IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 19-50175

WEALTHMARK ADVISORS INCORPORATED; DAVID SHIELDS,

Plaintiffs - Appellants

v.

PHOENIX LIFE INSURANCE COMPANY; PHL VARIABLE INSURANCE 

COMPANY, 

Defendants - Appellees

Appeal from the United States District Court

for the Western District of Texas

USDC No. 5:16-CV-485

Before KING, JONES, and DENNIS, Circuit Judges.

PER CURIAM:*

Appellant Wealthmark Advisors, Inc. (“Wealthmark”) challenges the 

judgment for more than $3 million for its breach of contract with Appellees. 

Having carefully considered the briefs, oral argument and pertinent portions 

of the record, we find no reversible error of fact or law and AFFIRM.

In 2010, Wealthmark entered into an Annuity Distributor Agreement 

(the “Distributor Agreement”) with Phoenix Life Insurance Company

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

February 21, 2020

Lyle W. Cayce

Clerk

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(“Phoenix”) whereby Wealthmark agreed to sell Phoenix annuities in exchange 

for sales commissions. Under the Distributor Agreement, if Phoenix had to 

refund to a policyholder a premium on an annuity that Wealthmark had sold, 

Wealthmark was required to repay to Phoenix the commission on the sale. 

Over the years, Wealthmark and its representatives successfully sold millions 

of dollars in Phoenix products and were paid accordingly. But in 2014, the 

Minnesota Attorney General sued a Wealthmark representative named 

Anthony Friendshuh, alleging Friendshuh had made misrepresentations to 

consumers in connection with his sales of Phoenix annuities. Phoenix’s parent 

company stepped in and settled the case, but not before agreeing to an 

Assurance of Discontinuance that resulted in Phoenix’s providing monetary 

relief on 248 annuities (the “Annuities”). In total, Phoenix returned over $27

million in premiums and interest.

Predictably, Phoenix demanded Wealthmark repay the commissions on 

the Annuities. Wealthmark refused and sued Phoenix in state court for 

negligence, seeking a declaration that the Distributor Agreement did not 

require Wealthmark to return any sales commissions. After removing the case 

to federal court, Phoenix filed a counterclaim against Wealthmark for breach 

of contract, alleging Wealthmark breached the Distributor Agreement by 

failing to repay the commissions. Phoenix then moved for partial summary 

judgment as to liability on Wealthmark’s negligence claim and Phoenix’s 

breach of contract counterclaim. The district court, approving a magistrate 

judge’s report and recommendation, granted Phoenix’s motion, and the case 

proceeded to a bench trial on damages. Wealthmark now appeals the district 

court’s adverse summary judgment as well as two evidentiary rulings made 

during the damages trial. We turn first to the summary judgment.

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We review the granting of a motion for summary judgment de novo, 

applying the same standard as the district court. Tango Transp. v. Healthcare 

Fin. Servs. LLC, 322 F.3d 888, 890 (5th Cir. 2003). Summary judgment is 

appropriate if no genuine dispute of material fact exists, and the moving party 

is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a).

As to Phoenix’s breach of contract claim, we agree with the magistrate 

judge’s careful analysis, as approved by the district court. The court held that

Wealthmark was contractually obliged to return the commissions Wealthmark 

had received on the Annuities because the Annuities were rescinded, and 

Wealthmark breached the Distributor Agreement by not doing so. It is 

undisputed that a Repayment-of-Commissions provision in the Distributor 

Agreement generally required Wealthmark to repay sales commissions “should 

Phoenix for any reason refund or return any amount of any premium payment” 

on an annuity, including when an annuity was rescinded. Nor is it disputed 

that “Footnote (e)” of the compensation schedule—attached to and 

incorporated into the Distributor Agreement—limited that repayment 

obligation when annuities were “surrendered.”1 The parties disagree only as 

to whether the Annuities were, in fact, rescinded (such that the general 

repayment requirement controls and Wealthmark is liable) or surrendered 

(such that the Footnote (e) exception controls and Wealthmark is off the hook).

The district court correctly explained that the Distributor Agreement 

does not define the term “surrender,” but “technical words are to be interpreted 

1 Footnote (e) limited the repayment requirement to fifty percent when annuities were

surrendered more than six months after issuance, and it extinguished the repayment 

requirement when annuities were surrendered more than one year after issuance. The record 

is silent as to whether, assuming the Annuities were surrendered, they were surrendered 

within these six- or twelve-month windows, but Phoenix does not dispute that, if the 

Annuities were surrendered, Wealthmark has no repayment obligation.

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as usually understood by persons in the business to which they relate.” Exxon 

Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 211 (Tex. 2011).2 In 

insurance parlance, “surrender” refers to a policyholder’s cancellation of an 

insurance policy in return for a sum of money, generally referred to as the “cash 

surrender value” of the policy.3 2 COUCH ON INS. § 32:83 (3d ed. 2019); see also 

Value, BLACK’S LAW DICTIONARY (11th ed. 2019) (defining “Cash Surrender 

Value” as “[t]he amount of money payable when an insurance policy having 

cash value . . . is redeemed before maturity or death.”). Rescission is legally 

distinct from surrender. “Upon rescission of a contract, ‘the rights and 

liabilities of the parties are extinguished and they are restored to the relative 

positions which they would have occupied had no such contract ever been 

made.’” Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 855 (Tex. App.—Houston 

[14th Dist.] 2001, pet. denied) (quoting Taylor v. Gill, 211 S.W. 2d 363, 367 

(Tex. Civ. App.—Eastland 1948, no writ.)). Thus, although surrender and 

rescission are conceptually both forms of policy cancellation, a key difference 

is whether the policyholder winds up in the position he was in prior to 

obtaining the policy.

2 Texas law applies because this is a diversity case. Ideal Mut. Ins. Co. v. Last Days 

Evangelical Ass’n, 783 F.2d 1234, 1240 (5th Cir. 1986).

3 As an example, one of the Annuities contained the following Surrender Provision:

You may request a withdrawal of the entire Accumulation Value 

at any time prior to the Contract Maturity Date; this is a 

surrender. Surrenders must be made by written request . . . . 

Surrender Charges, Market Value Adjustments, and taxes will 

be applied, if applicable. . . . The payment you will receive is the 

Cash Surrender Value. The Cash Surrender Value is an amount 

equal to the Accumulation Value, adjusted by any applicable 

Market Value Adjustment, less any applicable Surrender 

Charges and taxes.

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Here, the Annuities were cancelled—in the generic sense of the term—

pursuant to the Assurance of Discontinuance that governed Phoenix’s

settlement with the Minnesota Attorney General. The Assurance of 

Discontinuance created a claims process, described in a section titled 

“Rescission Offer,” that “gave each policyholder whose annuity was still in force 

the opportunity to submit a claim to request that their Phoenix annuity be 

rescinded if they believe[d] they were not fully informed about the terms or 

conditions of the annuity.” In accordance with this process, Phoenix provided 

relief on 248 annuities. Of those, Phoenix returned all premiums plus interest 

on 222 annuities. The remaining Annuities were no longer in force at the time 

the Assurance of Discontinuance was executed, but Phoenix returned “any 

surrender charges or fees” previously “imposed by Phoenix that resulted in the 

Policyholder receiving less than the amount of the premium paid to Phoenix

for the annuity.” In other words, the Annuities were cancelled, and 

policyholders received compensation designed to put them in the position they 

would have occupied had they never purchased a Phoenix annuity. That is

rescission. Wealthmark was therefore obliged to repay the commissions on the 

Annuities and, because it did not, Wealthmark breached the Distributor 

Agreement. Summary judgment was proper on Phoenix’s breach of contract 

claim.

The district court also found Wealthmark’s negligence claim was barred 

by the economic loss rule, which “precludes recovery in tort when the loss 

complained of is the subject matter of a contract between the parties.” Ibe v. 

Jones, 836 F.3d 516, 526 (5th Cir. 2016) (citing Sw. Bell. Tel. Co. v. DeLanney, 

809 S.W.2d 493, 494 (Tex. 1991)). Wealthmark’s briefing on this issue is 

perfunctory. Wealthmark seeks monetary relief for losses it sustained in 

“spending substantial sums to promote the business of Phoenix,” all of which 

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was allegedly “lost . . . due to defendants’ negligence in the way they handled 

the sale of their products.” But Wealthmark’s alleged losses would not have 

occurred had it not agreed in the Distributor Agreement to “promote, market, 

and sell Phoenix products” and to be generally “responsible for all expenses 

incurred” in fulfilling that commitment. Thus, Phoenix’s alleged malfeasance 

would not give rise to liability absent the Distributor Agreement. The 

economic loss rule therefore applies, and summary judgment was proper on 

Wealthmark’s negligence claim.

Now to damages. Because the district court granted summary judgment 

on liability only, the parties tried the issue of damages to the court. 

Wealthmark challenges the court’s admission of summaries of the commissions 

Phoenix paid to Wealthmark (Exhibit D10) and Friendshuh (Exhibit D11). 

“This court applies a ‘deferential abuse of discretion standard’ when reviewing 

a district court’s evidentiary rulings.” Williams v. Manitowoc Cranes, L.L.C., 

898 F.3d 607, 615 (5th Cir. 2018) (quoting Heinsohn v. Carabin & Shaw, P.C., 

832 F.3d 224, 233 (5th Cir. 2016)).

Wealthmark first argues the district court erred in admitting Exhibits 

D10 and D11 because the best evidence of the commissions Phoenix paid was

“in the form of checks and/or EFT records that evidenced the actual payments 

made.” Under Rule 1002, “[a]n original writing, recording, or photograph is 

required in order to prove its content.” FED. R. EVID. 1002. But Exhibits D10 

and D11 were not offered to prove the truth of the factual contents in the checks 

or electronic transfers; they were used to prove up the balance of the 

commissions Wealthmark owed Phoenix. See Dalton v. F.D.I.C., 

987 F.2d 1216, 1223 (5th Cir. 1993). Moreover, the summaries were admitted 

pursuant to Rule 1006 as summaries of voluminous records. See FED. R. EVID.

1006 (“The proponent may use a summary, chart, or calculation to prove the 

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contents of voluminous writings, records, or photographs that cannot be 

conveniently examined in court.”). Even if the summaries were used to prove 

the contents of the “checks and/or EFT records,” Rule 1006 operates as an 

exception to the best evidence rule. CHARLES ALAN WRIGHT & ARTHUR R.

MILLER, FEDERAL PRACTICE & PROCEDURE EVIDENCE § 8043 (3d ed. 2019). 

And while there are limits to the admission of summary evidence under 

Rule 1006, Wealthmark did not challenge Exhibits D10 and D11 on such 

grounds.

Wealthmark also argues the district court erred in admitting Exhibits 

D10 and D11 because they were irrelevant, as “they [were] not, and [could not]

be conclusive in showing the amounts paid on any particular product sold by

Phoenix.” But whether evidence is “conclusive” is not the standard. “Evidence 

is relevant if: (a) it has any tendency to make a fact more or less probable than 

it would be without the evidence; and (b) the fact is of consequence in 

determining the action.” FED. R. EVID. 401. Phoenix’s witness testified that 

Exhibit D10 summarized and totaled the commissions paid to Friendshuh and 

that his debt had been transferred to Wealthmark pursuant to the Distributor 

Agreement. The same witness also testified that Exhibit D11 summarized and 

totaled the commissions paid directly to Wealthmark. Both exhibits, then, had

a tendency to show the amount of commissions Phoenix paid, which was of 

consequence in determining Phoenix’s breach of contract damages. The 

district court did not abuse its discretion in overruling Wealthmark’s objections 

to Exhibits D10 and D11.4

4 Wealthmark submitted written pre-trial objections to Exhibits D10 and D11 that 

stated “OBJECTION: 401, 402, 403, 901, 1006.” At trial, however, Wealthmark only objected 

on best evidence and relevancy grounds. The district court never ruled on Wealthmark’s 

other written objections, and Wealthmark does not discuss them on appeal. Wealthmark’s 

objections on grounds other than the best evidence rule and relevance are therefore waived. 

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For the foregoing reasons, the district court’s summary judgment and 

evidentiary rulings are AFFIRMED.

See Audler v. CBC Innovis Inc., 519 F.3d 239, 255 (5th Cir. 2008) (“A party waives an issue 

if he fails to adequately brief it.”).

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