Charles Matlock, Individually and D/B/A Matlock Insurance Agency v. Gerald Hill and Martha Hill ( 2016 )

In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-15-00048-CV
CHARLES MATLOCK, INDIVIDUALLY AND D/B/A MATLOCK INSURANCE
AGENCY, APPELLANT
V.
GERALD HILL AND MARTHA HILL, APPELLEE
On Appeal from the 99th District Court
Lubbock County, Texas
Trial Court No. 2012-502885, Honorable William C. Sowder, Presiding
June 30, 2016
MEMORANDUM OPINION
Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.
Like that recently addressed by our Supreme Court in Life Partners, Inc. v.
Arnold, 464 S.W.3d 660 (Tex. 2015), the primary issue before us is whether a life
settlement is a security under the Texas Securities Act.1 Charles Matlock marketed life
settlements on behalf of A&O Life Fund and induced Gerald and Martha Hill to purchase
same via two different transactions. The total sum the Hills paid for those interests was
1
As explained in Life Partners, Inc. v. Arnold, 464 S.W.3d 660 (Tex. 2015), a life settlement is a
transaction wherein someone buys (at a discount from its payout value) an existing life insurance policy
from the insured and then sells interests in the policy to third parties. Id. at 663.
$100,000.00. After A&O filed for chapter 11 bankruptcy protection and the Hills lost
approximately 9/10th of the value of their investment, they sued Matlock individually and
as Matlock Insurance Agency (his company’s name). The causes of action sounded in
fraud arising under both the Texas Securities Act and the common law. They sought
damages, the rescission of the transactions, and attorney’s fees. Trial was to the court
which entered judgment for the Hills. Though the trial court did not specify in the decree
the particular cause of action upon which it allowed recovery, it nonetheless awarded
“Plaintiffs . . . actual damages from the Defendant in the sum of one hundred thousand
dollars ($100,000.00), less the eleven thousand nine hundred and sixty dollars and
thirty-six cents ($11,960.36) received by the Plaintiffs through different sources, which
totals eighty-eight thousand thirty-nine dollars and sixty-four cents ($88,039.64).”
Findings of fact and conclusions of law were subsequently executed by the trial court in
effort to illustrate the grounds underlying its decision. Matlock appealed. We affirm.
First Issue – Were the Life Settlements “Securities?”
Through his first issue, Matlock argues that “[t]he Trial Court Conclusion of Law
that the Life Settlements are Securities should be Reversed because the Trial Court
Improperly Concluded that the Life Settlements constituted a Security under the TSA.”
The argument has various components. The first involves whether the life settlements
at issue here were investment contracts. If they were not, then they were not securities,
according to Matlock.
The actual tenor of his argument is somewhat unclear. At times he seems to be
arguing that the omission of a finding or conclusion of law from the trial court’s findings
of fact and conclusions of law mandates reversal of the judgment. At other times he
2
seems to suggest that legal precedent deemed life settlement transactions something
other than securities. So too can his argument be read as intimating that no evidence
appears of record establishing one of the several elements to an investment contract or
security. Then he appears to segue into another proposition concerning an exemption
apparently found in the Securities Act. We will address each as we understand the
argument to be, and the first involves whether life settlements have been held not to be
securities.
Matlock cites us to the opinion in Griffitts v. Life Partners, Inc. No. 10-01-00271-
CV, 2004 Tex. App. LEXIS 4844 (Tex. App.—Waco May 26, 2004, no pet.) (mem. op.)
to support his contention that life settlements are not securities. To the extent that
opinion stands for the general proposition asserted by Matlock, our Supreme Court in
Arnold, recently debunked the contention. There, it concluded that a life settlement may
be an investment contract (and therefore a security) if it satisfies the elements or
definition of an investment contract. Life Partner’s, Inc. v. Arnold, 464 S.W.3d at 667
(defining the elements of an investment contract and then stating that upon “[a]pplying
this definition to the undisputed material facts, we conclude that Life Partners’ life
settlement agreements are ‘investment contracts’ and thus ‘securities’ under the Texas
Securities Act.”).
As for the matter of an exemption, Matlock cites us to the definition of a security
appearing in art. 581-4(a) of the Texas Civil Statutes. It defines the terms as
any limited partner interest in a limited partnership, share, stock, treasury stock,
stock certificate under a voting trust agreement, collateral trust certificate,
equipment trust certificate, preorganization certificate or receipt, subscription or
reorganization certificate, note, bond, debenture, mortgage certificate or other
evidence of indebtedness, any form of commercial paper, certificate in or under a
profit sharing or participation agreement, certificate or any instrument
3
representing any interest in or under an oil, gas or mining lease, fee or title, or
any certificate or instrument representing or secured by an interest in any or all of
the capital, property, assets, profits or earnings of any company, investment
contract, or any other instrument commonly known as a security, whether similar
to those herein referred to or not. The term applies regardless of whether the
“security” or “securities” are evidenced by a written instrument. Provided,
however, that this definition shall not apply to any insurance policy, endowment
policy, annuity contract, optional annuity contract, or any contract or agreement
in relation to and in consequence of any such policy or contract, issued by an
insurance company subject to the supervision or control of the Texas Department
of Insurance when the form of such policy or contract has been duly filed with the
Department as now or hereafter required by law.
TEX. REV. CIVIL STAT. ANN. art. 581-4(a) (West 2010) (emphasis added). Allegedly, the
life settlement in question fell within the penumbra of the passage we italicized.
Matlock does not question that A&O issued the life settlement, at bar. Indeed, he
said as much in his brief. Yet, we were cited to no evidence of record indicating that
A&O was “an insurance company subject to the supervision or control of the Texas
Department of Insurance when the form of such policy or contract [was] duly filed with
the Department . . . .” Nor did he direct us to evidence indicating that the A&O product
was “duly filed with the Department as . . . required by law.” And, while we have no
obligation to parse through the appellate record to find such evidence, see Brandon v.
American Sterilizer Co., 880 S.W.2d 488, 493 (Tex. App.—Austin 1994, no writ), our
effort to do just that uncovered none. This, therefore, precludes us from accepting the
argument he proffered. See State v. Life Partners Holding, Inc., 459 S.W.3d 619, 621
(Tex. App.—Austin 2014), affirmed, Life Partners, Inc. v. Arnold, 464 S.W.3d 660 (Tex.
2015) (holding that the exclusion did not apply because Life Partners was not subject to
the supervision or control of the Board of Insurance).
4
As for the presence of evidence establishing that the life settlements acquired by
the Hills were not investment contracts, Matlock focuses on one element of the
definition of that term as expressed in Arnold. The later mentioned four parts to the
definition. It consists of
(1) a contract, transaction, or scheme through which a person pays money (2)
to participate in a common venture or enterprise (3) with the expectation of
receiving profits, (4) under circumstances in which the failure or success of the
enterprise, and thus the person’s realization of the expected profits, is at least
predominately due to the entrepreneurial or managerial, rather than merely
ministerial or clerical, efforts of others, regardless of whether those efforts are
made before or after the transaction.
Life Partners, Inc. v. Arnold, 464 S.W.3d at 667. The element purportedly missing here
pertained to the failure or success of the enterprise being “at least predominately due to
the entrepreneurial or managerial . . . efforts of others . . . .” As noted in Arnold, those
efforts may occur “before or after the transaction” in question. Id. Furthermore,
managerial efforts are characterized as “actions through which the person exercises
oversight, discretion, and control over activities and transactions on which the
anticipation of profits depends.” Id. at 683. While the Arnold court did not explain what
it meant by entrepreneurial efforts, it did give examples of them. They included 1) the
identification of the insureds, 2) the negotiation of the discounts for the policy, 3) the
evaluation of the policy terms and conditions, 4) the evaluation of the insured’s health,
5) the acquisition of the policies, 6) the acquisition of others to buy interests in the life
settlement, 7) the evaluation of the insured’s life expectancy, and 8) the selection of a
purchase price to yield sufficient profit. Id.
Here, we find evidence illustrating that A&O selected the policies and pooled
them, that the “right” policies had to be acquired for the pool, that the life expectancies
5
of those insured under the policies had to be evaluated, and that the entity insuring the
investor’s payout (i.e. PCI) “is not going to continue to do business with A&O if A&O is
not picking policies that make sense.”2 A&O’s own offering statement, which was also
admitted into evidence, 1) revealed criteria utilized by A&O in selecting what insurance
policies to buy, 2) explained how there will be an “attempt to control risk through
diversification of investments,” 3) discussed the “investment process” that A&O’s
manager “may utilize in making investments,” 4) disclosed that A&O would own the
policies and death benefit, assume “the responsibility for future premium payments,”
and assume the “right to monitor the life and health of the insured,” and 5) mentioned its
intent to reinvest revenues from death benefits “to further the growth of” A&O. This,
coupled with the evidence (provided by an expert witness) that “[i]f A&O is not there to
pay and PCI is not there to pay, if they fail, the investor—the investment’s going to fail
for the Hills as well,” is much more than a scintilla of evidence from which a fact finder
could reasonably deduce that the failure or success of the enterprise and realization of
the expected profits is predominately due to the entrepreneurial or managerial efforts of
others. See Jelinek v. Casas, 328 S.W.3d 526, 532 (Tex. 2010) (holding that a verdict
has sufficient evidentiary support when the record has more than a scintilla of evidence
upon which a reasonable fact finder could conclude that a vital fact has been
established). Indeed, the evidence at bar was quite similar to that relied upon in Arnold
to satisfy the definition of an investment contract.
As for the complaint about the absence of a specific finding of fact regarding the
manner in which the life settlements were pooled, marketed and sold made them a
2
PCI was an insurance company licensed to do business in Costa Rica. Apparently, A&O
contracted with it to insure the investment return.
6
security, we note that such a statement appears in the trial court’s conclusions of law.3
Interestingly, Matlock cites us to no authority holding that the inclusion of relevant fact
findings within conclusions of law requires reversal of a judgment. Indeed, to so hold
would seem to place form over substance; and we are often cautioned against doing
that by our Supreme Court. See e.g. CMH Homes v. Perez, 340 S.W.3d 444, 449
(Tex. 2011). More importantly, the remedy for defective or omitted findings is not
reversal but rather remand for issuance of the requested findings. Brooks v. Housing
Auth. of City of El Paso, 926 S.W.2d 316, 321 (Tex. App.—El Paso 1996, no writ).
Here, Matlock simply prays for reversal.
Finally, even if we are to assume arguendo that the determination is actually a
conclusion of law, it nonetheless implicates an element of the Hills’ claim for securities
fraud. Thus, the omitted factual finding can be presumed given the evidence supporting
its existence. See Black v. Dallas Cty Child Welfare Unit, 835 S.W.2d 626, 630 n. 10
(Tex. 1992) (stating that an “omitted finding, supported by the evidence, may be
supplied by a presumption that it supports the judgment”); Dupree v. Garden City
Boxing Club, Inc., 219 S.W.3d 613, 616 (Tex. App.—Dallas 2007, no pet.) (stating the
same); see Tex. R. Civ. P. 299 (stating that “. . . when one or more elements [of a
ground for recovery] have been found by the trial court, omitted unrequested elements,
when supported by evidence, will be supplied by presumption in support of the
judgment.”).
Second Issue – Constitutional Prohibitions
3
Matlock actually avers that: “[e]qually compelling is the absence of any finding of fact (specific or
otherwise) that the alleged pooling, marketing, sale, and presence of a guarantee occurred in this case –
and if it did – to such an extent that it would lead to a conclusion that a security somehow existed. The
articulation of a Conclusion of Law adjudging same in the absence of any attendant finding of fact(s) also
constitutes reversible error.”
7
Next. Matlock argues that the “. . . alleged claims asserted against Defendants
under the TSA (after the fact) would violate the retroactive proscription of the Texas
Constitution.” In other words, we cannot retroactively apply any determination that life
settlements are securities, according to him. Yet, our time need not be spent on
analyzing the matter for it was resolved in Arnold; the court applied its decision
retroactively. It wrote that: 1) “. . . retroactive application of our holding furthers the
operation and enforcement of the Securities Act”; 2) “in light of the decades of
precedent on which we rely, the results impose no inequities on Life Partners”; and 3)
“in response to Life Partners’ constitutional concerns, we need only note that our
decision merely interprets and applies a very old law, consistent with the manner in
which other courts have interpreted and applied it for decades; it does not create a new
one.” Life Partners, Inc. v. Arnold, 464 S.W.3d at 685. It is not our place to disagree
with it and hold otherwise.
Matlock next asserts that deeming life settlements to be securities would deprive
him of property without due process. A like contention was made and rejected in State
v. Life Partners Holdings, Inc., 459 S.W.3d at 621-22 (refusing to find a due process
violation after recognizing that no “binding” decision on the matter of whether life
settlements could be securities had previously been rendered). More importantly, that
decision was affirmed by the Supreme Court in Life Partners, Inc. v. Arnold. To
reiterate the words of the Supreme Court uttered while considering “Life Partners’
constitutional concerns,” “we need only note that our decision merely interprets and
applies a very old law, consistent with the manner in which other courts have interpreted
and applied it for decades; it does not create a new one.” Life Partners, Inc. v. Arnold,
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464 S.W.3d at 685. Simply put, requiring one to follow existing law does not, in and of
itself, offend notions of due process.
Issue Three - Common Law Fraud/Statutory Fraud
Matlock’s next complaints relate to the findings of common law fraud and his
aiding and abetting others in the commission of that fraud. These specific contentions
we need not address since they are not dispositive of the appeal.4 We now explain
why.
From the trial court’s findings of fact and conclusions of law, one can reasonably
infer that its decision to award damages was based upon both the commission of
common law fraud and the violation of articles 581-12 and 581-33(A)(2) of the Texas
Revised Civil Statutes.5 Per the former, “. . . no person . . . shall, directly or through
agents, offer for sale, sell or make a sale of any securities in this state without first being
registered as in this Act provided” and “[n]o agent shall, in behalf of any dealer, sell,
offer for sale, or make sale of any securities . . . unless registered as an agent for that
particular registered dealer under the provisions of this Act.” TEX. REV. CIV. STAT. ANN.
4
Because we are not addressing Matlock’s complaint about common law fraud, we need not
address his issue concerning the admission of evidence to prove same.
5
Such findings and conclusions included statements that: 1) “[a] person selling the type of
financial vehicles involved in this case is required to be licensed to sell securities under Texas securities
law”; 2) “[t]he financial vehicles in question in this case (life insurance settlements), based on the way
they were pooled, marketed, sold and backed by a guarantee constituted securities under Texas
securities law”; 3) “[i]n or about January 2007, Wahab [an A&O executive] told Defendant Matlock that the
A&O life settlements which were then being sold to investors were legally considered as securities. Since
Defendant Matlock was not registered to sell securities, it was decided that Defendant Matlock would no
longer participate in efforts to sell those investment products”; 4) Matlock “failed to disclose [to the Hills]
that he was not registered with the Texas State Securities Board - such that he was prohibited from
selling A&O life settlements in Texas” when he sold the life settlements; 5) Matlock “failed to disclose that
PCI, the issuer of the guaranty bonds, was not licensed with the Texas Department of Insurance”; and 6)
Matlock “failed to disclose that the Texas Department of Insurance issued an Emergency Cease and
Desist Order against PCI on November 6, 2006, wherein it barred PCI from engaging in the business of
insurance in Texas, absent registration.”
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art. 581-12(A). One who violates that prohibition “is liable to the person buying the
security . . . who may sue either at law or in equity for rescission or for damages if the
buyer no longer owns the security.” Id. art. 581-33(A)(1).
That Matlock had no license to sell securities was not questioned on appeal. His
lack of a license coupled with his selling of such a security in the guise of a life
settlement evinced a violation of art. 581-12(A) of the Texas Civil Statutes. So, the trial
court had basis to award the Hills their damages or order the return of their $100,000.00
paid for the life settlements under art. 581-33(A)(1).
As for art. 581-33(A)(2), it provides that one “who offers or sells a security . . . by
means of an untrue statement of a material fact or an omission to state a material fact
necessary in order to make the statements made, in the light of the circumstances
under which they are made, not misleading, is liable to the person buying the security
from him . . . .” Id. art. 581-33(A)(2). Furthermore, the buyer “may sue either at law or
in equity for rescission, or for damages if the buyer no longer owns the security.” Id.
The record is replete with evidence illustrating that Matlock informed the Hills of the
secure nature of their investment and how that investment was secure because
payment was guaranteed by the PCI bond. That bond was “a game changer,” in his
view. These representations were uttered via communications made in March of 2007
and thereafter. What he did not tell them though, was that PCI had been barred by the
Texas Department of Insurance from conducting business in Texas as of November
2006. More importantly, Matlock knew of the bar before March of 2007.
Other evidence indicates that the offering documents describing the investment
advertised that 95% of the funds received from the “bond subscription” would be
10
“invested by the Fund in accordance with the investment objectives.” Yet, Matlock was
receiving a 10% commission on the sales he made. Receiving 10% of what the buyer
paid tends to contradict the representation that 95% of the buyer’s money was being
“invested.” Yet, Matlock felt it unnecessary to inform the Hills of his commission rate.
Failing to disclose information about both PCI’s inability to conduct business and
Matlock’s commission, at the very least, can reasonably be construed as an “omission
to state a material fact necessary . . . to make the statements made . . . not misleading.”
Thus, the trial court also had basis to award the Hills their damages or order the return
of their $100,000.00 paid for the life settlements under art. 581-33(A)(2).
Finally, Matlock does not attack the measure or amount of damages awarded by
the trial court to the Hills. Consequently, the trial court’s decision to award the damages
it did has a legitimate basis distinct from any claim related to common law fraud. That,
in turn, relieves us from having to determine if the Hills proved common law fraud.
Issue Four – Attorney’s Fees
Matlock’s final issue pertains to the attorney’s fees awarded the Hills. He
contends that his opponents failed to prove they were entitled to same. This argument
must be rejected too.
The legislature permitted those pursuing recovery under art. 581-33(A)(1) to
recover such fees if equitable under the circumstances. See id. art. 581-33(D)(7)
(stating that “[o]n rescission or as a part of damages, a buyer . . . may also recover
reasonable attorney’s fees if the court finds that the recovery would be equitable in the
circumstances”). So, the Hills were entitled to reasonable attorney’s fees if the trial
court deemed it equitable to award same under the circumstances.
11
Next, whether their recovery is equitable lies in the trial court’s discretion. See
Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998) (in assessing whether attorney’s
fees were recoverable under the Declaratory Judgment Act and upon noting that the Act
permitted the trial court to award “reasonable and necessary attorney’s fees as are
equitable and just,” the court stated that “[m]atters of equity are addressed to the trial
court’s discretion”). And, so long as the trial court’s decision comports with controlling
rules or guidelines and is not arbitrary or capricious, we are prohibited from interfering
with it. See Ford Motor Co. v. Garcia, 363 S.W.3d 573, 578 (Tex. 2012) (stating that
discretion is abused when the decision fails to comport with controlling rules and
guidelines or is arbitrary and capricious).
Here, the trial court found that “[i]n or about January 2007, Wahab told . . .
Matlock that the A&O life settlements which were then being sold to investors were
legally considered as securities” and “[s]ince . . . Matlock was not registered to sell
securities, it was decided that . . . Matlock would no longer participate in efforts to sell
those investment products.” These findings were not questioned on appeal. Despite
his having this information and agreeing to forego their sale, he sold $100,000.00 worth
of life settlements to the Hills. The latter were retired octogenarians at the time. In
return for his efforts, he received a 10% commission even though investors were told
that 95% of their subscription would be invested.
Several years earlier, Matlock had endeavored to sell different unregistered
securities while not being lawfully permitted to do so. That resulted in the issuance by
the Texas Securities Board of an order dated February 5, 2001 and directing him to
“CEASE AND DESIST from selling securities or offering securities for sale in the State
12
of Texas until he is registered, with the Securities Commissioner or an exemption is
available under the Texas Securities Act.” Again, he was not registered when he
resumed his statutorily prohibited efforts to sell securities and actually sold them to the
Hills in 2007.
The foregoing are circumstances upon which the trial court could have
reasonably concluded that it was equitable to award the Hills attorney’s fees under art.
581-33(D)(7). See TEX. REV. CIV. STAT. ANN. 581-33, Comment—1977 Amendment
(describing indicia to consider in deciding whether it is equitable to award attorney’s
fees). Its decision to award them, therefore, did not constitute an instance of abused
discretion.
Next, Matlock attacks the reasonableness of the fees awarded. Though the Hills
presented evidence illustrating that a reasonable fee would be $248,928.25, the trial
court granted them only $125,000.00. In determining whether that award was
reasonable, we initially consider the Hills statement that they were utilizing the lodestar
method to calculate the fees. Use of that method obligates the requesting party to
present, “at a minimum, evidence ‘of the services performed, who performed them, and
at what hourly rate, when they were performed, and how much time the work required.’”
Long v. Griffin, 442 S.W.3d 253, 255 (Tex. 2014), quoting, El Apple I, Ltd. v. Olivas, 370
S.W.3d 757, 763 (Tex. 2012).
According to the record here, two attorneys represented the Hills. Both
submitted affidavits to support the request for fees. The multi-paged documents
described 1) their educational background, 2) the hourly rate charged by each when
involved in “security matters,” 3) the range of hourly rates charged by others nationwide
13
in like matters, 4) the work performed by each attorney accompanied by the date on
which it was done, and 5) the amount of time (or an estimate of same) devoted to each
aspect of work performed. The time expended by each was then multiplied by their
respective hourly rates, and those totals were added to form the $248,928.25 sought.
We further note the nature of the case (i.e one involving security law), the number of
exhibits proffered into evidence and their ofttimes lengthy page number. Taken
together, the data before the trial court was of the ilk required by Long and El Apple.
We need not decide whether it was enough to warrant recovery of $248,000.00 in fees,
but we do conclude that it provided sufficient evidentiary basis to award $125,000.00 as
a reasonable fee.
Matlock next broached the specter of segregation. That is, he suggests the
“Plaintiff’s [sic] Affidavit of Legal Fees fails to segregate fees between ‘recoverable’ and
‘unrecoverable’ as required.” It is true that one seeking fees generally has the
obligation to segregate fees which are recoverable from those which are not if the suit
involves causes of action for which fees may and may not be recoverable. A.G.
Edwards & Sons, Inc. v. Beyer, 235 S.W.3d 704, 710 (Tex. 2007). An exception to that
obligation exists, though. As stated by our Supreme Court, “when discrete legal
services advance both a recoverable and unrecoverable claim that they are so
intertwined . . . [the fees] need not be segregated.” Tony Gullo Motors I, L.P. v. Chapa,
212 S.W.3d 299, 313-14 (Tex. 2006). That exemption applied here.
Via their live pleading, the Hills pursued causes of action sounding in both
common law fraud and statutory securities fraud. And, as previously illustrated,
attorney’s fees may be recoverable when redressing the latter. They, however, are not
14
recoverable for prosecuting common law claims of fraud. MBM Financial Corp. v.
Woodlands Operating Co., L.P., 292 S.W.3d 660, 667 (Tex. 2009) (stating that “fees are
not allowed for torts like fraud”). Furthermore, no effort was made by the Hills to
segregate fees incurred in relation to the common law fraud matter versus those relating
to the security law violations. This may be so because it would have been quite difficult
to do that. In short, the claims were more than intertwined; rather, proving one
effectively proved aspects of the other. Again, securities fraud could be established
under art. 581-33(A)(2) of the Revised Civil Statutes by proving that the accused offered
or sold “a security . . . by means of an untrue statement of a material fact or an
omission to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they are made, not misleading . . . .” TEX.
REV. CIV. STAT. ANN. art. 581-33(A)(2) (emphasis added). In turn, common law fraud
could be established via evidence of “‘a material misrepresentation, which was false,
and which was either known to be false when made or was asserted without knowledge
of its truth, which was intended to be acted upon, which was relied upon, and which
caused injury.’” Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143, 153 (Tex. 2015),
quoting Formosa Plastics Corp. v. Presidio Eng’rs & Contr., Inc., 960 S.W.2d 41, 47
(Tex. 1998) (emphasis added). There is also one other way to prove common law
fraud, and it involves the omission to disclose information. That is, common law fraud
may also be established by proving that 1) the opponent failed to disclose material facts
when he had a duty to do so, 2) the defendant knew the plaintiff was ignorant of the
facts and the plaintiff did not have an equal opportunity to discover the facts, 3) the
defendant was deliberately silent when it had a duty to speak, 4) by failing to disclose
15
the facts, the defendant intended to induce the plaintiff to take some action or refrain
from acting, 5) the plaintiff relied on the defendant’s nondisclosure, and 6) the plaintiff
was injured as a result of acting without that knowledge. Horizon Shipbuilding, Inc. v.
BLyn II Holding, LLC, 324 S.W.3d 840 (Tex. App.—Houston [14th Dist.] 2010, no pet.).
As can be seen, proving both an art. 581-33(A)(2) violation and common law
fraud required either a material misrepresentation or omission to disclose a material
fact. And, the conduct deemed fraudulent by the Hills under either of those theories
was often the same, e.g. the misrepresentations about or omissions related to the
amount of payment from the buyer actually being invested and the guaranteed nature of
the investment due to the PCI bond when PCI was barred from doing business in
Texas. We conclude that this intimate interrelationship between the Hills’ claims
satisfied the test of Gullo. “[D]iscrete legal services advance[d] both a recoverable and
unrecoverable claim [which were] . . . so intertwined . . . [that the fees] need not [have
been] segregated.” Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d at 313-14.
Via his final argument, Matlock suggested that the award was improper because
counsel were assisting other clients while prosecuting the case at bar. Assuming this
were true, however, he cited no authority suggesting this to be a basis upon which to
deny fees. Nor did he cite us to evidence of record establishing that the Hills’ trial
counsel not only represented others in claims against Matlock but also used the Hills
suit to develop those claims.
Nonetheless, we did find of record indication that Matlock may have defrauded
others via the improper sale of life settlements. Accompanying that evidence was other
evidence indicating that he utilized the same sales technique or pitch in each instance.
16
This alone, though, does not prove that legal counsel were double-dipping, so to speak.
Indeed, acts of fraud committed upon other life settlement buyers could well have been
relevant in establishing the claims of the Hills. See TEX. R. EVID. 404(b)(2) (stating that
evidence of other wrongs may be admissible to prove motive, opportunity, intent,
preparation, plan, knowledge, identity or the like). We say this simply to note that
proving other misconduct on the part of Matlock does not necessarily support the
inference that counsel was performing unneeded work for the Hills. So too has he failed
to cite us to anything of record suggesting that legal counsel, in assisting other clients,
was performing unnecessary work for the Hills.
In sum, we overrule each issue presented by Matlock and affirm the judgment of
the trial court.
Brian Quinn
Chief Justice
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