RSL-3B-IL, Ltd. v. the Prudential Insurance Company of America and Prudential Structured Settlement Company F/K/A Prudential Property and Casualty Insurance Company of Holmdel, New Jersey
ACCEPTED
01-14-00482-cv
FIRST COURT OF APPEALS
HOUSTON, TEXAS
1/12/2015 1:36:28 PM
CHRISTOPHER PRINE
CLERK
NO. 01-14-00482-CV
______________________________________________________________
FILED IN
1st COURT OF APPEALS
IN THE COURT OF APPEALS HOUSTON, TEXAS
FOR THE FIRST DISTRICT OF TEXAS 1/12/2015 1:36:28 PM
CHRISTOPHER A. PRINE
Clerk
______________________________________________________________
RSL-3B-IL, LTD.
v.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, ET AL.
______________________________________________________________
ON APPEAL FROM THE 269TH
DISTRICT COURT OF HARRIS COUNTY, TEXAS
______________________________________________________________
BRIEF OF APPELLEES THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA AND PRUDENTIAL STRUCTURED SETTLEMENT
COMPANY F/K/A PROPERTY AND CASUALTY INSURANCE
COMPANY OF HOLMDEL, NEW JERSEY
______________________________________________________________
Patrick B. Larkin Of Counsel:
State Bar No. 24013004 Stephen R. Harris
plarkin@larkin-law.com Drinker Biddle & Reath LLP
The Larkin Law Firm PC One Logan Square, Suite 2000
11200 Broadway Street, Suite 2705 Philadelphia, PA 19103-6996
Pearland, Texas 77584 Telephone: (215) 988-2700
Telephone: (281) 412-7500 Facsimile: (215) 988-2757
Facsimile: (281) 412-7502
Counsel for Appellees The Prudential Insurance
Company of America and Prudential Structured
Settlement Company f/k/a Prudential Property
and Casualty Insurance Company of Holmdel, New Jersey
IDENTITY OF PARTIES AND THEIR COUNSEL
In accordance with TEX. R. APP. P. 38.1(a) and TEX. R. APP. P. 38.2
(a)(1)(A), the following is a complete list of all parties to this appeal:
Appellant: RSL-3B-IL, LTD.
Counsel for Appellant:
E. John Gorman – trial and appellate counsel
State Bar No. 08217560
jgorman@feldlaw.com
John R. Craddock – trial and appellate counsel
State Bar No. 04969800
jcraddock@feldlaw.com
The Feldman Law Firm LLP
Two Post Oak Central
1980 Post Oak Blvd., Suite 1900
Houston, Texas 77056-3877
Telephone: (713) 850-0700
Facsimile: (713) 850-8530
Appellees: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
AND PRUDENTIAL STRUCTURED SETTLEMENT COMPANY F/K/A
PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY OF
HOLMDEL, NEW JERSEY
Counsel for Appellees:
Patrick B. Larkin – trial and appellate counsel
State Bar No. 24013004
plarkin@larkin-law.com
The Larkin Law Firm PC
11200 Broadway Street, Suite 2705
Pearland, Texas 77584
Telephone: (281) 412-7500
Facsimile: (281) 412-7502
Stephen R. Harris – trial and appellate counsel; admitted pro hac vice
Stephen.harris@dbr.com
Drinker Biddle & Reath LLP
One Logan Square, Suite 2000
Philadelphia, PA 19103-6996
Telephone: (215) 988-2700
Facsimile: (215) 988-2757
Appellee: SETTLEMENT CAPITAL CORPORATION
Counsel for Appellee:
Earl S. Nesbitt
State Bar No. 14916900
enesbitt@nvmlaw.com
Davis S. Vassar
State Bar No. 20503175
dvassar@nvmlaw.com
Nesbitt, Vassar & McCown, LLP
15851 Dallas Parkway, Suite 800
Addison, Texas 75001
Telephone: (972) 371-2411
Facsimile: (972) 371-2410
Appellee: OLUBUMI ADEGOKE
Counsel for Olubumi Adegoke:
Greg Hill
State Bar No. 24042990
ghill@greghilllaw.com
Greg Hill, Attorney, PLLC
11200 Broadway, Suite 2743
Pearland, Texas 77584
Telephone: (832) 895-6640
Facsimile: (832) 895-6444
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES .................................................................................. iii
RECORD REFERENCES ..................................................................................... xii
STATEMENT OF THE CASE ............................................................................. xiii
ISSUES PRESENTED...........................................................................................xiv
MAY IT PLEASE THE COURT: ............................................................................1
I. STATEMENT OF FACTS .............................................................................4
A. The Underlying Settlement Agreement, the Qualified
Assignment, and the Annuity.....................................................4
B. The Factoring Transaction with Settlement Capital
Corporation ................................................................................7
C. The 2003 Factoring Transaction with Rapid Settlements,
Ltd. and the Conflicting Order ...................................................9
D. RSL’s Petition and the Prudential Defendants’
Interpleader ..............................................................................14
E. The Trial and the Final Judgment ............................................15
F. Olubumi Adegoke’s Intervention and Nonsuit, and the
Court’s Severance ....................................................................17
II. SUMMARY OF THE ARGUMENT ...........................................................18
III. ARGUMENT ................................................................................................20
A. Standard of Review for Appeal of Directed Verdict ...............20
B. RSL’s Breach of Contract Claim Fails, and the Court
Should Affirm the Directed Verdict ........................................21
1. The Rapid Order is Not a Contract with Prudential
Defendants .....................................................................22
2. Adegoke Had No Rights in the Annuity to Assign .......25
3. As a Mere Incidental Third-Party Beneficiary,
Adegoke had No Enforceable Interests in the
Annuity ..........................................................................29
-i-
TABLE OF CONTENTS
(continued)
Page
4. RSL Was Not Assigned the Separate Contracts of
the Annuity, Settlement Agreement, and Qualified
Assignment ....................................................................33
5. The Anti-Assignment Language is Enforceable ...........35
6. RSL has failed to Establish Standing ............................38
7. RSL Failed to Establish a Valid Contractual
Assignment ....................................................................40
C. The Trial Court Properly Severed the Case .............................41
D. RSL is Wrong on the Interpleader Facts and Relief, and
the Trial Court Properly Determined That the Prudential
Defendants Interpleaded the Funds..........................................44
1. There Were Conflicting Claims to the Funds, and
Trial Court Properly Recognized that the
Prudential Defendants Interpleaded the Funds ..............44
2. The Prudential Defendants Attempted to Resolve
the Conflicting Payment Directions, But RSL and
Rapid were Uncooperative. The Prudential
Defendants Filed their Interpleader Promptly with
their Answer...................................................................49
3. The Jury Properly Awarded the Prudential
Defendants their Fees ....................................................52
IV. PRAYER FOR RELIEF ...............................................................................53
- ii -
TABLE OF AUTHORITIES
Page(s)
CASES
Matter of 321 Henderson Receivables Origination LLC (Logan),
19 Misc. 3d 504, 865 N.Y.S. 2d 817 (N.Y. Sup. Ct. 2008)..........................36, 37
In re All Trac Transp., Inc.,
306 B.R. 859 (Bankr. N.D. Tex. 2004)...............................................................24
Allstate Ins. Co. v. American Bankers Ins. Co. of Florida,
882 F.2d 856 (4th Cir. 1989) ........................................................................26, 32
Am. Zurich Ins. Co. v. Barker Roofing, L.P.,
387 S.W.3d 54 (Tex. App.—Amarillo 2012, no pet.) ........................................22
AMX Enters., L.L.P. v. Master Realty Corp.,
283 S.W.3d 506 (Tex. App.—Fort Worth 2009, no pet.) (op. on reh'g) ............ 53
Austin Nursing Ctr., Inc. v. Lovato,
171 S.W.3d 845 (Tex. 2005) ..............................................................................38
AVCO Corp. v. Interstate Sw., Ltd.,
251 S.W.3d 632 (Tex. App.—Houston [14th Dist.] 2007, pet. denied)............. 39
Avila v. Lone Star Radiology,
183 S.W.3d 814 (Tex. App.—Waco 2005, no pet.) .....................................51, 52
Barnett v. Woodland,
310 S.W.2d 644 (Tex. App.—Austin 1958, writ ref’d n.r.e.) ............................44
Beneficial Standard Life Ins. Co. v. Trinity Nat'l Bank,
763 S.W.2d 52 (Tex. App.—Dallas 1988, writ denied) .....................................52
Bill Nolan Livestock, Inc. v. Simpson,
402 So. 2d 214 (La. Ct. App. 1981)....................................................................24
Blackmon-Dunda v. Mary Kay, Inc.,
2009 Tex. App. LEXIS 2512 (Tex. App. —Dallas, Apr. 1, 2009, pet.
denied).................................................................................................................28
- iii -
Boston Prop. Exch. Transfer Co. v. Iantosca,
834 F. Supp. 2d 4 (D. Mass. 2011) .....................................................................24
Brown v. Mesa Distributors, Inc.,
414 S.W.3d 279 (Tex. App.—Houston [1st Dist.] 2013, no pet.) ......................40
Bruner v. Exxon Co., U.S.A., A Div. of Exxon Corp.,
752 S.W.2d 679 (Tex. App.—Dallas 1988, writ denied) ...................................30
Bryant v. United Shortline Inc.,
984 S.W.2d 292 (Tex. App.—Fort Worth 1998, no pet.)...................................45
Cadle Co. v. Henderson,
982 S.W.2d 543 (Tex. App.—San Antonio 1998, no pet.) ................................40
Camco Oil Corp. v. Vander Laan,
220 F.2d 897 (5th Cir. 1955) ..............................................................................30
Carlile v. Harris,
38 S.W.2d 622 (Tex. Civ. App.—Galveston 1931, no pet.) ..............................28
Cavadi v. Bank of Am.,
2008 DNH 66, 2008 U.S. Dist. LEXIS 26389 (D.N.H. 2008) ...........................24
City of Beaumont v. Guillory,
751 S.W.2d 491 (Tex. 1988) ..............................................................................42
Clayton v. Mony Life Ins. Co. of Am.,
284 S.W.3d 398 (Tex. App.—Beaumont 2009, no pet.) ........................45, 47, 49
Cloughly v. NBC Bank-Seguin, N.A.,
773 S.W.2d 652 (Tex. App.—San Antonio 1989, writ denied) .........................37
Conoco, Inc. v. Republic Ins. Co.,
819 F.2d 120 (5th Cir. 1987) ..............................................................................37
Cook Composites, Inc. v. Westlake Styrene Corp.,
15 S.W.3d 124 (Tex. App.—Houston [14th Dist.] 2000, pet. dism’d) ............... 35
In re D. Wilson Construction Co.,
196 S.W.3d 774 (Tex. 2006) ..............................................................................35
- iv -
Dallas Cnty. Tax Collector v. Andolina,
303 S.W.3d 926 (Tex. App.—Dallas 2010, no pet.) ..........................................50
Devji v. Keller,
No. 03-02-00754-CV, 2003 WL 21705829 (Tex. App.—Austin July 24,
2003, no pet.) ......................................................................................................50
Double Ace, Inc. v. Pope,
190 S.W.3d 18 (Tex. App.—Amarillo 2005, no pet.) ........................................21
Enos v. State,
889 S.W.2d 303 (Tex. Crim. App. 1994) ...........................................................36
EOG Res., Inc. v. Hurt,
357 S.W.3d 144 (Tex. App.—Fort Worth 2011, pet. denied) ......................30, 33
Farmer v. Ben E. Keith Co.,
907 S.W.2d 495 (Tex. 1995) (per curiam) .........................................................42
Fiess v. State Farm Lloyds,
202 S.W.3d 744 (Tex.2006)................................................................................22
Finserv Casualty Corp. v. Transamerica Occidental Life Ins. Co.,
Case No. 2011-05238 (District Court —Harris County, Texas [165th
Dist.] August 27, 2013)...................................................................................23, 1
First Nat'l Bank of Edinburg v. Cameron Cnty.,
159 S.W.3d 109 (Tex. App.—Corpus Christi 2004, pet. denied) ......................22
In re Foreman,
365 Ill. App. 3d 608, 850 N.E.2d 387 (Ill. App. Ct. 2006) ..........................36, 37
Foreman v. Graham,
693 S.W.2d 774 (Tex. App.—Fort Worth 1985, writ ref'd n.r.e.) ......................53
Fox-Greenwald Sheet Metal Co. v. Markowitz Bros.,
452 F.2d 1346 (D.C. Cir. 1971) ..........................................................................37
In re French Gardens, Ltd.,
58 B.R. 959 (Bankr. S.D. Tex. 1986) ................................................................50
Frontier Logistics, L.P. v. Nat’l Prop. Holdings,
417 S.W.3d 656, 660 (Tex. App. – Corpus Christi 2013, pet. pending) ............ 22
-v-
In the Interest of G.D.H.,
366 S.W.3d 766 (Tex. App.—Amarillo 2012, no pet.) ......................................22
Ginn v. Texas Farmers Ins. Co.,
1998 Tex. App. LEXIS 6355 (Tex. App.—Austin Oct. 15, 1998, no pet.) ....... 49
Green Tree Servicing, LLC v. Woods,
388 S.W.3d 785 (Tex. App.—Houston [1st Dist.] 2012, no pet.) ......................38
Green v. Safeco Life Ins. Co.,
727 N.E.2d 393 (Ill. App. Ct. 2000) ...................................................................37
Grieve v. General American Life Ins. Co.,
58 F. Supp. 2d 391 (D. Vt. 1999) .......................................................................37
Guar. Fed. Sav. Bank v. Horseshoe Operating Co.,
793 S.W.2d 652 (Tex. 1990) (op. on reh’g) .......................................................41
Guar. Fed. Sav. Bank v. Horseshoe Operating Co.,
893 S.W. 2nd 652, 657-58 (Tex. 1990) ..............................................................44
Gulf Ins. Co. v. Burns Motors,
22 S.W.3d 417 (Tex. 2000).................................................................................35
Guynn v. Corpus Christi Bank and Trust,
589 S.W.2d 764 (Tex. Civ. App.—Corpus Christi 1979) ..................................20
Heggy v. Am. Trading Employee Ret. Account Plan,
123 S.W.3d 770 (Tex. App.—Houston [14th Dist.] 2003, pet. denied).......47, 52
Henderson v. Little,
248 S.W.2d 759 (Tex. App.—Amarillo 1952, reh’g denied) .............................34
Henderson v. Roadway Express,
720 N.E.2d 1108 (Ill. App. Ct. 1999) .................................................................37
Heritage Res., Inc. v. Anschutz Corp.,
689 S.W.2d 952 (Tex. App.—El Paso 1985, writ ref'd n.r.e.) ...........................27
Heritage Res., Inc. v. Nationsbank,
939 S.W.2d 118 (Tex. 1996) ..............................................................................35
- vi -
Hydro-Line Mfg. Co. v. Pulido,
674 S.W.2d 382 (Tex. App.—Corpus Christi 1984, reh’g denied) ....................34
Interstate Contracting Corp. v. City of Dallas,
135 S.W.3d 605 (Tex. 2004) ..............................................................................39
Island Recreational Dev. Corp. v. Republic of Texas Sav. Ass’n.,
710 S.W.2d 551 (Tex. 1986) ..............................................................................37
J.G. Wentworth Originations, LLC v. Freelon,
2014 Tex. App. LEXIS 8797 (Tex. App.—Houston [1st Dist.] Aug. 12,
2014, no pet.) ......................................................................................................46
J.G. Wentworth Originations, LLC v. Perez,
2014 Tex. App. LEXIS 8798 (Tex. App.—Houston [1st Dist.] Aug. 12,
2014, no pet.) ......................................................................................................46
J.G. Wentworth S.S.C., Ltd. P’Ship v. Callahan,
649 N.W. 2d 695 (Wis. Ct. App. 2002) ..............................................................37
J.G. Wentworth v. Jones,
28 S.W.3d 309 (Ky. App. Ct. 2000) .................................................25, 31, 32, 33
Jenkins by Jenkins v. State of Mo.,
122 F.3d 588 (8th Cir. 1997), reh’g vacated by 133 F.3d 560 (8th Cir.
1997) ...................................................................................................................24
Johnson v. First Colony Life Ins. Co.,
26 F. Supp. 2d 1227 (C.D. Cal. 1998) ................................................................37
Johnson v. Structured Asset Services,
148 S.W.3d 711 (Tex. App.—Dallas, 2004, no pet.) .........................................36
Kanan v. Plantation Homeowner’s Ass’n Inc.,
407 S.W.3d 320 (Tex. App.—Corpus Christi 2013, no pet.) .............................22
In re Kaufman,
37 P.3d 845 (Okla. 2001) ....................................................................................37
Lee Memorial Hosp. v. Elgin-Butler Brick Co.,
436 S.W.2d 354 (Tex. Civ. App.—Austin 1969, no writ) ...........................49, 53
- vii -
Liberty Life Assur. Co. of Boston v. Stone Street Capital, Inc.,
93 F. Supp. 2d 630 (D. Md. 2000) ......................................................................37
Liberty Nat'l Fire Ins. Co. v. Akin,
927 S.W.2d 627 (Tex. 1996) ..............................................................................42
Lincoln Gen. Ins. Co. v. U.S. Auto Ins. Servs., Inc.,
809 F. Supp. 2d 582 (N.D. Tex. 2011) ...............................................................40
Lone Mountain Production Co. v. Natural Gas Pipeline Co. of Am.,
710 F. Supp. 305 (D. Utah 1989)........................................................................40
Lopez v. Munoz, Hockema & Reed,
22 S.W.3d 857 (Tex. 2000).................................................................................35
Luse v. Union City Transfer,
324 S.W.2d 935 (Tex. App.—Waco 1959, writ dism’d) ...................................45
Marine Creek Partners, Ltd. v. Caldwell,
926 S.W.2d 793 (Tex. App.—Fort Worth 1996, no writ) ..................................30
Martin v. Davis Constructors, Inc.,
552 S.W.2d 873 (Tex. Civ. App.—San Antonio 1977, writ ref’d n.r.e.) ........... 35
Martinez v. Martinez,
2010 Tex. App. LEXIS 6994 (Tex. App.—Corpus Christi Aug. 26, 2010,
pet. filed) .............................................................................................................47
McKelvy v. Barber,
381 S.W.2d 59 (Tex. 1964).................................................................................20
In re Nitz,
739 N.E.2d 93 (Ill. App. Ct. 2000) .....................................................................37
Nobles v. Marcus,
533 S.W.2d 923 (Tex. 1976) ..............................................................................39
Olmos v. Pecan Grove Mun. Util. Dist.,
857 S.W.2d 734 (Tex. App.—Houston [14th Dist.] 1993, no writ) ....................52
Petro Source Partners, Ltd. v. 3-B Rattlesnake Red (1990), Ltd.,
905 S.W.2d 371 (Tex. App.—El Paso 1995, writ denied) ...............44, 45, 47, 49
- viii -
Piasecki v. Liberty Life Assur. Co. of Boston,
728 N.E.2d 71 (Ill. App. Ct. 2000) .....................................................................37
Pilgrim Enterprises, Inc. v. Maryland Cas. Co.,
24 S.W.3d 488 (Tex. App.—Houston [1st Dist.] 2000, no pet.) .........................42
In re Rapid Settlements, Ltd.,
202 S.W.3d 456 (Tex. App.—Beaumont 2006, pet. denied). Here, the
Rapid Order.....................................................................................................24, 9
Reef v. Mills Novelty Co.,
89 S.W.2d 210 (Tex. 1936)...........................................................................36, 37
RSL Funding LLC v. Everett,
519 B.R. 644, 2014 U.S. Dist. LEXIS 145747 (W.D. La. 2014) .................26, 27
Rudolph v. ABC Pest Control, Inc.,
763 S.W.2d 930 (Tex. App.—San Antonio 1989, writ denied) .........................20
Salazar v. San Benito Bank & Trust Co.,
730 S.W.2d 21 (Tex. App.—Corpus Christi 1987, no writ) ..............................52
Security State Bank v. Shanley,
182 S.W.2d 136 (Tex. Civ. App.—San Antonio 1944, no writ) ........................45
Settlement Capital Corp. v. Allstate Life Insurance Co. (In re Jack),
390 B.R. 307 (Bankr. S.D. Tex. 2008) ...............................................................27
Settlement Funding, LLC v. Garcia,
533 F. Supp. 2d 685 (W.D. Tex. 2006) ..............................................................26
Shafer Plumbing & Heating, Inc. v. Controlled Air, Inc.,
742 S.W.2d 717 (Tex. App.—San Antonio 1987, no writ) ................................42
Sharyland Water Supply Corp. v. City of Alton,
354 S.W.3d 407 (Tex. 2011) ..............................................................................30
Sigmar v. Anderson,
212 S.W.3d 789 (Tex. App.—Austin 2006, no pet.) ..........................................50
Singer Asset Fin. Co., LLC v. Continental Cas. Co.,
886 So. 2d 1004 (Fla. Dist. Ct. App. 2004) ........................................................36
- ix -
South Texas Water Authority v. Lomas,
223 S.W.3d 304 (Tex. 2007) ........................................................................29, 30
Speedemissions, Inc. v. Gate,
404 S.W.3d 34 (Tex. App.—Houston [1st Dist.] 2013, no pet.) ........................34
State Farm Life Ins. Co. v. Martinez,
216 S.W.3d 799 (Tex. 2007) ..............................................................................51
Stine v. Stewart,
80 S.W.3d 586 (Tex. 2002)...........................................................................29, 30
Sw. Elec. Power Co. v. Grant,
73 S.W.3d 211 (Tex. 2002).................................................................................35
Symetra Life Ins. Co. v. Rapid Settlements, Ltd.,
2014 U.S. App. LEXIS 24349 (5th Cir. Dec. 23, 2014).....................................43
Tawes v. Barnes,
340 S.W.3d 419 (Tex. 2011) ........................................................................21, 30
Texaco, Inc. v. LeFevre,
610 S.W.2d 173 (Tex. Civ. App.—Houston [1st Dist.] 1980, no writ) .............45
Texas Farmers Ins. v. Gerdes,
880 S.W.2d 215 (Tex. App.—Fort Worth 1994, writ denied) ...........................37
United States v. Ray Thomas Gravel Co.,
380 S.W.2d 576 (Tex. 1964) ..............................................................................52
Univ. of Tex. Med. Branch at Galveston v. Allan,
777 S.W.2d 450 (Tex. App.—Houston [14th Dist.] 1989, no writ) ................... 40
Voye v. Ragan,
616 S.W.2d 673 (Tex. Civ. App.—Corpus Christi 1981) ..................................20
Wagner v. Warnasch,
295 S.W.2d 890 (Tex. 1956) ..............................................................................23
Walters v. Walters,
298 S.E.2d 338 (N.C. 1983)................................................................................24
-x-
Washington Square Fin. LLC v. RSL Funding, LLC,
418 S.W.3d 761 (Tex. App.—Houston [14th Dist.] 2013, pet. filed) ................. 21
West v. Triple B Servs., LLP,
264 S.W.3d 440 (Tex. App.—Houston [14th Dist.] 2008, no pet.) ................... 21
Windsor-Thomas Group, Inc. v. Parker,
782 So.2d 478 (Fla. Dist. Ct. App. 2001) ..........................................................32
Womack v. Berry,
291 S.W.2d 677 (Tex. 1956) ..............................................................................42
STATUTES, RULES & REGULATIONS
Tex. Civ. Prac. & Rem. Code § 141.007(e) .............................................................36
Tex. R. App. P. Rule 33 ...........................................................................................35
Tex. R. Civ. P. 41 .....................................................................................................41
Tex. R. Civ. P. 174(b) ..............................................................................................41
- xi -
RECORD REFERENCES
Record citations appearing as “CR” refer to the Original Clerk’s Record
filed in the First Court of Appeals on August 12, 2014.
Record citations appearing as “1st Supp. CR” refer to the 1st Supplemental
Clerk’s Record filed in the First Court of Appeals on October 27, 2014.
Record citations appearing as “2nd Supp. CR” refer to a second
Supplemental Clerk’s Record that was filed in the First Court of Appeals on
December 12, 2014.1
Record citations appearing as “RR” refer to the Reporter’s Record filed in
the First Court of Appeals on December 10, 2013.
1
This second Supplemental Clerk’s Record, when filed, was identified as a “1st Supplemental
Clerk’s Record.” However, it is actually the second supplemental record, the first one having
been filed on October 27, 2014, and therefore, for clarity of citation reference, it is referred to
herein as “2nd Supp. CR.”
- xii -
STATEMENT OF THE CASE
Nature of the Case and RSL-3B-IL, Ltd. (“RSL”) initiated this action for
Parties: breach of contract and declaratory relief against
The Prudential Insurance Company of America
and Prudential Structured Settlement Company
f/k/a Prudential Property and Casualty Insurance
Company of Holmdel, New Jersey, based on a
transaction between decedent Erica Adegoke and
Rapid Settlements, Ltd. RSL has no claim for
breach of contract against the Prudential
Defendants.
Olubumi Adegoke intervened in the case and
subsequently nonsuited. There were never any
claims between Olubumi and the Prudential
Defendants, and, following a final judgment, the
trial court severed any claims between Olubumi
and RSL from this matter.
Trial Court The Honorable Dan Hinde, 269th District Court
of Harris County, Texas
Trial Court’s Disposition: Trial court granted the Prudential Defendants’
motion for directed verdict and, on March 18,
2014, entered a final judgment.
In an order dated May 28, 2014, the trial court
denied RSL’s Motion for New Trial.
In an order dated June 20, 2014, the trial court
ordered Olubumi Adegoke’s claims severed.
- xiii -
ISSUES PRESENTED
1. Should the directed verdict in favor of the Prudential Defendants be
affirmed, because RSL has failed to establish a breach of contract claim?
2. Following entry of a final judgment, did the trial court properly sever
Olubumi Adegoke’s intervention and nonsuit against RSL from this matter?
3. Should the jury award of attorneys’ fees to the Prudential Defendants
on their interpleader claim be affirmed?
- xiv -
MAY IT PLEASE THE COURT:
“How is it you’re not having your cake and eat[ing] it, too, here,” asked the
trial court judge to plaintiff-appellant RSL-3B-IL, Ltd. (“RSL”). 2 That is precisely
what RSL has sought to do throughout this litigation. It is getting what it claims to
have lost, i.e., certain payments, but nevertheless insists it also has a breach of
contract claim based on these same payments, despite the absence of either a
breach or a contract.
RSL is trying to do what has never been recognized before – suing an
annuity issuer and annuity owner for breach of contract based on an order for the
transfer of structured settlement payments.3 RSL has cited no precedent for its
case. Indeed, a Texas court recently rejected a similar breach of contract claim that
was based on a problematic court order in the structured settlement context.
2
See RR, Vol. 4, p. 142.
3
Plaintiff RSL-3B-IL, Ltd. is a “factoring company,” which means that it purchases from
consumers, in exchange for discounted lump-sum payments, streams of future settlement
payments. Factoring companies have been preying on the structured settlement industry and its
payees for a number of years. To protect structured settlement payees from being exploited by
factoring companies, at least 47 states, including Texas, have enacted structured settlement
protection acts (“SSPAs”), which require court approval before a factoring transaction can be
effectuated. The SSPAs serve to regulate factoring transactions and do not automatically
validate them. In this case, payee Erica Adegoke (“Adegoke”) entered into a factoring
transaction with Rapid Settlements, Ltd. (“Rapid”). RSL asserts it was obtained Adegoke’s
rights from Rapid by way of the court order approving the transfer of payments.
-1-
Moreover, RSL created the problem in the first place. It obtained a court
order by its purported assignor directing appellees The Prudential Insurance
Company of America (“Prudential”) and Prudential Structured Settlement
Company f/k/a Prudential Property and Casualty Insurance Company of Holmdel,
New Jersey (“PSSC”) (collectively, the “Prudential Defendants”) to send certain
annuity payments to RSL, despite the fact that RSL knew those payments were
already scheduled to go to another factoring company pursuant to an earlier court
order. Then, RSL refused to cooperate with the Prudential Defendants and other
parties, who were attempting to rectify the problem of two different payment
instructions on the same finite funds.
The Prudential Defendants were agreeable to fixing RSL’s problem with a
stipulation and amended order. Instead, however, RSL sued the Prudential
Defendants for breach of contract, arguing that the court order obtained by its
purported assignor gave RSL not only the right to the annuity payments, but also
contract claims.
There are numerous problems with RSL’s claim. First, the court order relied
up on by RSL does not constitute a contract upon which RSL can sue for breach of
contract. A court order does not have the requisite elements of a contract.
However, even if the order could constitute a contract, the breach of contract claim
still fails.
-2-
Case law makes clear that an annuitant, like Adegoke, has no enforceable
interest in the annuity, and, therefore, neither does anyone purporting to make a
claim through her, like RSL. Adegoke was a mere incidental third-party
beneficiary of the annuity, which means she had no rights capable of enforcement.
Furthermore, because Adegoke did not own the annuity, she also lacked the ability
to assign or transfer the annuity payments. Prudential Defendants have exclusive
control over the Annuity and any payment directions. Moreover, Adegoke only
purportedly assigned annuity payments, not the annuity contract. Adegoke had no
right to assign the contract, and if she could not and did not assign the contract,
then a breach of contract claim must fail. While RSL attempts to divert attention
away from these problems by pointing to other contracts, RSL failed to prove that
those contracts were assigned to RSL and that the Prudential Defendants were
parties.
RSL’s claim is not recognized by the courts in Texas or elsewhere, and the
Court should not allow such a claim to succeed against innocent stakeholders like
the Prudential Defendants, who have interpleaded the funds at issue in the face of
conflicting orders as to disbursement of those funds. RSL can collect those funds,
and this matter should be over. The Court should affirm the directed verdict in
favor of the Prudential Defendants and against RSL, as well as the jury award of
attorneys’ fees to the interpleaders-Prudential Defendants and the order severing
-3-
this matter from RSL’s dispute with Adegoke’s estate distributee. For the reasons
set forth herein, the trial court’s orders should be affirmed and RSL’s appeal
should be dismissed.
I.
STATEMENT OF FACTS
Because RSL has omitted key facts relating to this appeal, it is necessary for
the Prudential Defendants to provide a statement of facts.
A. The Underlying Settlement Agreement, the Qualified Assignment, and
the Annuity
On or about November 18, 1993, Adegoke entered into a settlement
agreement with a tort defendant to resolve a personal injury claim (the “Settlement
Agreement”), which provided for certain monthly and lump sum payments. 4 The
Prudential Defendants were not parties to the Settlement Agreement. Under the
Settlement Agreement, Adegoke had no right to vary the schedule of the proposed
payments, and she could not sell, transfer, assign, or encumber the payments. 5
4
The Settlement Agreement provided for Adegoke to receive the following payments:
(i) monthly payments of $1,000.00, beginning on November 5, 2003, and continuing through
October 5, 2023 (with a three percent increase every November 5th); (ii) one lump sum payment
of $15,000.00 due on September 21, 2001; (iii) one lump sum payment of $20,000.00 due on
September 21, 2006; (iv) one lump sum payment of $30,000.00 due on September 21, 2011; and
(v) one lump sum payment of $75,000.00 due on September 21, 2016.
5
The Settlement Agreement provided:
(Continued)
-4-
The Settlement Agreement is also clear that Adegoke would not (and did
not) have any enforceable interest in any annuity purchased by the tort defendant
or its assignee to fund the payment obligation. Specifically, the Settlement
Agreement provided that, for any annuity purchased, Prudential “may” make
payments to Adegoke for PSSC’s “convenience”; Adegoke “shall not…have any
control of the investment of funds from which payments detailed in Exhibit A,
number 2 are made”; and “All rights of ownership and control of such annuity
shall be vested in [PSSC].” See 1st Supp. CR 424-25 (emphasis added); 1st Supp.
CR 423-425 (emphases added); 2nd Supp. CR 275-76.
(Continued)
It is further UNDERSTOOD AND AGREED by the parties hereto that the
recipient [i.e., Erica Adegoke] of the future payments detailed in Exhibit A,
number 2 to this document, shall not have the right to accelerate said future
payments at any time or vary in any respect the payment schedules detailed in
Exhibit A, number 2; receive the present discounted value of future payments
detailed in Exhibit A, number 2; have any control of the investment of funds
from which payments detailed in Exhibit A, number 2 are made; have any right
to increase or decrease the monthly payments detailed in Exhibit A, number 2;
change or modify the manner, mode or method of making any payments
detailed in Exhibit A, number 2.
* * *
It is FURTHER AGREED that the payments detailed in Exhibit A, number 2 to
be received by ERICA ADEGOKE are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, or encumbrance by ERICA
ADEGOKE, her heirs, personal representatives, successors and assigns, or any
other person or entity.
See 1st Supp. CR 423-425 (emphases added); 2nd Supp. CR 275-76.
-5-
On or about September 30, 1993, the tort defendant entered into a qualified
assignment (the “Qualified Assignment”) with PSSC. Similar to the Settlement
Agreement, the Qualified Assignment is clear that Adegoke would not have any
enforceable interest in any annuity purchased, stating, “[a]ll rights of ownership
and control of such annuity contract shall be and remain vested in the Assignee
[PSSC] exclusively,” and that PSSC’s payment directions “shall be solely for
[PSSC]’s convenience and shall not provide [Adegoke] or any payee with any
rights of ownership or control over the [Annuity] or against the Annuity Issuer. ”
See RR, Vol. 6, Plaintiff’s Ex. 1, ¶¶ 6-7 (emphasis added).6
On or about September 30, 1993, PSSC purchased annuity contract no.
A9901070 (the “Annuity”). See RR, Vol. 6, Plaintiff’s Ex. 2. PSSC is the owner
of the Annuity, and Prudential is the issuer of the Annuity. See id. Adegoke (now
deceased) was merely the annuitant. See id.
In addition to certain lump sum payments, the Annuity entitled PSSC to the
following monthly payments:
• a. Monthly payments of $1,000.00 each, starting on November
5, 1993, with 12 payments certain; and
6
The Qualified Assignment further states, “[n]one of the Periodic Payments may be accelerated,
deferred, increased or decreased and may not be anticipated, sold, assigned or encumbered. RR,
Vol. 6, Plaintiff’s Ex. 1, ¶ 3.
-6-
• b. Monthly payments starting on November 5, 1994 and for as
long after that as the annuitant lives, such that the amount of
each payment will be 103% of the same month’s payment in the
prior contract year, with 228 payments certain. Payments end
with the last one due before the annuitant’s death if such death
occurs after all the payments certain have been paid.
See id. at “Payment Schedule.”7
The Annuity clearly states, “while the annuitant is living[,] the owner alone
[i.e., PSSC] is entitled to (a) any contract benefit, and (b) the exercise of any right
and privilege granted by the contract or by us [Prudential].” See RR, Vol. 6,
Plaintiff’s Ex. 1, p. 2 (emphasis added). The rights of the owner, PSSC, “include
but are not limited to the right to designate or change the person or entity to whom
annuity payments will be made.” Id.
B. The Factoring Transaction with Settlement Capital Corporation
Adegoke subsequently entered into a factoring transaction with Settlement
Capital Corporation (“SCC”), a factoring company, to assign certain Periodic
Payments to SCC. Pursuant to a January 7, 2003 order (the “SCC Order”) from
the County Civil Court for Harris County, Texas, the court approved the transfer of
certain Periodic Payments to SCC in accordance with the Texas Structured
7
These payments and the lump sum payments are collectively, the “Periodic Payments.”
-7-
Settlement Protection Act, Tex. Civ. Prac. & Rem. Code §§ 141.001-.007 (the
“Act”). 8 See RR, Vol. 6, Plaintiff’s Ex. 4.
Importantly, the SCC Order required the Prudential Defendants to
send the full amount of each monthly Periodic Payment to SCC, ordering that
the Prudential Defendants were “directed to deliver and make payable to
Transferee Settlement Capital Corporation” the full amount of each monthly
Periodic Payment. See RR, Vol. 6, Plaintiff’s Ex. 4, p. 3.9 SCC was then ordered
to remit to the unassigned portion of each Periodic Payment to Adegoke as part of
a servicing agreement. See id. However, the SCC Order is clear that the full
amount of each Periodic Payment is to be “deliver[ed] and [made] payable to”
SCC. See id. (emphasis added).
The SCC Order also provided that, by making the aforementioned payments
to SCC, the Prudential Defendants “will be discharged from all liability for these
8
Specifically: (i) monthly payments of $900.00, beginning on February 5, 2003, and continuing
through May 5, 2011; (ii) monthly payments of $950.00, beginning on June 5, 2011, and
continuing through October 5, 2013; (iii) one lump sum payment of $20,000.00 due on
September 21, 2006; and (iv) one lump sum payment of $30,000.00 due on September 21, 2011 .
9
Specifically: one hundred monthly payments of $1,304.75, which increases 3% each Nov. 5th,
commencing Feb. 5, 2003 and continuing on the 5th of each month thereafter through and
including May 5, 2011; twenty-nine monthly payments of $1,652.82, , which increases 3% each
Nov. 5th, commencing June 5, 2011 and continuing on the 5th of each month thereafter through
and including October 5, 2013; lump sum payment of $20,000 due on September 21, 2006; and
lump sum payment of $30,000 due on September 21, 2011.
-8-
Periodic Payments due Payee under the Annuity.” See id. at pp. 3-4. Finally, the
SCC Order stated “[t]his Order in no way modifies or negates the ownership or
control over the underlying annuity contract by Annuity Issuer [Prudential] or
Structured Settlement Obligor [PSSC].” Id. at p. 4.
C. The 2003 Factoring Transaction with Rapid Settlements, Ltd. and the
Conflicting Order
On or about October 13, 2003, Adegoke then entered into another factoring
transaction and purchase agreement (the “Transfer Agreement”) with Rapid
Settlements, Ltd. (“Rapid”) to sell and assign certain of the Annuity payments to
Rapid. See RR, Vol. 6, Plaintiff’s Ex. 5. Pursuant to that agreement between
Adegoke and Rapid, Adegoke agreed to transfer certain Annuity payments to
Rapid. See RR, Vol. 6, Plaintiff’s Ex. 5, p. 2, ¶ 1. Rapid is not a party to this
litigation. The Prudential Defendants were not a party to the Transfer Agreement.
See id.
Under the Transfer Agreement, the proposed “Assigned Payments” to be
transferred were identified as follows:
The following portion of the monthly annuity payments originally in
the amount of $1,000.00 per month commencing on November 5,
1993 through October 5, 2013 and increasing 3% per annum every
November 5th (presently as of the date hereof in the amount of
$1,303.77 per month due on November 5, 2003 and on the 5th of each
month thereafter): for the period of November 5, 2003 through May 5,
2011, all monthly payments less $900.00 per month (such $900.00 per
month not subject to any increase) previously assigned (the Assigned
Payments being $443.92 per month as of November 5, 2003, subject
-9-
to further increase); (ii) for the period of June 5, 2011 through
October 5, 2013, all monthly payments less $950.00 per month (such
$950.00 per month not subject to any increase) previously assigned
($443.92 per month as of November 5, 2003 subject to further
increase); and (iii) one (1) lump sum payment in the amount of
$75,000.00 due on September 21, 2016. Following this transfer
Assignor shall no longer have any financial interest in the Assigned
Payments or in the payments due under the Annuity Contract [No.
A990 1070] because all of the Periodic Payments due under the
Annuity Contract will have been assigned, transferred and sold.
See RR, Vol. 6, Plaintiff’s Ex. 5, p. 1 (emphasis added).
The Prudential Defendants notified Rapid that each monthly Periodic
Payment through and including the Periodic Payment due on Oct. 5, 2013, was
already scheduled to be made to SCC. See RR, Vol. 6, Plaintiff’s Ex. 7.
Therefore, Rapid knew and was aware that Prudential was already under an
obligation to make the Periodic Payments to SCC, that the Prudential Defendants
were not scheduled to make such payments to Adegoke, and that if Rapid wanted
any such payments to be sent to it, then it should seek them from SCC, not the
Prudential Defendants. See id.; see also RR, Vol. 3, p. 185 (Rapid representative
admitting to receiving letter admitted as Plaintiff’s Exhibit 7). 10
10
Rapid and RSL failed to notify the court that the payments at issue were already the subject of
a prior court order, i.e., the SCC Order. They also failed to notify the court that, despite the
language included in the Rapid Order, the Prudential Defendants had notified Rapid that the
proposed assigned payments had been previously “encumbered, or other wise [sic] pledged…”
See RR, Vol. 6, Plaintiff’s Ex. 8; see also RR, Vol. 3, p. 185.
- 10 -
Pursuant to a November 13, 2003 order (the “Rapid Order”) from the
County Civil Court for Harris County, Texas, pursuant to the Act, the court
ordered the Prudential Defendants to make the Annuity payments to RSL,
specifically identifying the “Assigned Payments” as the Annuity payments:
It is FURTHER ORDERED that Annuity Owner and Annuity Issuer
[i.e., PSSC and Prudential] are hereby directed to deliver and make
payable to Transferee, its successors and/or assigns, the following
payments under the Annuity Contract No. A9901070 with Payee,
regardless of whether Payee is living:
The following portion of the monthly annuity payments
originally in the amount of $1,000.00 per month commencing
on November 5, 1993 through October 5, 2013 and increasing
3% per annum every November 5th (presently as of the date
hereof in the amount of $1,303.77 per month due on November
5, 2003 and on the 5th of each month thereafter): for the period
of November 5, 2003 through May 5, 2011, all monthly
payments less $900.00 per month (such $900.00 per month not
subject to any increase) previously assigned (the Assigned
Payments being $443.92 per month as of November 5, 2003,
subject to further increase); (ii) for the period of June 5, 2011
through October 5, 2013, all monthly payments less $950.00
per month (such $950.00 per month not subject to any increase)
previously assigned ($443.92 per month as of November 5,
2003 subject to further increase); and (iii) one (1) lump sum
payment in the amount of $75,000.00 due on September 21,
2016. Following this transfer Assignor shall no longer have
any financial interest in the Assigned Payments or in the
payments due under the Annuity Contract [No. A990 1070]
because all of the Periodic Payments due under the Annuity
Contract will have been assigned, transferred and sold.
(The “Assigned Payments”) which is either currently due or to
become due to Payee, as it becomes due.
- 11 -
See RR, Vol. 6, Plaintiff’s Ex. 8, pp. 3-4 (emphasis added). The Rapid Order also
states “[t]his Order in no way modifies or negates the ownership or control over
the underlying annuity contract by Annuity Issuer [Prudential] or Annuity Owner
[PSSC].” See RR, Vol. 6, Plaintiff’s Ex. 8, p. 5.
The Assigned Payments were to be “made payable to and delivered to
Transferee at the following address: RSL-3B-IL-Ltd., c/o Rapid Settlements,
Ltd….” Id. at p. 4. The Rapid Order is the only document purporting to assign
anything to RSL.
Contrary to the assertions made by RSL, the SCC Order and Rapid Order
stand in direct conflict with respect to whom the Prudential Defendants are
required to make the assigned Periodic Payments. The SCC Order requires the
Prudential Defendants to make payable and deliver the entire amount of the
assigned Periodic Payments to SCC, while the Rapid Order purports to direct the
Prudential Defendants to send part of those same Periodic Payments directly to
RSL. Compare RR, Vol. 6, Plaintiff’s Ex. 4 with RR, Vol. 6, Plaintiff’s Ex. 8.
Both orders could not be followed at the same time.
Due to the conflict between the SCC Order and the Rapid Order, Prudential
suspended payment of the Periodic Payments. See 1st Supp. CR 32-34 at ¶¶ 35,
- 12 -
45. In an attempt to resolve the conflict, Prudential, PSSC, SCC, Rapid, and RSL
entered into a stipulation (the “Stipulation”).11 1st Supp. CR 32-34, 66-114.
Pursuant to the Stipulation, Rapid and RSL agreed to obtain Adegoke’s signature
on the Stipulation, vacate the Rapid Order, and obtain an Amended Order of
Transfer Nunc Pro Tunc (the “Amended Rapid Order”). See id. Prudential would
then be relieved of the obligation to send the entire amount of the Periodic
Payments to SCC.
However, RSL and Rapid failed to satisfy their obligations under the
Stipulation. 1st Supp. CR 33 at ¶ 39. Adegoke’s signature was never obtained, the
Rapid Order was never vacated, and the Amended Rapid Order was never
obtained. Additional efforts were made to resolve the conflict, including a
proposed addendum to the Stipulation (the “Addendum”). While SCC, Prudential,
and PSSC were all in agreement with the terms of the Addendum, Rapid and RSL
would not agree and were unwilling to cooperate. Thus, the conflict between the
two orders remained. 1st Supp. CR 32-34, 66-114.
11
The details regarding the Stipulation and Addendum to the Stipulation were set forth in the
Prudential Defendants’ claim for interpleader. See 1st Supp. CR 24-114; see also RR, Vol. 4, pp.
152-167.
- 13 -
D. RSL’s Petition and the Prudential Defendants’ Interpleader
Instead of resolving the conflict that RSL itself created, RSL filed a petition
against the Prudential Defendants and SCC on February 12, 2012. See 1st Supp.
CR 8-23. RSL asserted a breach of contract claim against the Prudential
Defendants and sought declaratory relief. See id.
As set forth in RSL’s petition, RSL asserted that it obtained from “Adegoke
the rights to annuity payments (the ‘Annuity Payments’) via a final non-appealable
court order (‘[Rapid] Order”)”; that it possessed the “right to receive the proceeds
due under the Annuity contract as required by the [Rapid] Order”; and that the
Prudential Defendants breached their agreement by “refusing to make the Annuity
Payments as set forth by the [Rapid] Order.” 1st Supp. CR 10-13 at ¶¶ 9, 18-19.
Because the Prudential Defendants faced a conflict as to which entity to send
the payments under the Annuity, the Prudential Defendants filed their Answer to
Plaintiff’s Original Petition and asserted a counterclaim for Interpleader. See 1st
Supp. CR 24-114. In the Interpleader, the Prudential Defendants stated:
• “The SCC Order and the Rapid Order are in conflict with regards to
whom Prudential is required to make the assigned Periodic Payments.
The SCC Order, which includes a Servicing Arrangement, directs
Prudential to send the entire amount of the relevant Periodic Payments
to SCC. Conversely, the Rapid Order directs Prudential to send part
of the same Periodic Payments directly to 3B [i.e., RSL-3B].” See 1st
Supp. CR 32 at ¶ 34.
• Based on the conflict between the SCC Order and the Rapid Order,
“Prudential and PSSC are at risk of suffering competing claims and
- 14 -
violating the SCC Order and the Rapid Order.” See 1st Supp. CR 34
at ¶ 45.
• The Prudential Defendants “seek certainty regarding the parties’
respective rights to receive the Payments at Issue.” See 1st Supp. CR
34 at ¶ 46.
• The Prudential Defendants “are innocent stakeholders and claim no
title or interest in the Payments at Issue.” See 1st Supp. CR 35 at ¶
48.
• “Prudential and PSSC are willing and able to deposit the Payments at
Issue into the registry of this court, or to continue to hold the
Payments at Issue, pending direction from this court as to the proper
payee of the Payments at Issue.” See 1st Supp. CR 35 at ¶ 50.
On January 25, 2013, in granting SCC’s motion for summary judgment, the Court
recognized that the Prudential Defendants had previously interpleaded the
payments at issue. See 2nd Supp. CR 105-110, p. 2 (“Settlement Capital is entitled
to received, collect, and recover certain of the monies, funds, and payments that
were interpleaded by the Prudential Defendants in this case (the ‘Interpleaded
Funds’)” (emphasis added)).
E. The Trial and the Final Judgment
Trial started on Monday, October 28, 2013. On October 29, 2013, the trial
court granted the Prudential Defendants’ motion for directed verdict. On October
30, 2013, the case went to the jury on the issue of the Prudential Defendants’
attorneys’ fees only. See CR 410-416. The jury made a finding that the Prudential
Defendants should be awarded attorneys’ fees in the amount of $8,860.95. Id.
- 15 -
In an interlocutory judgment dated February 4, 2014, the trial court rendered
judgment for the Prudential Defendants/Interpleaders. See 2nd Supp. CR 313-314.
The order was interlocutory because it did not address disbursement of the funds
deposited by the Prudential Defendants in the court registry. 2nd Supp. CR 314.
However, there was no dispute over RSL’s ability to move for disbursement of the
funds, as “all parties agreed at multiple hearings before trial that there is no longer
any dispute as to who should receive the interpleaded funds,” i.e., RSL. See 2nd
Supp. CR 313.
On February 25, 2014, the Prudential Defendants filed their First Amended
Motion to Sign Judgment, which attached the proposed final judgment (the “Final
Judgment”). 2nd Supp. CR 309 -321. RSL did not file any objection to the
Court’s February 4, 2014 Order to prepare the final judgment or file any response
to the Prudential Defendants’ First Amended Motion to Sign Judgment.
On March 18, 2014, the Court entered the Final Judgment. CR 4-6. The
Court stated, “[t]he parties are not in dispute that Plaintiff RSL-3B should receive
the interpleaded funds.” CR 5. The Court ordered that the Prudential Defendants
are entitled to their attorneys’ fees, interest, and costs, which amount was to be
deducted from the interpleaded funds in the registry of the court, and that RSL-3B
can recover the remaining interpleader funds after the aforementioned amount was
deducted and provided to the Prudential Defendants/Interpleaders. See id. Finally,
- 16 -
the Final Judgment provides, “This judgment is final, disposes of all claims and all
parties, and is appealable. All other relief requested by any party and not expressly
granted herein or in the SCC Summary Judgment is denied.” CR 6.
F. Olubumi Adegoke’s Intervention and Nonsuit, and the Court’s
Severance
Adegoke entered into the transaction with Rapid back in 2003. RR, Vol. 6,
Plaintiff’s Ex. 5. She died in 2011, without ever having been fully paid for the
transfer of the payments to Rapid. See 1st Supp. CR 612-614; see also 1st Supp.
CR 599-600. For over a decade, Rapid has failed to remit monies owed under the
Transfer Agreement. See 1st Supp. CR 612-614.
On or about August 9, 2013, Olubumi Adegoke (“Olubumi”) intervened as
Adegoke’s sole heir and sole estate distributee of Adegoke’s estate. See 1st Supp.
CR 618-622. Olubumi subsequently nonsuited. On October 7, 2013, the trial
court ordered that Olubumi’s non-suit was accepted and that all claims brought by
Olubumi were dismissed without prejudice. 1st Supp. CR 917-918.12
Olubumi did not participate in the trial and has not been involved in this
matter’s proceedings since she non-suited. She never asserted any claims against
12
RSL sought to force Olubumi into arbitration based on another factoring transaction between
Olubumi and another factoring company. It does not appear that RSL fully proceeded with the
arbitration proceedings, despite seeking a stay of the trial while it sought to arbitrate and after
having its interlocutory appeal dismissed. See 2nd Supp. CR 456.
- 17 -
the Prudential Defendants, and the Prudential Defendants never asserted any
claims against her.
On May 28, 2014, in denying RSL’s motion for new trial, the trial court
ordered the parties to show cause why Olubumi’s Petition in Intervention and
Nonsuit, RSL’s motion to compel Olubumi to arbitration, and the trial court’s
order compelling Olubumi to arbitrate should not be severed into a separate cause.
CR 164. RSL objected to the severance, even though nothing remained as between
RSL and the Prudential Defendants. See 2nd Supp. CR 423-434. On June 13,
2014, the trial court ordered severance. 1st Supp. CR 1311-1313.
II.
SUMMARY OF THE ARGUMENT
First, RSL has failed to establish its breach of contract claim. The Rapid
Order, under which RSL purports to have been assigned the rights to the Annuity
payments, cannot constitute a contract. Moreover, the Annuity contract was not
owned by Adegoke, and without such ownership rights, she did not have the right
to direct or assign the payments. The case law is also clear that she was an
incidental, not intended, third-party beneficiary without the right to sue on the
contract. Adegoke had no enforceable interest in the Annuity, and therefore,
neither did RSL. Furthermore, to the extent RSL attempts to rely on the Settlement
Agreement or Qualified Assignment, these contracts were not assigned to RSL; the
Prudential Defendants were not parties to the Settlement Agreement; and all the
- 18 -
underlying contracts contain anti-assignment language prohibiting the payments
from being assigned. The directed verdict in favor of the Prudential Defendant
should be affirmed.
Second, when the trial court ordered severance, nothing remained to be
disputed between RSL and the Prudential Defendants, and there was never any
dispute between Olubumi and the Prudential Defendants. The trial court also
ordered that RSL could recover the interpleaded funds (less the attorneys’ fee
award and interest); if anything remains to be disputed between RSL and Olubumi,
the Prudential Defendants have no involvement. While it is questionable whether
RSL or Olubumi are actually pursuing any claims against each other, they were
already ordered to arbitration without the Prudential Defendants and, thus, can
continue on without Prudential Defendants. The Court should affirm the
severance.
Finally, the Prudential Defendants properly interpleaded, and the trial court
determined that the Prudential Defendants interpleaded the funds. Texas law
allows an interpleading party to recover its attorneys’ fees from the interpleaded
funds, which the jury awarded to the Prudential Defendants based on the evidence
submitted. The award of the fees and interest should be affirmed.
- 19 -
III.
ARGUMENT
A. Standard of Review for Appeal of Directed Verdict
An instructed verdict is proper when (1) the opponent’s pleadings are
insufficient to support a judgment; (2) the evidence conclusively proves a fact that
established a party’s right to judgment as a matter of law; or (3) the evidence
offered on a cause of action is insufficient to raise an issue of fact. Rudolph v.
ABC Pest Control, Inc., 763 S.W.2d 930, 932 (Tex. App.—San Antonio 1989, writ
denied).
The burden is on the appellant “to prove that the peremptory instruction in
favor of [the] appellee cannot be sustained on any of the grounds set out in the
motion for instructed verdict of that appellee.” Voye v. Ragan, 616 S.W.2d 673,
674 (Tex. Civ. App.—Corpus Christi 1981) (emphasis added) (citing McKelvy v.
Barber, 381 S.W.2d 59 (Tex. 1964)). Therefore, to obtain a reversal, the appellant
must establish “that the contentions in the motions for instructed verdict cannot
serve as a basis for granting such motions.” Id. (citing Guynn v. Corpus Christi
Bank and Trust, 589 S.W.2d 764, 770 (Tex. Civ. App.—Corpus Christi
1979)(dism’d Mar. 26,1980)).
To the extent that an appellant is able to meet this burden, the Court must
still look beyond the “contentions in the motions” and, on review, “must affirm an
instructed verdict if the record discloses a ground that establishes, as a matter of
- 20 -
law, the movant was entitled to judgment, even though the ground was not
embodied in the motion for instructed verdict.” Double Ace, Inc. v. Pope, 190
S.W.3d 18, 26 (Tex. App.—Amarillo 2005, no pet.) (emphasis added). 13
Appellate courts will apply a de novo standard of review to issues involving
the construction of an unambiguous contract. See Tawes v. Barnes, 340 S.W.3d
419, 425 (Tex. 2011). The primary concern in interpreting a contract is to
ascertain and to give effect to the intentions of the parties as expressed in the
instrument. Washington Square Fin. LLC v. RSL Funding, LLC, 418 S.W.3d 761,
767 (Tex. App.—Houston [14th Dist.] 2013, pet. filed).
B. RSL’s Breach of Contract Claim Fails, and the Court Should Affirm the
Directed Verdict.
RSL’s claim against the Prudential Defendants is for breach of contract. To
recover for breach of contract, RSL must establish (i) that a valid contract existed
between RSL and the Prudential Defendants, (ii) that RSL tendered performance or
is excused from doing so, (iii) that the Prudential Defendants breached the
contract’s terms, and (iv) damages sustained as a result of the Prudential
Defendants’ breach. See e.g., West v. Triple B Servs., LLP, 264 S.W.3d 440, 446
13
For the Prudential Defendants’ motion for directed verdict and motions for summary
judgment, see 2nd Supp. CR 275-300; 1st Supp. CR 321-405, 509-614; 2nd Supp. CR 117-151,
164-259.
- 21 -
(Tex. App.—Houston [14th Dist.] 2008, no pet.). Further, in order to have a valid
contract, RSL must establish: (1) an offer; (2) an acceptance in strict compliance
with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to
the terms; and (5) execution and delivery of the contract with the intent that it be
mutual and binding.” First Nat'l Bank of Edinburg v. Cameron Cnty., 159 S.W.3d
109, 112 (Tex. App.—Corpus Christi 2004, pet. denied).
RSL has no enforceable, legal contract with the Prudential Defendants. A
court cannot create a contract where none exists. Kanan v. Plantation
Homeowner’s Ass’n Inc., 407 S.W.3d 320, 333 (Tex. App.—Corpus Christi 2013,
no pet.). 14 Without a contract, it is axiomatic that there can be no breach of
contract.
1. The Rapid Order is Not a Contract with the Prudential
Defendants.
For its breach of contract claim, RSL has asserted that it obtained contract
rights against the Prudential Defendants by way of the Rapid Order. 1st Supp. CR
14
Traditional principles of contract law, including the rules of contract interpretation, prohibit
courts of equity from rewriting a current contract or creating a new contract between two private
parties. See 25 Williston on Contracts § 67:30 (4th ed.2006). Texas courts have consistently
upheld these principles. See, e.g., In the Interest of G.D.H., 366 S.W.3d 766, 770 (Tex. App.—
Amarillo 2012, no pet.) (“A court cannot make contracts for the litigants appearing before it”);
Am. Zurich Ins. Co. v. Barker Roofing, L.P., 387 S.W.3d 54, 60 (Tex. App.—Amarillo 2012, no
pet.) (quoting Fiess v. State Farm Lloyds, 202 S.W.3d 744, 753 (Tex.2006); see also Frontier
Logistics, L.P. v. Nat’l Prop. Holdings, L.P., 417 S.W.3d 656, 660 (Tex. App.—Houston [14th
Dist.] 2013, pet. filed).
- 22 -
10-13 at ¶¶ 9, 18; Appellant’s Brief, p. 29. However, the Rapid Order cannot be
the basis for a breach of contract claim.
A recent Texas court case is on point on this issue. In Finserv Casualty
Corp. v. Transamerica Occidental Life Ins. Co., in the 165th Judicial District in the
District Court of Harris County, Texas, on a factoring company’s breach of
contract action against the annuity company, the court first rejected the argument
that the factoring company stood in the shoes of the payees (like Adegoke), and
further held that annuity company could not be “held contractually liable for
confusing or inaccurate court orders, which require a trip to the courthouse to
clarify.” Finserv Casualty Corp. v. Transamerica Occidental Life Ins. Co., Case
No. 2011-05238 (District Court —Harris County, Texas [165th Dist.] August 27,
2013) (emphasis added).15 The same result is demanded here.
Furthermore, Texas and other jurisdictions have repeatedly recognized that
court orders cannot constitute contracts, as they do not meet the requisites for the
creation of a contract. Wagner v. Warnasch, 295 S.W.2d 890, 893 (Tex. 1956)
(agreed judgment is not a contract and contract law does not apply to its
enforcement; reversing court of appeals decision treating consent judgment as
15
A copy of this case is attached hereto as Exhibit A.
- 23 -
contract); Boston Prop. Exch. Transfer Co. v. Iantosca, 834 F. Supp. 2d 4, 8 (D.
Mass. 2011) (rejecting claim that court order constituted contract because there
was no mutual assent or voluntary conferral of benefit); Cavadi v. Bank of Am.,
2008 DNH 66, 2008 U.S. Dist. LEXIS 26389, *7-8 (D.N.H. 2008) (“court order is
a public act by the court issued in its exercise of the judicial power, not a private
agreement between the court and the party bound”); see also Jenkins by Jenkins v.
State of Mo., 122 F.3d 588, 603-04 n.11 (8th Cir. 1997), reh’g vacated by 133 F.3d
560 (8th Cir. 1997) (rejecting characterization of district court’s order as contract).
Cf. In re All Trac Transp., Inc., 306 B.R. 859, 913 (Bankr. N.D. Tex. 2004) (noting
that court-ordered adequate protection payments do not create contractual
relationship between debtor and secured creditor); Bill Nolan Livestock, Inc. v.
Simpson, 402 So. 2d 214, 217 (La. Ct. App. 1981) (holding that where attorney-
client relationship is only based upon court’s order, there is no contractual
relationship between attorney and client); Walters v. Walters, 298 S.E.2d 338, 342
(N.C. 1983) (approved agreement to be treated as court-ordered judgment, not
contract).16
16
If RSL had a problem concerning the Rapid Order, Texas case law specifically provides that
the filing of application for approval of a structured settlement transfer agreement invokes that
trial court’s jurisdiction, and the trial court thereafter possesses plenary power over the
controversy and can take actions necessary to protect the jurisdiction. In re Rapid Settlements,
Ltd., 202 S.W.3d 456, 462 (Tex. App.—Beaumont 2006, pet. denied). Here, the Rapid Order
(Continued)
- 24 -
The Rapid Order is not a private agreement between any of the parties, and
RSL may not base its breach of contract claim on the Rapid Order. Seeking
contractual damages for a violation of an imaginary covenant is not the appropriate
method for dealing with a party’s alleged violation of a court order. Therefore, the
breach of contract claim fails, and the directed verdict should be affirmed.
2. Adegoke Had No Rights in the Annuity to Assign.
Even assuming arguendo that RSL could establish a breach of contract claim
based on the Rapid Order, the Rapid Order only purportedly assigned Adegoke’s
rights to the Annuity payments. However, Adegoke had no rights in the Annuity
contract susceptible of assignment.
Courts have consistently recognized that payees like Adegoke have no
ownership rights in the Annuity and that there cannot be enforcement of any
purported assignment of such payments due thereunder. See J.G. Wentworth v.
Jones, 28 S.W.3d 309, 313-14 (Ky. App. Ct. 2000) (where insurer, in order to fund
payments owed under a structured settlement agreement, agreed to fund payments
by purchase of annuity, payee could not assign such payments funded from the
(Continued)
was signed by Judge Cynthia Crowe in the Civil County Court of Harris County, Texas, Court at
Law No. 4. See RR, Vol. 6, Plaintiff’s Ex. 8. Judge Crowe in the Civil County Court retained
jurisdiction to enforce the orders issued in her court, and if RSL had an issue with the Rapid
Order, it should have brought the matter before Judge Crowe.
- 25 -
annuity because the annuitant had no ownership interest in the annuity itself; in
rejecting the factoring company’s argument that the payee owned the rights to
receive the periodic payments and thus was entitled to assign such rights, the court
found that the structured settlement agreement and annuity “render[ed] the payees
incidental third-party beneficiaries who retained none of the incidents or
accoutrements of ownership in the annuities” and, therefore, the payees “had no
interest susceptible of assignment”); see also Settlement Funding, LLC v. Garcia,
533 F. Supp. 2d 685, 694 (W.D. Tex. 2006) (holding that although the structured
settlement recipient was the named payee under the annuity, the payee had no
rights in the annuity that he could transfer because the annuity had been purchased
and was owned by the structured settlement obligor, the United States, and not by
the payee; “[annuity payee] Garcia was not a party to this annuity contract. Thus,
Garcia did not acquire any rights to control the payments made pursuant to the
annuity contract” (emphasis added)); Allstate Ins. Co. v. American Bankers Ins.
Co. of Florida, 882 F.2d 856, 859 (4th Cir. 1989) (“axiomatic that one may not
sell, assign or hypothecate that which he does not own”; holding that payee could
not enforce assignment of his rights to future payments against annuity precisely
because he had no legal rights to that contract).
Indeed, the court in RSL Funding LLC v. Everett, 519 B.R. 644, 2014 U.S.
Dist. LEXIS 145747 (W.D. La. 2014), recently came to the same conclusion
- 26 -
relying on and applying Texas law. In Everett, the annuitant had purportedly
assigned annuity payments to an RSL entity, but the annuity was owned by Pruco
Assignment Company and Everett was the mere annuitant under the annuity, like
Adegoke. The court affirmed the bankruptcy court’s decision, which had
concluded that the assignment agreement was invalid, because the “assignment
between Everett and RSL was an attempt to assign rights under the Annuity
Contract that were held by PRUCO rather than Everett.” Everett, 2014 U.S.
Dist. LEXIS 145747 at *12 (emphasis added).
The court in Everett also relied heavily on Settlement Capital Corp. v.
Allstate Life Insurance Co. (In re Jack), 390 B.R. 307 (Bankr. S.D. Tex. 2008),
which applied Texas law. In In re Jack, like here, the annuity contract stated that
the owner of the annuity had the sole right to direct payments and that this right
could not be assigned. The court concluded that the annuitant Jack “was not a
party to the Annuity Contract and he has no right under the Annuity Contract to
designate the payee…Thus, the Court concludes that Samuel Jack owned no rights
under the Annuity Contract which he could assign to [the factoring company].”
390 B.R. at 326.17
17
Texas cases have recognized that where a party attempts to sell something when it has nothing
to sell, there can be no breach of contract or no enforcement of the assignment. See Heritage
Res., Inc. v. Anschutz Corp., 689 S.W.2d 952, 956 (Tex. App.—El Paso 1985, writ ref'd n.r.e.)
(Continued)
- 27 -
Like the above cases, the annuitant here, Adegoke, does not own the
Annuity. PSSC is the owner of the Annuity. See RR, Vol. 6, Plaintiff’s Ex. 2.
The Annuity is also clear that “the owner alone is entitled to (a) any contract
benefit,” and has “the right to designate or change the person or entity to whom
annuity payments will be made.” See id.at p. 2 (emphasis added). In other words,
PSSC had the right to designate and direct the Annuity payments as it wanted, and
Adegoke would have had no right to say otherwise.18
Exactly like the above cases, here RSL asserts that Adegoke assigned her
rights to the Annuity to RSL, asserting that it obtained from “Adegoke the rights to
(Continued)
(contract provision provided that party could sell earned interest; however, there was no earned
interest and therefore nothing to sell, and therefore there was no breach of a contract right to sell
earned interest); Carlile v. Harris, 38 S.W.2d 622, 624 (Tex. Civ. App.—Galveston 1931, no
pet.) (assignee took no better title to papers than assignor, and papers were all void ab initio
because of total failure of consideration; “‘lien must exist before it can be assigned, and, if the
conditions of its existence are lacking, one who takes by assignment of the paper purporting to
be such a lien is in no better attitude than his assignor, who had nothing to assign; for an
assignment cannot bring into existence that which had no being before it was made’”; “note and
liens being thus null and void, they could not constitute the basis of any right”); Blackmon-
Dunda v. Mary Kay, Inc., 2009 Tex. App. LEXIS 2512, *7-9 (Tex. App. —Dallas, Apr. 1, 2009,
pet. denied).
18
That Adegoke was never to have any rights to the Annuity was set forth repeatedly. See 1st
Supp. CR 425 (“All rights of ownership and control of [the Annuity] shall be vested in [PSSC]”);
RR, Vol. 6, Plaintiff’s Ex. 1 (“All rights of ownership and contract of such annuity contract shall
be and remain vested in [PSSC] exclusively”; PSSC’s payment directions “shall be solely for
[PSSC]’s convenience and shall not provide [Adegoke] or any payee with any rights or
ownership or control over the [Annuity] or against the Annuity Issuer” (emphasis added)); RR,
Vol. 6, Plaintiff’s Exs. 4 and 8 (SCC Order and the Rapid Order specifically state that the orders
do not modify or negate ownership or control of the Annuity).
- 28 -
annuity payments”; that it possessed the “right to receive the proceeds due under
the Annuity contract”; and that the Prudential Defendants breached their agreement
by “refusing to make the Annuity Payments as set forth by the [Rapid] Order.” 1st
Supp. CR 10-13 at ¶¶ 9, 18-19. The Rapid Order itself identifies the assigned
payments specifically as payments under “Annuity Contract No. A9901070” and
as the “monthly annuity payments.” See RR, Vol. 6, Plaintiff’s Ex. 8.
The above cases make it clear that neither an annuitant nor factoring
company can seek to enforce assignment rights under an annuity contract to which
the annuitant is not the owner, because those rights could not be assigned in the
first instance. Therefore, RSL’s claim fails on this basis as well.
3. As a Mere Incidental Third-Party Beneficiary, Adegoke had No
Enforceable Interests in the Annuity.
In addition to not being a party to the Annuity, Adegoke was also not an
“intended” third-party beneficiary. As a mere “incidental” third-party beneficiary,
Adegoke had no rights capable of enforcement (even assuming they could be
assigned, which they could not), and neither does RSL.
A third party may only recover on a contract made between other parties “if
the parties intended to secure a benefit to that third party, and only if the
contracting parties entered into the contract directly for the third party's benefit.”
Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002) (emphasis added). South Texas
Water Authority v. Lomas, 223 S.W.3d 304, 306 (Tex. 2007). There is a strong
- 29 -
presumption against – not in favor of – conferring third-party beneficiary status on
a non-party to a contract. Id.19
A court will not create a third-party beneficiary contract by implication.
“Rather, an agreement must clearly and fully express an intent to confer a direct
benefit to the third party.” Stine v. Stewart, 80 S.W.3d at 589 (emphasis added);
Lomas, 223 S.W.3d at 306.20 “‘[T]he fact that a person is directly affected by the
parties’ conduct, or that he “may have a substantial interest in a contract's
enforcement, does not make him a third-party beneficiary.”’” Sharyland Water
Supply Corp. v. City of Alton, 354 S.W.3d 407, 421 (Tex. 2011) (citations omitted).
“‘An incidental beneficiary acquires no right either against the promisor or
the promisee.’” See Tawes, 340 S.W.3d at 425 (quoting 13 Williston on Contracts
§ 37:19, at 124-25 (4th ed. 2000)); see also Hurt, 357 S.W.3d at 148; Bruner v.
19
Indeed, establishing third-party beneficiary status, which is on the party claiming to be the
intended third-party beneficiary, is “a difficult burden” because of the “strong presumption”
against third-party beneficiary status. Marine Creek Partners, Ltd. v. Caldwell, 926 S.W.2d 793,
795 (Tex. App.—Fort Worth 1996, no writ).
20
See also Camco Oil Corp. v. Vander Laan, 220 F.2d 897, 899 (5th Cir. 1955) (“recovery is not
allowed without an express statement that the promise is for the benefit of the third party”);
Caldwell, 926 S.W.2d at 795 (concluding terms of contract were insufficient to confer intended
third party-beneficiary status); EOG Res., Inc. v. Hurt, 357 S.W.3d 144, 148 (Tex. App.—Fort
Worth 2011, pet. denied) (“It is well settled that third-party beneficiary claims succeed or fail
according to the provisions of the contract upon which suit is brought”; “A third party may
recover on a contract made between other parties if the parties (1) intended to secure a benefit to
that third party and (2) entered into the contract directly for the third party's benefit”).
- 30 -
Exxon Co., U.S.A., A Div. of Exxon Corp., 752 S.W.2d 679, 682 (Tex. App.—
Dallas 1988, writ denied) (“There are three types of third-party beneficiaries:
donee beneficiaries, creditor beneficiaries, and incidental beneficiaries. Only the
first two may enforce contracts to which they are not parties.”)
Indeed, RSL has not cited to any case under Texas law (or the law of any
other jurisdiction) where a structured settlement payee was permitted to pursue a
claim for payments as an intended third-party beneficiary against an annuity issuer.
To the contrary, in the structured settlement context, courts have consistently
concluded that annuitants like Adegoke are incidental, not intended, third-party
beneficiaries of the annuity. As the court in Jones reasoned, although a payee like
Adegoke may derive a benefit from a structured settlement annuity, that benefit is
purely incidental:
In the settlement agreements, Equitable as assignee agreed to purchase
an annuity contract from Integrity and to assume thereby all obligation
for payment of proceeds to the plaintiff-payees. The … Agreement …
specifically stated (in keeping with the dictates of Section 130 of the
Internal Revenue Code): ‘Plaintiff shall have no legal interest, vested
or contingent, in such annuity contract as owner.’ … Further
reinforcing the absence of ownership in the payees, the annuity
contracts restricted the right of assignment to Equitable alone. …
Thus, although Equitable clearly owed a duty to the obligor-
tortfeasors to make payments to the tort victim-payees, the right to
receive payments flowed from Integrity to Equitable, rendering the
payees incidental third-party beneficiaries who retained none of the
incidents or accouterments of ownership in the annuities.
- 31 -
Jones, 28 S.W.3d at 313-314 (emphasis added); see also Windsor-Thomas Group,
Inc. v. Parker, 782 So.2d 478 (Fla. Dist. Ct. App. 2001) (granting annuity issuer’s
motion to dissolve writ seeking attachment of structured settlement annuity);
Allstate Ins. Co. v. Am. Bankers Ins. Co., 882 F. 2d 856, 859-60 (4th Cir. 1989)
(holding that payee could not enforce assignment of his rights to future payments
against annuity precisely because he had no legal rights to that contract).
Here, it is clear here that, in terms of intent, the Annuity was only purchased
for PSSC’s convenience and provided no rights to Adegoke. The Annuity is
specific that PSSC alone had the right to designate or change to whom the Annuity
payments would be made. RR, Vol. 6, Plaintiff’s Ex. 2, p. 2. While payments
were being issued to Adegoke, it was for PSSC’s convenience only, and any
payment was “subject to the owner’s right to direct payments.” Id. at “Payment
Schedule.”
Other separate contracts likewise make clear that Adegoke did not have any
enforceable interest in the Annuity and that the Annuity was solely for PSSC’s
benefit and convenience. Specifically:
• The Settlement Agreement was clear that, “[a]ll rights of ownership
and control” in any annuity were vested in PSSC, and that, for any
annuity purchased, Prudential “may” make payments to Adegoke for
PSSC’s “convenience.” See 1st Supp. CR 424-25 (emphasis added).
• The Qualified Assignment provided that PSSC “may” fund the
periodic payments by purchasing an annuity, and all “rights of
ownership and control of such annuity contract shall be and remain
- 32 -
vested in [PSSC] exclusively.” RR, Vol. 6, Plaintiff’s Ex. 1, ¶ 6
(emphasis added).
• The Qualified Assignment also provided that PSSC’s payment
directions “shall be solely for [PSSC]’s convenience and shall not
provide [Adegoke] or any payee with any rights of ownership or
control over the [Annuity] or against the Annuity Issuer.” RR, Vol. 6,
Plaintiff’s Ex. 1, ¶ 7 (emphasis added).
In short, Adegoke was an incidental – not intended – beneficiary of the
Annuity, with no enforceable rights. As such, neither she nor RSL could recover
under the Annuity. See e.g., Jones, 28 S.W.3d at 313-14; Hurt, 357 S.W.3d at
151.
4. RSL Was Not Assigned the Separate Contracts of the Annuity,
Settlement Agreement, and Qualified Assignment.
First, RSL admits it was only assigned the “annuity payments.” See 1st
Supp. CR 8-16 at ¶¶ 9, 10, 18, 19; see also RR, Vol. 6, Plaintiff’s Exs. 5 and 8.
Assigning payments and assigning a contract are two different matters. Because
Adegoke did not assign contractual rights (assuming arguendo, she could assign
the Annuity contract), there can be no breach of contract.
Likewise, nothing in the Rapid Order – or anywhere else – provides that the
Settlement Agreement and Qualified Assignment were assigned to RSL.21 If these
21
In addition, the Prudential Defendants were not parties to the Settlement Agreement, and there
is nothing in the record establishing otherwise. Moreover, Adegoke was not a party to the
Qualified Assignment; she only signed as to form and content.
- 33 -
contracts had been assigned to RSL, it would certainly need to be clear and, as
provided in Section III(B)(7) infra, meet the requirements for a valid contractual
assignment. RSL is clearly lacking that here and has not proved otherwise.
RSL then argues that the Settlement Agreement, Qualified Assignment, and
Annuity should all be read as one contract. However, the law in Texas is that
separate and distinct contracts, executed and signed by different parties and
imposing different obligations on the parties executing them, cannot be read
together. See Henderson v. Little, 248 S.W.2d 759, 761 (Tex. App.—Amarillo
1952, reh’g denied) (explaining that independent contracts, between different
parties, and not made with reference to each other, may not be construed together,
though one refers to other); Speedemissions, Inc. v. Gate, 404 S.W.3d 34 (Tex.
App.—Houston [1st Dist.] 2013, no pet.) (refusing to read two agreements
together, which were between different parties and each had separate and distinct
purposes); see also Hydro-Line Mfg. Co. v. Pulido, 674 S.W.2d 382, 387 (Tex.
App.—Corpus Christi 1984, reh’g denied) (“[W]here the instruments are separate,
distinct, and completely different, the first contract is not considered in construing
- 34 -
the second.”); Martin v. Davis Constructors, Inc., 552 S.W.2d 873, 877 (Tex. Civ.
App.—San Antonio 1977, writ ref’d n.r.e.) (same). 22
Because the Annuity payments were the only matters purportedly assigned
in the Rapid Order, RSL has failed to establish an enforceable contract.
5. The Anti-Assignment Language is Enforceable.
Assuming arguendo that it was appropriate to consider the Settlement
Agreement and Qualified Assignment, these contracts contain enforceable anti-
assignment language, which prohibits the assignment of payments. See 1st Supp.
CR 425 and 423; RR, Vol. 6, Plaintiff’s Ex. 1, ¶ 3. RSL has provided no binding
22
In addition, the only time multiple contracts can arguably be read together is to ascertain the
parties’ intent where there is an ambiguity. If a written contract is worded so that it can be given
a definite or certain legal meaning, then it is unambiguous. See Gulf Ins. Co. v. Burns Motors,
22 S.W.3d 417, 423 (Tex. 2000); Cook Composites, Inc. v. Westlake Styrene Corp., 15 S.W.3d
124, 131 (Tex. App.—Houston [14th Dist.] 2000, pet. dism’d). An ambiguity does not arise
simply because the parties offer conflicting interpretations. In re D. Wilson Construction Co.,
196 S.W.3d 774, 781 (Tex. 2006); Lopez v. Munoz, Hockema & Reed, 22 S.W.3d 857, 861 (Tex.
2000). Unambiguous contracts are enforced as written. See, e.g., Heritage Res., Inc. v.
Nationsbank, 939 S.W.2d 118, 121 (Tex. 1996).
Here, RSL has never identified any ambiguity that requires examination into intent. RSL has
always maintained it was assigned the Annuity payments via the Rapid Order. It has never
identified anything ambiguous with the Annuity and would be precluded from doing so now.
Tex. R. App. P. Rule 33; Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 222 (Tex. 2002) (party
failed to raise argument and thus did not preserve it for appeal). RSL has failed to establish why
separate contracts, executed by different parties and for different purposes, should be read
together.
- 35 -
authority otherwise, and its citation to a New Jersey case as the “leading case” in
the country is just plain wrong.23
In Texas and across the country, anti-assignment language is regularly
enforced and, contrary to RSL’s contention, is done so without requiring any
specific kind of language. In Singer Asset Fin. Co., LLC v. Continental Cas. Co.,
the court concluded that, “under Texas Law, the anti-assignment provision is valid
and enforceable,” where the anti-assignment provision simply provided, “‘To the
extent provided by law, the aforesaid monthly payments shall not be subject to
assignment, transfer, commutation or encumbrance, except as provided herein.’”
See Singer Asset Fin. Co., LLC v. Continental Cas. Co., 886 So. 2d 1004, 1005
(Fla. Dist. Ct. App. 2004); Johnson v. Structured Asset Services, 148 S.W.3d 711,
721 (Tex. App.—Dallas, 2004, no pet.) (“Anti-assignment clauses are enforceable
unless rendered ineffective by a statute”) (citing Reef v. Mills Novelty Co., 89
23
In addition, it well-established that the SSPAs, which have been enacted in at least 47 states,
including Texas, do not abrogate the common law of contracts or contractual anti-assignment
provisions. See In re Foreman, 365 Ill. App. 3d 608, 850 N.E.2d 387 (Ill. App. Ct. 2006) (“anti-
assignment provision . . . benefits [the settlement obligor and annuity issuer] by guarding against
administrative risks and burdens, the potential for multiple liability, and the loss of
predictability”); Matter of 321 Henderson Receivables Origination LLC (Logan), 19 Misc. 3d
504, 506, 865 N.Y.S. 2d 817, 819 (N.Y. Sup. Ct. 2008); see also Enos v. State, 889 S.W.2d 303,
305 (Tex. Crim. App. 1994) (well-established tenet that a statute must not be interpreted as
abrogating a principle of the common law unless such overruling is clearly indicated in statute);
Tex. Civ. Prac. & Rem. Code § 141.007(e) (“[n]othing contained in this chapter may be
construed to authorize any transfer of structured settlement payment rights in contravention of
any law” (emphasis added)).
- 36 -
S.W.2d 210, 211 (Tex. 1936)).24 Indeed, virtually every court in the country that
has ruled on anti-assignment provisions depriving the payee of the ability to assign
structured settlement payment rights has held that such language effectively
invalidates a purported assignment. 25
Further, the anti-assignment provision is for the benefit of the obligor, not
the payee, and the Prudential Defendants have the right to assert the validity of the
terms of these contracts. See Fox-Greenwald Sheet Metal Co. v. Markowitz Bros.,
452 F.2d 1346, 1351-1352 (D.C. Cir. 1971); Matter of 321 Henderson Receivables
Origination LLC (Logan), 865 N.Y.S.2d at 819.26
24
See also Island Recreational Dev. Corp. v. Republic of Texas Sav. Ass’n., 710 S.W.2d 551,
556 (Tex. 1986) (enforcing the anti-assignment provision of loan); Reef v. Mills Novelty Co., 89
S.W.2d 210, 211 (Tex. 1936); Texas Farmers Ins. v. Gerdes, 880 S.W.2d 215, 218 (Tex. App.—
Fort Worth 1994, writ denied) (enforcing anti-assignment clause in insurance policy); Cloughly
v. NBC Bank-Seguin, N.A., 773 S.W.2d 652, 656 (Tex. App.—San Antonio 1989, writ denied)
(enforcing anti-assignment provision of annuity agreement); Conoco, Inc. v. Republic Ins. Co.,
819 F.2d 120, 124 (5th Cir. 1987) (enforcing anti-assignment provision in insurance contract).
25
See e.g., J.G. Wentworth S.S.C., Ltd. P’Ship v. Callahan, 649 N.W. 2d 695 (Wis. Ct. App.
2002) (upholding the modern trend by enforcing an anti-assignment clause in the structured
settlement agreement); In re Kaufman, 37 P.3d 845 (Okla. 2001); In re Nitz, 739 N.E.2d 93 (Ill.
App. Ct. 2000); Piasecki v. Liberty Life Assur. Co. of Boston, 728 N.E.2d 71, 74 (Ill. App. Ct.
2000); Green v. Safeco Life Ins. Co., 727 N.E.2d 393 (Ill. App. Ct. 2000); Henderson v.
Roadway Express, 720 N.E.2d 1108, 1110 (Ill. App. Ct. 1999); In re Foreman, 365 Ill. App. 3d
at 614-15, 850 N.E.2d at 392-93; Liberty Life Assur. Co. of Boston v. Stone Street Capital, Inc.,
93 F. Supp. 2d 630, 637 (D. Md. 2000); Grieve v. General American Life Ins. Co., 58 F. Supp.
2d 391, 321 (D. Vt. 1999); Johnson v. First Colony Life Ins. Co., 26 F. Supp. 2d 1227, 1229
(C.D. Cal. 1998).
26
To the extent RSL argues that the Prudential Defendants waived the breach of the anti-
assignment clause, it is not clear that RSL has established that it needs to be raised as an
(Continued)
- 37 -
6. RSL has Failed to Establish Standing
Texas courts are clear that in order to bring suit, a plaintiff must have both
standing and capacity. See Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845,
847 (Tex. 2005). Although often misconstrued, capacity and standing are distinct
concepts. “A plaintiff has standing when it is personally aggrieved, regardless of
whether it is acting with legal authority; a party has capacity when it has the legal
authority to act, regardless of whether it has a justiciable interest in the
controversy.” Green Tree Servicing, LLC v. Woods, 388 S.W.3d 785, 789-90
(Tex. App.—Houston [1st Dist.] 2012, no pet.); cf. Austin Nursing Ctr., 171
S.W.3d at 849 (finding that capacity concerns whether party has personal right to
come into court, rather than whether party has enforceable right or interest).
The issue here is whether RSL has a legal right to a lawsuit, i.e., a justiciable
interest in the outcome and a sufficient relationship with the Annuity such that it
would be personally aggrieved by any breach thereof. This is a matter of
standing. Cf. Green Tree Servicing, 388 S.W.3d at 790 (whether plaintiff
established sufficient chain of title related to the issue of standing rather than
(Continued)
affirmative defense. However, even if it does, the Prudential Defendants raised it. See e.g., 1st
Supp. CR 26-27 (Fourth, Fifth, and Tenth Defenses); 2nd Supp. CR 275-300.
- 38 -
capacity) (citing Interstate Contracting Corp. v. City of Dallas, 135 S.W.3d 605,
618 (Tex. 2004) (holding that privity of contract is matter of standing)); AVCO
Corp. v. Interstate Sw., Ltd., 251 S.W.3d 632, 649 (Tex. App.—Houston [14th
Dist.] 2007, pet. denied) (“[c]apacity concerns ‘a party's personal right to come
into court,’ while standing concerns ‘the question of whether a party has an
enforceable right or interest’”).
Here, RSL is not suing on behalf of anyone else, which might implicate a
capacity issue; it is suing on its own behalf. Thus, the issue is whether RSL has a
legally cognizable right and that is one of standing. Nobles v. Marcus, 533 S.W.2d
923, 927 (Tex. 1976) (“Without a breach of a legal right belonging to the
plaintiff[,] no cause of action can accrue to his benefit”). RSL has failed to
establish it obtained a legally cognizable right to the Annuity. Therefore, the
directed verdict should be affirmed. 27
27
It is also worth noting here that once Adegoke agreed, in connection with factoring transaction
with SCC, that the Prudential Defendants were to send the full amount of each payment made
payable and delivered to SCC, she had no further claim against the Prudential Defendants, and
therefore, neither would RSL. If RSL had any claim, it would be against Adegoke or SCC for
the payments, not the Prudential Defendants.
- 39 -
7. RSL Failed to Establish a Valid Contractual Assignment.
RSL argues that Rapid assigned its rights under the Transfer Agreement to
RSL. See Appellant’s Brief, p. 28.28 However, an assignment is a contract and
operates by way of contract. See Univ. of Tex. Med. Branch at Galveston v. Allan,
777 S.W.2d 450, 453 (Tex. App.—Houston [14th Dist.] 1989, no writ) (citing 6
Am. Jur. 2d Assignments § 82 (“A valid assignment must contain clear evidence of
the intent to transfer rights, must describe the subject matter of the assignment,
must be clear and unequivocal, and must be noticed to the obligor.”)); Lincoln
Gen. Ins. Co. v. U.S. Auto Ins. Servs., Inc., 809 F. Supp. 2d 582, 590 (N.D. Tex.
2011). Accordingly, “[a]n assignment is subject to the same requisites for validity
as are other contracts; i.e., mutuality of assent, proper parties with the capacity to
make a contract, consideration and legal subject matter.” Lone Mountain
Production Co. v. Natural Gas Pipeline Co. of Am., 710 F. Supp. 305, 310 (D.
Utah 1989); see also Brown v. Mesa Distributors, Inc., 414 S.W.3d 279, 285 (Tex.
App.—Houston [1st Dist.] 2013, no pet.) (“Assignments are governed by contract
law.”); Cadle Co. v. Henderson, 982 S.W.2d 543, 546 (Tex. App.—San Antonio
1998, no pet.) (same).
28
RSL has never established – nor does it appear to argue – that the Transfer Agreement is a
contract between any parties other than Adegoke and Rapid, the latter of which is not a party to
this litigation. See RR, Vol. 6, Plaintiff’s Ex. 5.
- 40 -
Here, RSL has failed to present evidence of the requisites for a valid
contractual assignment (mutuality of assent, proper parties with the capacity to
make a contract, consideration and legal subject matter) between itself and Rapid.
Like many of the chains above, this is a necessary step for RSL to be able to assert
a breach of contract claim. Further, as established above, the Rapid Order cannot
constitute a contract.
C. The Trial Court Properly Severed the Case.
A claim is properly severable if (1) the controversy involves more than one
cause of action; (2) the severed claim is one that would be the proper subject of a
lawsuit if independently asserted; and (3) the severed claim is not so interwoven
with the remaining action that they involve the same facts and issues. See Guar.
Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex. 1990) (op.
on reh’g); see also Tex. R. Civ. P. 41 (“Any claim against a party may be severed
and proceeded with separately.”) (emphasis added); Tex. R. Civ. P. 174(b) (“The
court in furtherance of convenience or to avoid prejudice may order a separate trial
of any claim, cross-claim, counterclaim, or third-party claim, or of any separate
issue or of any number of claims . . . or issues.”) (emphasis added).
As “[t]he controlling reasons for a severance are to do justice, avoid
prejudice, and further convenience,” Rule 41 of the Texas Rules of Civil Procedure
“grants the trial court broad discretion in the matter of severance . . . .” Guar. Fed.
- 41 -
Sav. Bank, 793 S.W.2d at 658. The Court will therefore review a trial court’s
decision to grant or deny a motion to sever for an abuse of discretion. See Liberty
Nat'l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 629 (Tex. 1996).29
Severance is available to the court for any number of purposes, including
severing a remaining claim from issues that have already been the subject of
interlocutory orders. “Severance is a proper means of rendering an otherwise
interlocutory appeal final when some parties and issues still remain.” City of
Beaumont v. Guillory, 751 S.W.2d 491 (Tex. 1988); Pilgrim Enterprises, Inc. v.
Maryland Cas. Co., 24 S.W.3d 488, 492 (Tex. App.—Houston [1st Dist.] 2000, no
pet.). See Farmer v. Ben E. Keith Co., 907 S.W.2d 495, 496-97 (Tex. 1995) (per
curiam); see also Shafer Plumbing & Heating, Inc. v. Controlled Air, Inc., 742
S.W.2d 717, 721 (Tex. App.—San Antonio 1987, no writ).
In this case, when the trial court ordered severance, nothing remained to be
tried between RSL and the Prudential Defendants. There had been a conventional
trial on the merits, and the trial court had entered a final judgment as to all claims
29
RSL’s citation to Womack v. Berry, 291 S.W.2d 677, 683 (Tex. 1956) actually works against
it. Holding that the failure to sever was an abuse of discretion, the Court explained that where
“there is no fact or circumstance supporting or tending to support a contrary conclusion, and the
legal rights of the parties will not be prejudiced thereby, there is no room for the exercise of
discretion . . . [and] [t]he rule then is peremptory in operation and imposes upon the court a
duty to order a separate trial.” Womack, 291 S.W.2d at 683 (emphasis added). In other words,
the court essentially must sever.
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and all parties. See CR 4-6. While RSL argues the existence of interpleader means
there can be no severance, the Prudential Defendants did not make a claim to the
interpleaded funds, and the trial court ordered that RSL could recover the
interpleaded funds, less the attorneys’ fees and interest awarded to the Prudential
Defendants. CR 5.30
Therefore, at the time of severance, all that remained was the potential that
RSL and Olubumi might arbitrate their claims with each other. There is no
evidence in the record that RSL has been currently seeking to arbitrate any claims
with Olubumi, 31 and there is no evidence that Olubumi has been seeking to assert
claims against RSL since intervening. Olubumi had non-suited long before the
trial and has not participated in proceedings since non-suiting. Further, there were
never any claims asserted between the Prudential Defendants and Olubumi.
30
This award out of the interpleaded funds is simply a procedural mechanism and provided for
under Texas law to ensure the Prudential Defendants actually get paid, rather than have to go
through possible enforcement or garnishment procedures. The result is the same as if RSL was
awarded the entirety of the interpleaded funds and then had to pay the award. Therefore, RSL
has nothing to complain about.
31
That RSL would be attempting to utilize arbitration as an offensive measure is simply the
usual practice of RSL-related entities. In Symetra Life Ins. Co. v. Rapid Settlements, Ltd., 2014
U.S. App. LEXIS 24349 (5th Cir. Dec. 23, 2014), the court recognized that whenever there was a
dispute, “[w]hatever the circumstances,” Rapid invoked the arbitration clauses, and the “ensuing
arbitrations were a sham” and a “naked attempt to circumvent the SSPAs.” 2014 U.S. App.
LEXIS 24349 at *6-7.
- 43 -
It appears that RSL opposes severance simply to try and keep the Prudential
Defendants in litigation, even though the trial court ordered that RSL could recover
the interpleaded funds, thus giving RSL what it sought when it created this
unnecessary mess in the first place. If there is a dispute between RSL and
Olubumi over the interpleaded funds, that does not involve the Prudential
Defendants. Significantly, the dispute between RSL and Olubumi was, at RSL’s
request, ordered to proceed separately from this litigation in arbitration, and was
never going involve the Prudential Defendants, who were not ordered to
arbitraiton. This further demonstrates the independence of the claims. The claims
were properly severable. Guar. Fed. Sav. Bank v. Horseshoe Operating Co., 893
S.W. 2nd 652, 657-58 (Tex. 1990).
D. RSL is Wrong on the Interpleader Facts and Relief, and the Trial Court
Properly Determined That the Prudential Defendants Interpleaded the
Funds.
1. There Were Conflicting Claims to the Funds, and Trial Court
Properly Recognized that the Prudential Defendants Interpleaded
the Funds.
Granting a party the right to interplead is within the sound discretion of the
trial court. Barnett v. Woodland, 310 S.W.2d 644, 647 (Tex. App.—Austin 1958,
writ ref’d n.r.e.); Petro Source Partners, Ltd. v. 3-B Rattlesnake Red (1990), Ltd.,
905 S.W.2d 371, 375 (Tex. App.—El Paso 1995, writ denied). “It has been said
concerning the remedy of interpleader that it is so beneficial and so just that any
- 44 -
reasonable doubt as to the right thereto will be resolved in favor of the existence of
the remedy.” Security State Bank v. Shanley, 182 S.W.2d 136, 138 (Tex. Civ.
App.—San Antonio 1944, no writ). Therefore, “any reasonable doubt about a
stakeholder’s right to interpleader must be resolved in the stakeholder’s
favor.” Bryant v. United Shortline Inc., 984 S.W.2d 292, 296 (Tex. App.—Fort
Worth 1998, no pet.); Petro, 905 S.W.2d at 375; Luse v. Union City Transfer, 324
S.W.2d 935 (Tex. App.—Waco 1959, writ dism’d).
Texas Rule of Civil Procedure 43 “expressly disclaims certain pre-rule
restrictions imposed on interpleader practice” and only requires conflicting claims.
Clayton v. Mony Life Ins. Co. of Am., 284 S.W.3d 398, 401 (Tex. App.—Beaumont
2009, no pet.). Interpleader is proper where there are conflicting orders. See
Texaco, Inc. v. LeFevre, 610 S.W.2d 173, 176 (Tex. Civ. App.—Houston [1st
Dist.] 1980, no writ) (stakeholder that received conflicting orders was allowed to
interplead).
Here, the Prudential Defendants filed a Counterclaim for Interpleader in
their Answer, providing the facts of the conflicting claims and conflicting orders.
See 1st Supp. CR 24-114; 1st Supp. CR 32 at ¶¶ 34, 45-50. Under the SCC Order,
the Prudential Defendants were “directed to deliver and make payable” to SCC
the full amount of each Periodic Payment. See RR, Vol. 6, Plaintiff’s Ex. 4, p. 3.
Then, under the Rapid Order, the Prudential Defendants were purportedly
- 45 -
“directed to deliver and make payable” to RSL portions of the same payments that
were ordered to be made payable to SCC. Compare RR, Vol. 6, Plaintiff’s Ex. 4
with Plaintiff’s Ex. 8. Both orders could not be followed at the same time. 32 This
is sufficient to establish interpleader.
32
RSL focuses on what was purportedly “assigned,” instead of what the Prudential Defendants
were ordered to pay. Even though Adegoke may have only assigned a portion of each payment
to SCC and later purportedly assigned the remaining portion to RSL, the fault with RSL’s claim
is that, with respect to the Prudential Defendants, they were first and foremost obligated to send
the entire payment to SCC. See RR, Vol. 6, Plaintiff’s Ex. 4. If they have to make the entirety
of each payment payable to SCC, they cannot also make those same monies payable to RSL.
RSL’s problem is that when Rapid obtained the Rapid Order, it should have sought to obtain its
payments from SCC, not the Prudential Defendants. This appears to be what happened in cases
relied upon by RSL, but which cases are inapposite because of this fact. In J.G. Wentworth
Originations, LLC v. Perez, 2014 Tex. App. LEXIS 8798 (Tex. App.—Houston [1st Dist.] Aug.
12, 2014, no pet.) and J.G. Wentworth Originations, LLC v. Freelon, 2014 Tex. App. LEXIS
8797 (Tex. App.—Houston [1st Dist.] Aug. 12, 2014, no pet.), there were servicing agreements
in the initial factoring transactions, where the annuity issuer was sending the entirety of each
payment to the factoring company, which would then remit the unassigned portion of the
payment back to the payee, like here. However, unlike here, in the subsequent factoring
transaction, the first factoring company was ordered to send the unassigned portions to the next
factoring company (in both cases, an RSL entity), instead of the payee. The only reason the
court could conclude that the subsequent factoring transaction did not contravene a prior court
order, as required under the Texas Act, was because the annuity issuer (like Prudential) was still
required to send 100% to the first factoring company under the first order, and it was that first
factoring company who had to remit the assigned payments to the RSL entity per the second
order. Therefore, unlike here, the annuity issuer was not being ordered to send the entirety of
each payment to the first factoring company and then also send a portion of the same payments
to a second factoring company.
RSL should clearly be aware of this distinction, as well as the fact that it caused its own problem
by seeking payments from the wrong parties. Instead, it pretends that these facts do not exist.
Indeed, even the trial court recognized that once the SCC Order was entered and was res
judicata, the Prudential Defendants had no further obligation to Adegoke on the monthly
payments. See RR, Vol. 4, pp. 137-141 (trial court questioning, “Where is Prudential’s
obligation on these monthly payments in light of that obligation that [Adegoke] signed” to send
the entirety of each payment to SCC).
- 46 -
Moreover, RSL admitted in its initial pleading that there was a conflict,
stating that it had “embarked on discussions to settle any hyper-technical issue
pertaining to conflicting payments.” 1st Supp. CR 12 at ¶ 12 (emphasis added).
RSL also admitted during trial and oral argument that the Prudential Defendants
were ordered to send and make payable the entire amount to SCC and that
interpleader was proper. See RR, Vol. 3, pp. 257-260, 265, 269-270; Vol. 4, pp.
21-25; RR, Vol. 4, p. 141; see also RR, Vol. 4, p. 167.
In addition, an actual deposit of the funds into the court registry is not
required, only an unconditional tender. Heggy v. Am. Trading Employee Ret.
Account Plan, 123 S.W.3d 770 (Tex. App.—Houston [14th Dist.] 2003, pet.
denied) (“only an unconditional tender, not a deposit, is required”); see also Petro,
905 S.W.2d at 377; Clayton, 284 S.W.3d at 403; Martinez v. Martinez, 2010 Tex.
App. LEXIS 6994 (Tex. App.—Corpus Christi Aug. 26, 2010, pet. filed)
(recognizing insurer had made unconditional tender of funds in a motion for
interpleader, even though insurer was not ordered until later to deposit sums into
court registry).
Here, the Prudential Defendants stated that they “are innocent stakeholders
and claim no title or interest in the Payments at Issue” and are “are willing and able
to deposit the Payments at Issue into the registry of this court.” See 1st Supp. CR
35 at ¶¶ 48-50; see also RR, Vol. 4, pp. 171-172, 175 (Prudential Defendants were
- 47 -
willing to pay the Payments at Issue once they got the appropriate direction and
that they have “always been willing to make the payments owed”). Thus,
regardless of when the Prudential Defendants actually deposited the funds into the
registry of the Court, the Prudential Defendants unconditionally tendered the funds
and disclaimed any interest in their Answer.
Further and importantly, on January 25, 2013, in granting SCC’s motion for
summary judgment, the trial court recognized that the Prudential Defendants had
previously interpleaded the payments at issue. See 2nd Supp. CR 105-110, p. 2
(“Settlement Capital is entitled to received, collect, and recover certain of the
monies, funds, and payments that were interpleaded by the Prudential
Defendants in this case (the ‘Interpleaded Funds’)” (emphasis added)). RSL
cannot challenge the Court’s determination that the Prudential Defendants
interpleaded the funds. It was already decided and is the law of the case. As such,
all that was left at trial was for the award of attorneys’ fees.
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2. The Prudential Defendants Attempted to Resolve the Conflicting
Payment Directions, But RSL and Rapid were Uncooperative.
The Prudential Defendants Filed their Interpleader Promptly
with their Answer.
RSL argues that the Prudential Defendants failed to prove that they did not
unreasonably delay in filing their interpleader.33 However, Texas courts have
repeatedly recognized that interpleader “‘is not improper merely because it is
delayed…the rules of procedure require only conflicting claims.’” Clayton v.
Mony Life Ins. Co. of Am., 284 S.W.3d 398, 401 (Tex. App.—Beaumont 2009, no
pet.). Moreover, courts look at the timing of when a petition for interpleader is
filed in the litigation, recognizing that interpleader is properly filed with an answer
to the suit. See Petro, 905 S.W.2d at 377 (stakeholder did not delay unreasonably
in interpleading funds until seven weeks after suit was filed). The “purpose of
requiring a petition in interpleader to be filed promptly is to avoid delaying
disposition of the action.” Ginn v. Texas Farmers Ins. Co., 1998 Tex. App. LEXIS
6355 (Tex. App.—Austin Oct. 15, 1998, no pet.).
Here, there was no unreasonable delay, as the interpleader was filed less
than a month after the litigation commenced. Lee Memorial Hosp. v. Elgin-Butler
Brick Co., 436 S.W.2d 354, 356 (Tex. Civ. App.—Austin 1969, no writ) (delay in
33
To the extent RSL is asserting laches, it failed to identify this as an affirmative defense, and it
is waived. See 1st Supp. CR 238-239.
- 49 -
requesting permission to file an interpleader, not quite nine months from the date
of appellees’ last pleading was “insignificant”; petition brought to court’s attention
on the day of trial would not necessarily cause undue delay).
Further, the Prudential Defendants informed Rapid prior to the Rapid
transfer that the subject payments were already scheduled to be made to SCC. See
RR, Vol. 6, Plaintiff’s Ex. 7; see also RR, Vol. 3, p. 185.34 The Prudential
Defendants then attempted to amicably resolve the conflict for years, but Rapid
and RSL were uncooperative and failed to satisfy their obligations under the
Stipulation. See 1st Supp. CR 24-114.35
34
While RSL argues that the Prudential Defendants are bound by res judicata to the Rapid Order,
the Rapid Order was an impermissible collateral attack on the SCC Order. A collateral attack is
an “attempt to avoid the effect of a judgment in a proceeding not instituted for the purpose of
correcting, modifying, or vacating the judgment, but in order to obtain some specific relief,
which the judgment currently stands as a bar against.” Sigmar v. Anderson, 212 S.W.3d 789,
793 (Tex. App.—Austin 2006, no pet.); see also In re French Gardens, Ltd., 58 B.R. 959, 963
(Bankr. S.D. Tex. 1986) (“A final judgment is conclusive and collateral attacks are not
permitted. Though an action may have an independent purpose and may contemplate some other
relief, it is a collateral attack if it must in effect overrule a previous judgment.”). With the Rapid
Order, Rapid and RSL sought to obtain relief, i.e., payments, against which the SCC Order stood
as a bar, since such payments were already scheduled to go to SCC. As an impermissible
collateral attack on the SCC Order, the Rapid Order is void or barred. See Dallas Cnty. Tax
Collector v. Andolina, 303 S.W.3d 926, 929-32 (Tex. App.—Dallas 2010, no pet.) (plaintiff’s
prior suit for declaratory relief constituted impermissible collateral attack on prior order); Devji
v. Keller, No. 03-02-00754-CV, 2003 WL 21705829, at *8-9 (Tex. App.—Austin July 24, 2003,
no pet.) (plaintiff’s request for dissolution was barred as impermissible collateral attack on prior
final judgment).
35
RSL admitted during trial that there had been ongoing discussions with the Prudential
Defendants for a long time and that there were efforts to try to work out the differences between
the parties. See RR, Vol. 3, pp. 272-279, 285-6; RR, Vol. 4, pp. 49-50. The Prudential
(Continued)
- 50 -
Therefore, the ongoing settlement discussions, RSL’s failure to fulfill its
obligations to resolve the matter for which it has no excuse, and the Prudential
Defendants’ timely filing of its interpleader with its Answer establish that there
was no unreasonable delay. See Avila v. Lone Star Radiology, 183 S.W.3d 814,
816 (Tex. App.—Waco 2005, no pet.) (no evidence that stakeholder delayed in
bringing the interpleader action once it became clear that the matter could not be
resolved, stakeholder tendered amount, and therefore was an innocent stakeholder
entitled to fees in interpleader); State Farm Life Ins. Co. v. Martinez, 216 S.W.3d
799, 805 (Tex. 2007) (“delay before filing an interpleader may benefit all
concerned, if settlement can be reached before lawyers must be hired and pleadings
filed”).
RSL’s behavior throughout this matter has been consistent: cause a problem,
blame someone else. It obtained a conflicting order and seeks to blame the
Prudential Defendants. It refused to cooperate with the Prudential Defendants’
efforts to resolve the problem, then RSL argues the Prudential Defendants delayed
in filing their interpleader, even though the interpleader was filed with their
(Continued)
Defendants also testified as to their attempts to rectify the conflict and the ongoing discussions
trying to resolve this matter. See RR, Vol. 4, pp. 156-165, 175-76.
- 51 -
Answer. There was simply no unreasonable delay here, and the fact that RSL
refused to fix the problem it created was exactly what necessitated interpleader.
3. The Jury Properly Awarded the Prudential Defendants their
Fees.
In Texas, “the award of attorney fees is within the sound discretion of the
trial court.” Avila v. Lone Star Radiology, 183 S.W.3d 814, 816 (Tex. App.—
Waco 2005, no pet.) (citing Olmos v. Pecan Grove Mun. Util. Dist., 857 S.W.2d
734, 741 (Tex. App.—Houston [14th Dist.] 1993, no writ)); Beneficial Standard
Life Ins. Co. v. Trinity Nat'l Bank, 763 S.W.2d 52, 56 (Tex. App.—Dallas 1988,
writ denied).
Moreover, under Texas interpleader law, an innocent stakeholder “is entitled
to attorney’s fees . . . .” Id. (emphasis added); United States v. Ray Thomas Gravel
Co., 380 S.W.2d 576, 581 (Tex. 1964); Heggy, 123 S.W.3d at 780 (trial court
abused discretion in refusing to award innocent stakeholder its attorneys fees);
Olmos, 857 S.W.2d at 741; Salazar v. San Benito Bank & Trust Co., 730 S.W.2d
21, 24 (Tex. App.—Corpus Christi 1987, no writ) (affirming trial court’s award of
attorneys’ fees to interpleading party).
Because the Court has already determined that the Prudential Defendants
interpleaded the funds, see 2nd Supp. CR 105-110, p. 2, and because the Prudential
Defendants disclaimed any interest in the payments at issue from the start, an
award of attorneys’ fees was proper. Avila, 183 S.W.3d at 816 (trial court abused
- 52 -
discretion in failing to award stakeholder attorney's fees for bringing the
interpleader); AMX Enters., L.L.P. v. Master Realty Corp., 283 S.W.3d 506, 519
(Tex. App.—Fort Worth 2009, no pet.) (op. on reh'g) (trial court did not err by
awarding attorney's fees out of the impleaded funds); see also Foreman v. Graham,
693 S.W.2d 774, 778 (Tex. App.—Fort Worth 1985, writ ref'd n.r.e.) (trial court
properly taxed stakeholder’s attorneys’ fees against losing party); Lee Memorial,
436 S.W.2d at 356. 36
Thus, this Court should affirm the award of attorneys’ fees and affirm the
trial court’s order that the Prudential Defendants may recover that amount, taxable
costs, and post-judgment interest from the interpleaded funds. See CR 4-6.
IV.
PRAYER FOR RELIEF
For all of the foregoing reasons, the Prudential Defendants respectfully
request that the Court deny the relief sought in RSL’s appeal, dismiss this appeal,
and affirm the trial court’s orders and jury’s award of attorneys’ fees and interest to
the Prudential Defendants.
36
The Prudential Defendants presented evidence at trial as to their attorneys’ fees, including
their invoices. See RR, Vol. 4, pp. 184-190, 193; RR, Vol. 7, Defendants’ Ex. 10. The first
invoice evidenced total fees for the period of $8,860.95, which is the same amount that the jury
awarded the Prudential Defendants. See RR, Vol. 5, pp. 19-22; see also CR 4-6.
- 53 -
Dated: January 12, 2015 Respectfully submitted,
_/s/ Patrick B. Larkin_____
Patrick B. Larkin
State Bar No. 24013004
THE LARKIN LAW FIRM, P.C.
11200 Broadway Street, Suite 2705
Pearland, Texas 77584
Telephone: (281) 412-7500
Facsimile: (281) 412-7502
Of Counsel:
Stephen R. Harris (admitted pro hac
vice)
DRINKER BIDDLE & REATH LLP
One Logan Square, Suite 2000
Philadelphia, PA 19103-6996
Telephone: (215) 988-2700
Facsimile: (215) 988-2757
Counsel for Appellees The
Prudential Insurance Company of
America and Prudential Structured
Settlement Company f/k/a
Prudential Property and Casualty
Insurance Company of Holmdel,
New Jersey
- 54 -
CERTIFICATE OF COMPLIANCE
I certify the brief of Appellees filed by The Prudential Insurance Company
of America and Prudential Structured Settlement Company f/k/a Prudential
Property and Casualty Insurance Company of Holmdel, New Jersey complies with
the word-count limit specified by Texas Rule of Appellate Procedure 9.4(i)(2)(B).
According to the word counter used by Microsoft Word (version 14.0.6112.5000)
computer software, this brief contains 13,994 words of text.
_/s/ Patrick B. Larkin_________
PATRICK B. LARKIN
CERTIFICATE OF SERVICE
I certify that on this 12th day of January, 2015, I delivered a true and correct
copy of the foregoing instrument and any accompanying exhibit to all counsel of
record, by electronic service and/or email in compliance with Texas Rule of
Appellate Procedure 9.5.
E. John Gorman
John R. Craddock
The Feldman Law Firm LLP
Two Post Oak Central
1980 Post Oak Blvd., Suite 1900
Houston, Texas 77056-3877
Counsel for Appellant, RSL-3B-IL, Ltd.
Earl S. Nesbitt
Davis S. Vassar
Nesbitt, Vassar & McCown, LLP
15851 Dallas Parkway, Suite 800
Addison, Texas 75001
Counsel for Appellee, Settlement Capital Corporation
-1-
Greg Hill
Greg Hill, Attorney, PLLC
11200 Broadway, Suite 2743
Pearland, Texas 77584
Counsel for Appellee, Olubumi Adegoke
_/s/ Patrick B. Larkin________________
PATRICK B. LARKIN
-2-
APPENDIX OF APPELLEES, THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA AND PRUDENTIAL STRUCTURED
SETTLEMENT COMPANY F/K/A PRUDENTIAL PROPERTY AND
CASUALTY INSURANCE COMPANY OF HOLMDEL, NEW JERSEY
TABLE OF CONTENTS
Exhibit A: Copy of decision in Finserv Casualty Corp. v. Transamerica
Occidental Life Ins. Co., Case No. 2011-05238 (District Court —
Harris County, Texas [165th Dist.] August 27, 2013).
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EXHIBIT ''A''
NO. 2011-05238
FINSERV CASUALTY CORP., § IN THE DISTRICT COURT OF
CAPSTONE ASSOCIATED SERVICES, LTD
LIQUIDATING MARKETING, LTD., §
RSL FUNIDNG, LLC, RSL-3B-1L. LTD §
RSL-5B-1L, LTD, RSL SPECIAL-lV, §
PlaiotifT(s)
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VS § HARRIS COUNT~E ~ ~B ~ X AS c-
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TRANSAMERICA OCCIDENTAL LIFE § t?~ ._.tic.! =>
INSURANCE COMPANY, § 0 'f!;;,dJ ~DUll ~
Th1s1nstrumer;~~1i1y
COMPANY, TRANSAMERICA ANNUITY §
SERVICE CORPORATION and §
at tile ti
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MONUMENTAL LIFE INSURANCE §
COMPANY, §
Defendants(s) § 1~ JUDICIAL DISTRICT
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TIONAL AND NO-EVIDENCE MOTION FOR
GMENTAND
N TO STRIKE THIRD AMENDED PETITION
The Court considered Defen~' Traditional and No-Evidence Motion for Summary Judgment.
The Court reviewed the motion, t~porting evidence and the response(s) The Court then considered
the Defendants' Motion to Strik~~Jaintiffs' Third Amended Petition, the evidence, court files and the
response. The Court also co~red the comments and positions espoused by both counsel at hearing on
related case matters. Ba~~ all of the above, the Court GRANTS both the Defendants' motion(s) for
summary judgment and ~efendants' Motion to Strike the Third Amended Petition.
BREACH OF CO~CT CLAIMS
The fac~em in the cases which fonned the genesis of this lawsuit are fairly standard.
Generally, an ~f~d Plaintiff would file suit against a Defendant, and settle the case in such a way that a
structured settlement called for the purchase by the Defendant of an annuity for the benefit of the
Pla_intiff. The Defendant in these cases chose Transamerica Occidental Life Insurance Company as the
annuity provider. Transamerica would then begin making annuity payments directly to the individual
Plaintiffs pursuant to the tenns of the respective annuity contracts. To better understand the nature of
these transactions. the court has attached to its order, as Exhibit "A", a rough drawing of the generic
nature of these transactions.
RECORDER'S MEMORANDUM
Thia instrument is of poor quality
at the time of Imaging
At some point in time, the individual Plaintiffs would decide to sell their annuity rights to
FinServe, which would buy them at a present value rate well below the face value of the annuity.
Fin Serve would assist the individual Plaintiffs in obtaining a district court order approving the sale of the
annuity (or a part of the annuity), a statutory requirement. Jn that proposed order, Fin Serve would include
a paragraph requiring that the annuity company, in this case Transamerica, acknowledge in writing the
transfer of rights to FinServe. ("acknowledgment letters") Transamerica would not be present at the
hearing and would not have knowledge that the annuity rights had been sold until such time as it received
a copy of the court order. In some case, it would send the acknowledgment letter to Fi~e.
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In most instances, the procedure appeared to work without interruption. ~530 +/-annuities
in the instant case, only approximately 30 annuities had problems. Those proble~~emmed from
incomplete or bad addresses for the individual plaintiffs such that Transame~i~uld not provide
adequate notice to them of the change, or a defective court order, requirin~~samerica to go back to
court to get clarification of the order. Once the issue was cleared up, Fiv~e received all of the annuity
payments for all but l of the 30 +/-cases which had trouble. The one~ning case is the subject of
pending litigation in Florida so Transamerica has chosen not to ma~nnuity payments in that case.
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FinServe's plan was to purchase a large group of an~ui ~undle them and sell them. The
structure FinServe elected for this transaction was a mecha · ailed "securitization". FinServe was
unable to close the deal using this method, so instead chos ther method to sell the bundle. FinServe
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alleges that the reason it could not close the securitizati al was because Transamerica breached its
contract to pay on the 30 +/- annuities. Transameri grees. FinServe alleges its damages stem from
the delta between the profit it would have received the sale via securitization as opposed to the profit
it received from the method it ultimately used tobl the bundle.
The genesis of Plaintiff's breach of act claims stem from several allegations. First,
FinServe posits that the acknowledgrne rs were, in fact, contracts between Fin Serve and
Transamerica. There is no evidence ever to support this cause of action. The second alleged basis
is that FinServe stands in the shoes <\(tl e individual Plaintiffs such that Transamerica's failure to
promptly pay on the 30+/- troubl~~uities constitutes a breach of contract. This basis is also flawed
and cannot support the evide~~eight required for a viable cause of action for several reasons, not the
least of which is that Trans~~ cannot be held contractually liable for failing to providing written
notice to individuals, on ~~nd, when those same individuals have failed to give current contact
information to Transa!Jl~~. nor can Transamerica be held contractually liable for confusing or
inaccurate court ord~ich require a trip to the courthouse to clarify.
TORTCLA~
There were no tort causes of action pied in the case until Plaintiffs' filed their Third Amended
pleading on July 19, 2013. This was four weeks after the court imposed deadline for re-pleading and less
than 4 weeks before the schedule trial date. The defense has filed a motion to strike the Plaintiffs' Third
Amended Petition, which is well taken, particularly after the pattern of discovery abuses employed by the
Plaintiffs in this case.
IT IS, THEREFORE,
ORDERED that Defendants' Traditional and No-evidence Motion for Summary Judgment is
GRANTED. It is further
ORDERED that Defendants' Motion to Strike ~!~~Amended Petition is hereby GRANTED.
It is further
ORDERED that Defendants are entitled to recover court costs and reasonable attorneys' fees in
relation to Defendants' defense of Plaintiffs' declaratory judgment action, pursuant to
Tex.Civ.Prac.&Rem.Code Section 37.00, with the amount of such fees to be detennin~ evidentiary
hearing. ~~
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Signed this J7t'tt day of August, 2013. ~
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