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Alfaro v. Reiley

United States District Court, W.D. Texas, San Antonio Division

September 27, 2019

BRIAN K. ALFARO, ALFARO OIL & GAS, LLC, and ALFARO ENERGY, LLC, Appellants,
v.
RICK REILEY, BETTY REILEY, VINCENT GILLETTE, SHARON WALLS, RICK GRIFFEY, THOMAS GILLETTE, DC OIL COMPANY, JAMES BUFORD SALMON, and DAVID DAVALOS, Appellees.

          ORDER

          JASON K. PULLIAM UNITED STATES DISTRICT JUDGE.

         Appellants Brian K. Alfaro, Alfaro Oil and Gas, LLC, and Alfaro Energy, LLC appeal the bankruptcy court's final judgment. The Court AFFIRMS the bankruptcy court's judgment.

         1. Background

         This action was commenced in the 288th District Court for Bexar County on April 24, 2015. On April 28, 2015, the Plaintiffs sought and obtained a temporary restraining order against Brian Alfaro, Primera Energy, LLC, Alfaro Oil and Gas, LLC, and Alfaro Energy, LLC. On June 2, 2015, the state court judge entered a temporary injunction against Defendants Alfaro, Primera, Alfaro O&G, and Alfaro Energy. On June 3, 2015, Primera filed for relief under Title 11 of the U.S. Code commencing Bankruptcy No. 15-51396. On June 19, 2015, Alfaro, Primera, Alfaro O&G, Alfaro Energy, King Minerals, LLC, and Silver Star Resources, LLC removed the state court action to the federal bankruptcy court, commencing Adversary Proceeding No. 15-05047.

         The bankruptcy court conducted a six-day trial, which concluded on April 18, 2017. After presentation of their evidence, Plaintiffs rested and Defendants asked for a directed verdict, asserting that Plaintiffs had not met their burden of proof. The court denied Defendants' oral request for a directed verdict. Thereafter, Defendants rested without offering any controverting evidence or argument. The parties were allowed to submit post-trial briefs.

         On December 29, 2017, the bankruptcy court issued its Memorandum Opinion and Judgment. No. 15-05047-CAG, Dkt. Nos. 369, 370. The court found in favor of the Plaintiffs on five of the ten claims presented at trial, to wit: common law fraud, fraud in the inducement, fraud in the real estate transaction, negligent misrepresentation, Texas Uniform Fraudulent Transfer Act (“TUFTA”). The bankruptcy court's judgment holds Defendants liable for $7, 989, 526.75 in actual damages; awards attorneys' fees, expert witness fees, costs for copies of depositions, and costs of court; and imposes a constructive trust.

         II. Jurisdiction and Standard of Review

         A. Jurisdiction

         This Court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a), which provides district courts with the authority to hear appeals from final judgments and orders of bankruptcy judges. When a district court reviews the decision of a bankruptcy court, the district court “functions as a[n] appellate court, and applies the standard of review generally applied in federal court appeals.” In re Webb, 954 F.2d 1102, 1103-04 (5th Cir. 1992).

         B. Standard of Review

         “A bankruptcy court's findings of fact are subject to review for clear error, and its conclusions of law are reviewed de novo.Saenz v. Gomez (In re Saenz), 899 F.3d 384, 390 (5th Cir. 2018) (citing Gen. Elec. Capital Corp. v. Acosta (In re Acosta), 406 F.3d 367, 372 (5th Cir. 2005); see also In re Morrison, 555 F.3d 473, 480 (5th Cir. 2009) (“Under a clear error standard, this court will reverse ‘only if, on the entire evidence, we are left with the definite and firm conviction that a mistake has been made.'”) (quoting Otto Candies, L.L.C. v. Nippon Kaiji Kyokai Corp., 346 F.3d 530, 533 (5th Cir. 2003)).

         III. Discussion

         The success of Appellants' appeal turns on whether there was sufficient evidence before the bankruptcy court to (1) support judgments for fraud, fraud in the inducement, fraud in a real estate transaction, and negligent misrepresentation; (2) find that Primera paid its employees using a commission-based compensation; (3) find justified reliance in support of fraud findings; (4) find that the representations made by the Appellants to the Appellees were material; and (5) to make fraudulent transfer findings. See Appellant's Brief, ECF No. 6 at 8-9.

         Appellants' failure to comply with the Federal Rules of Appellate Procedure and the Bankruptcy Appellate Panel Rules prevents this Court from reviewing this case.[1] ...


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