims, interests, rights, remedies and causes of action known or unknown, matured or unmatured, contingent or direct, existing or hereafter arisjng. The James Parties, Beste and Plaintiffs acknowledge (after :full consideration of the consequences and after being :fu.lly advised in the premises) that the waiver and relinquishment of their respective claims contained in this Agreement is full and complete, whether or not the factual basis for their respective clab:ns or defenses are currently known to them.

14. Other Acknowledgments. Plaintiffs, the Jatnes Parties and Beste, and each of them, hereby represent and certify that they (1) have bad an oppOliunity to read aU of this Agreement; (2) have been given a fair opportunity to, and have been advised to, discuss and negotiate the terms of this Agreement by and through their legal counsel~ (3) have been given a reasonable time to consider the Agreement; (4) understand the provisions of this Agreement; (5) have bad ample opportunity to seek and have received advice from an attorney or other advisors regarwng this Agreement or have otherwise waived their right to do so; (6) have determined that it is in their best interest to enter h1to this Agreement; (7) have not been influen.c.ed. to sign this Agreement by a.ny statement or representation by the other party or its legal counsel or other representative not contained in this Agreement; (8) have had sufficient time to investigate the existence of the claims and other rights hereby released and have satisfied themselves with respect to the same based upon their investigation and the advice of counsel, (9) are fully authorized to execute this Agreement in the capacities in which it is executed and (I 0) enter jnto this Agreement knowingly and voluntarily without coercion, duress, or fraud.

15. Valid Consideration. Plajntiffs, the James Parties and Beste agree that this Agreement is supported by good, valuable, and sufficient consideration.

16. Change of Facts. Plaintiffs, 1hc James Parties and Beste understand and agree tl1at the facts in respect of which this Agreement is made may hereafter prove to be other lilan, or of different form than, the facts now known by either of them or believed by either of them to be true as set forth in this Agreement. Plaint:i.ffi'i, the James Parties and Beste expressly accept and assume the risk of the facts proving to be so different, and each of them agrees that all of the terms of this Agreement shall be, in all respects, effective and binding, and not subject to termination or rescission by either of them due to any such difference in facts.

17. Multiple Countexparts. Plaintiffs, the James Parties and Beste agree that this Agreement may be signed in multiple counterparts, each of which shall be deemed an original for all purposes.

Plaintiffs the James Parties and Beste have executed this Agre~?ment on the following date

Remainder of this Page Intention:d1y Left Blank

Eduardo S. Espinosa in s capacity as Receiver of Retirement Value, LLC and on behalf of Retirement Value, LLC

TJIESTATE OF TEXAS § § COUNTY OF DALLA$ §

BEFORE :tviE, the undersigned authodty, on this day p~onally appew:ed Eduardo S.

Espinosa known to me to be the person whose na.-rne is subscribed to the foregoing "Settlement Agreement and Release of all Claims" and acknowledged to me that he executed same for the purposes and consioerations therein expressed and in the capacity or capactties indicated.

11,r ~~~R MY HAND AND · SEAL OF OFFICE this JZ t1;i day of

-3·

THE STATE OF TEXAS § § COUNTY OFTRAVIS §

BEFORE ME, the undersigned authority, on this day personally appeared Donald Taylor known to me to be the person whose name is subscribed to tlle foregoing "Settlement Agreement and Release of all Claims'' and acknowledged to me that he executed sam~ for the puxposes and considerations therein expressed and in the capacity or capacities indicated.

. )GIVEN UNDER MY HAND AND SEAL OF OFFICE tbis _d.) 1~ay of flfr 1 -· 2013.

oate:d.tw; U, £0U ~~.~lbLof 'Retlrement Value, LLC

TflESTATEOFTEXAS § § COUNTY OF HARIUS §

BEFORE ME, the uoder.;igoed anthority} on this <lay perso118lly appeared Janet Mortenson known to me to be the persot~ ~>.those: name Is subscribed to the foregoing "Seitleroent Agreement apd Rdense of all Claims" and aol'..nowledged to mo that she executed &amc for the purposes and considerations therein expressed and in the capa.oity or capacities indicf!t.OO.

A ylVEN < UNDER MY HAND AND SEAL.. OF OFFICE this cJ2nd day of ~2013.

UNDASM1TH NoL:IJV Public STATE OF TEXAS M~ eomm. EXP. 10·28·15

• 10-

Date: 'j- JJ..- J..otJ Jack Hohengarten Assistant Attorney General On behaffofthe State ofTexas

THE STATE OF TEXAS § § COUNTY OF TRAVIS §

BEFORE. ME. the undersigned authority, ·on this day personally .appeared ·Jack Hohengarten known to me to be the person whose name is subscribed to the foregoing "Settlement Agreement and Release of all Claims•• and acknowledged to me that she executed same for the purpos~ and considerations therein expressed and in the capacity or capacities indicated,

() ,...., • GAVEN UNDER MY HAND AND SEAL OF OFFICE this ~ day of ~-2013.

P.@4/

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Date:

J arne dement Services. LLC By: dJames Its: anagjng Member

TIIE STATE OF CALlFORNIA§ § COUNTY OF CONTRA COSTA §

BEFORE 'ME. the undersigned authority, on this day personally appeat·ed Ronald James, the Managing Member of James Settlement Services, LLC, known to me to be the person whose name is subscnoed to the foregoing ..Settlement Agreement and Release of all Claims" and acknowledged to me that he executed same for the purposes and considerations therein ex'P.ressed and in the capacity or capacities indicated.

OJVEN UNDER MY HAND AND SEAL OF OFFICE this } 8" day of Af~~k 2o13.

KAZIE 1<. AFSARI Comm, #1903 Notary Pub/Jc C .175 Contra C , • i!llfomla ;:; Com osta Count)' ~ rn.&p/resSep6, 20!4

.. . . . .... . .....

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Date:~ Ljj_;f- dJ) / J Rlsames. individually

§ THE STATE OF CALIFORNIA § COUNTYOFCONTRACOSTA §

BEFORE ME, the undersigned authority, on this day personally appeared Ronald James, known to me to be the person whose name is subscribed to the foregoing "Settlement Ag.reen1ent and Release of alL Claims" and acknowledged to me that he executed same for the purposes and considerations therein expressed and in the capacity or capacities indicated.

GIVEN UNDER l\fY HAND AND SEAL OF OFFICE this lX_ day of A'P~i L... 2013.

KAZlE K. AFS~ C.omm. M\903)75 . ~ Notary PubHc. CahfotOla n contUI Cost<"~ County t comm.ExplresSep6,20\4 _j"

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Date:

~> nald Ja

THE STATE OF CALIFORNIA§ § COUNTY OF CONTRA COSTA §

BEFORE ME, the undersigned authority, on this day personally appeared Donald James known to me to be the person whose name is subscribed to the foregoing "Settlement Agreement aod Release of aU Claims" and acknowledged to me that he executed same for the purposes and considerations therein expressed and in the capacity or capacities indicated.

GIVEN UNDER MY HAND AND SEAL OF. OFFICE this J..x_ day of A f?R_r L. 2013.

AAZIE 1<. AFSARI ~ ~ K. 4/t.i---., cornm. 1:1903175 Notary Public, the State of ('..alifomia Notary Public. California n Contra Costa Covnty comm. Expru~s.Se!!' 6, 20\4

2037

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~ ··

I H.

Date: ~ ~lBeste

TBESTATEOFNEWMEXlCO § § COUNTY OF SANTA FE §

BEFORE ME. the undersigned authority. on this day personally appeared Michael Beste known ro me to be the person whose name is subscribed to the foregoing "Settlement Agreement and Release of all Claims'$ and aclmowledged to me that he executed same f~r the purposes and considerations therein eJ...'Pressed and in the capacity or capacities indicated.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this 17--rf.l day of /kvL 2013.

I I II ·t

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