United States Court of Appeals

for the Fifth Circuit

No. 19-20841

In the Matter of: 3 Star Properties, L.L.C.

Debtor,

SED Holdings, L.L.C., 

Appellee Cross-Appellant,

versus

TM Property Solutions, L.L.C.; Biltmore Funding, 

L.L.C.; TMPS, L.L.C.; Mark Hyland; Home Servicing, 

L.L.C., 

Appellants Cross-Appellees,

Don St. John; Howard L. Nations, a Professional 

Corporation,

Cross-Appellees.

Appeal from the United States District Court

for the Southern District of Texas

USDC No. 4:17-CV-1655

Before Haynes, Duncan, and Engelhardt, Circuit Judges.

United States Court of Appeals

Fifth Circuit

FILED

July 27, 2021

Lyle W. Cayce

Clerk

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On Petition for Panel Rehearing

Stuart Kyle Duncan, Circuit Judge:

The motion to file out-of-time motions for panel rehearing and to 

recall the mandate is GRANTED. The motions are DENIED. We 

withdraw our previous opinion, reported at 2 F.4th 387, and substitute the 

following:

A federal jury found that 3 Star Properties fraudulently sold SED 

Holdings millions in loans and awarded SED over $14 million in damages.

From that verdict, we must untangle a snarled skein of appeals and 

cross-appeals. We affirm the liability judgment but, concluding the damages 

award was excessive, we remand for remittitur of the award. We vacate a 

separate judgment against Home Servicing for breaching a contract to service 

the loans, and we remand for a new trial on that claim. 

I. Background

A. Facts

In 2014, SED contracted with 3 Star to buy 1,235 non-performing 

residential mortgage loans.1 3 Star made certain representations about the 

loans—that it was their sole owner, that it had the right to sell them, and that 

they would be sold “free and clear”—that were not true. In fact, at the time 

the parties signed the loan sale agreement (“LSA”), 3 Star was a shell 

company that did not own the loans, had no assets, and did not generate 

revenue. Three other companies owned the loans: Biltmore Funding 

1 SED is a North Carolina company. 3 Star is a Nevada company based in North 

Carolina.

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(“Biltmore”); TM Property Solutions2(“TM Property”); and Biltmore 

Funding II (“Biltmore II”), all of which were partly owned and/or managed 

by Mark Hyland. Hyland authorized those entities to sell the loans to 3 Star, 

but only after 3 Star purportedly sold them to SED. Hyland had authorized 3 

Star to market the loans to SED and represent it owned them, despite 

knowing that was untrue. Hyland and James Johnson, 3 Star’s managing 

member, crafted the 3 Star-SED LSA and agreed to split the profits. SED was 

in the dark about all of this.

Under the LSA’s terms, SED bought the loans for nearly $14 million. 

SED would pay $2 million in cash at closing, $2 million about a month later,

and the balance by year’s end. The loan proceeds were to be transferred to 

Mark Dykes, an attorney with Nations Law Firm, who would act as escrow 

agent until SED paid 3 Star in full. The LSA provided that “the parties will 

use Home Servicing . . . to service the loans, as more fully outlined in the 

Collateral Agreement.” The collateral agreement between 3 Star and SED 

provided that SED would “not modify the servicing agreement presently in 

place for the [loans] without written approval of [3 Star].” The referenced 

servicing agreement was a residential special servicing agreement (“RSSA”) 

between Home Servicing and TM Property.

After SED had fronted $4 million, things unraveled. SED discovered 

most of the loans were defective. It tried, unsuccessfully, to “put back”

nearly all the loans under a provision in the LSA.

3 Then it started suing.

2 The parties also refer to an entity named “TMPS.” It is unclear whether TM 

Property Solutions and TMPS are different entities. Hyland testified the two are 

interchangeable, and no party distinguishes them. We also treat them as one and the same. 

3 The LSA outlined the “put back” procedure, providing that within forty-five days of 

closing, SED could notify 3 Star of any loan that (a) was not secured by a valid first 

mortgage, or (b) had an incurable documentary defect. 3 Star would then have forty-five 

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B. Procedural History 

SED first filed suit in a North Carolina state court against 3 Star, 

Johnson, Hyland, TM Property, and Home Servicing, seeking to recover 

damages from the LSA transaction (the “North Carolina suit”). About two 

months later, 3 Star sued SED in a Harris County, Texas state court for 

allegedly breaching the LSA (the “Harris County suit”). Biltmore, TM 

Property, and others intervened in the Harris County suit, moving to 

substitute for 3 Star, asserting superior title to the loans at issue, and bringing 

their own claims against SED. SED counterclaimed against 3 Star, Biltmore, 

and TM Property. Biltmore and TM Property then filed an involuntary

bankruptcy petition against 3 Star. The North Carolina and Harris County 

suits were removed to bankruptcy court and consolidated, but after the

bankruptcy court approved the sale of the Biltmore and TM Property pools 

of loans, the suits proceeded in the Southern District of Texas.

Meanwhile, Biltmore II was in the midst of separate litigation against 

3 Star. Shortly after the North Carolina and Harris County suits were filed, 

Biltmore II sued 3 Star in a Tarrant County, Texas state court (the “Tarrant 

County suit”), seeking a declaratory judgment that it (Biltmore II) held title 

to the 473 loans it sold 3 Star because 3 Star never paid for them. SED 

intervened as a defendant, arguing that it, not Biltmore II, held title to the 473 

loans and seeking a declaration of “clear and negotiable title to [all] the 1,235 

mortgage notes” in the 3 Star-SED LSA. SED and Biltmore II settled before 

trial.4 Biltmore II’s claims against 3 Star, however, proceeded to a bench trial. 

days to cure the defect. If SED put back a loan whose defect 3 Star did not cure during this 

period, 3 Star would owe SED 19.5 percent of the loan’s unpaid balance.

4 As part of the settlement, SED and Biltmore II agreed to “work together and 

cooperate with each other . . . to achieve an outcome whereby” Biltmore II was declared 

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The Tarrant County court held that Biltmore II had clear and negotiable title 

to the 473 loans. In reaching its judgment, the court examined the 3 Star-SED 

LSA, finding that 3 Star made various misrepresentations about the 473 

Biltmore II loans; that 3 Star committed fraud on SED by attempting to sell 

473 loans in which it had no ownership interest; and that the 3 Star-SED LSA 

was therefore void and unenforceable as to the 473 loans.

Back in the Southern District of Texas, the court made a number of 

pre-trial rulings to narrow the scope of SED’s wide-ranging suit. The 

remaining claims were: (1) SED’s fraudulent transfer claims against 

Biltmore, TM Property, Hyland, and 3 Star; (2) SED’s breach of contract 

claim against Home Servicing; (3) SED’s breach of contract and negligence 

claims against Brown & Associates; (4) SED’s conspiracy claims against 

Hyland, TM Property, Biltmore, Brown & Associates, Dykes, 3 Star, and 

Johnson; and (5) Home Servicing’s breach of contract counterclaim against 

SED. Those claims went to a jury, except SED’s claims against 3 Star and 

Johnson, on which the court entered a default judgment for SED.

The jury found for SED on every claim. The final judgment held 3 Star 

and Johnson liable for fraud and Hyland, Dykes, Johnson, 3 Star, TM 

Property, and Biltmore jointly and severally liable for conspiracy to commit 

fraud. It awarded SED a $9,430,000 judgment against Dykes,5Johnson, 3 

Star, TM Property, and Biltmore. The court also held Biltmore, TM 

Property, Hyland, and 3 Star liable for fraudulent transfer of SED’s payments 

to 3 Star totaling $4,372,739; SED was entitled to avoidance of those funds 

and equitable subordination of TM Property’s and Biltmore’s claims. 

“the owner of the [loans] with clear and negotiable title . . . free and clear of any claims by 

or through 3 Star.” The parties would then split the proceeds of the loans, once liquidated.

5 Dykes subsequently filed a notice of partial settlement, pursuant to which Dykes 

agreed to pay SED $425,000.

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Finally, Home Servicing was held liable for breach of the Servicing 

Agreement, for which SED was awarded $300,000. The court subsequently 

denied Home Servicing’s motion for new trial, Dykes and Hyland’s motion 

to alter the judgment, and TM Property’s motion to alter the judgment, as 

well as their joint renewed motion for judgment as a matter of law 

(“JMOL”). That brings us to this appeal.

Hyland, TM Property, and Biltmore (“Hyland Defendants”) appeal 

the district court’s partial denial of their motion to dismiss, various 

evidentiary rulings, the verdict, the final judgment, the equitable 

subordination order, and the district court’s denial of their motions for new 

trial, JMOL, and to alter or amend the judgment. Home Servicing appeals the 

verdict and final judgment against it, as well as the order denying its motion 

for a new trial. SED cross-appeals. It contends primarily that the district 

court should not have dismissed certain claims against the Hyland 

Defendants, Home Servicing, Dykes, and Home Servicing’s chief operating 

officer Don St. John. 

II. Discussion

A. Hyland Defendants’ Claims

1. Res Judicata

As a threshold issue, the Hyland Defendants argue res judicata should 

have barred SED’s claims against them because SED was involved in the 

Tarrant County suit, which already resolved the merits of this case. The 

district court rejected their motion to dismiss based on res judicata, a ruling 

we review de novo. Basic Cap. Mgmt., Inc. v. Dynex Cap., Inc., 976 F.3d 585, 

588 (5th Cir. 2020). “Dismissal under Rule 12(b)(6) may be appropriate 

based on a successful affirmative defense, provided that the affirmative 

defense appears on the face of the complaint.” Ibid. (cleaned up). A court 

may dismiss claims as barred by res judicata if the “bar is apparent from the 

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pleadings and judicially noticed facts.” Kahn v. Ripley, 772 F. App’x 141, 142 

(5th Cir. 2019) (per curiam).

The Tarrant County suit involved an entity not party to this appeal, 

Biltmore II. Biltmore II sued 3 Star, seeking a judgment that Biltmore II held 

title to the loans it sold to 3 Star. Understandably, SED intervened to assert 

that it had “clear and negotiable title” to all the loans in the LSA, including 

those to which Biltmore II laid claim. The court ultimately ruled in favor of 

Biltmore II, along the way holding that 3 Star never owned Biltmore II’s pool 

of loans and thus committed fraud by “selling” them to SED. It also held the 

3 Star-SED LSA void and unenforceable as to the Biltmore II loans. The 

wrinkle is that SED settled with Biltmore II before the court issued its 

decision; the parties agreed that Biltmore II held title to the contested loans 

but that they would divvy up the proceeds of the loans, once liquidated.

The Hyland Defendants urge that the Tarrant County suit precludes

SED from bringing its claims against them here because SED previously

“sought affirmative relief for each and every loan that is at issue in this case 

[and] SED’s claims in Tarrant County were resolved by a final judgment—a 

judgment that SED agreed to.” Applying the federalstandard for res judicata, 

the district court concluded the defense “clearly does not apply.” Under that 

test, a claim is barred by res judicata when: (1) the parties are identical in the 

two actions; (2) the first judgment was rendered by a court of competent 

jurisdiction; (3) there was a final judgment on the merits; and (4) the same 

claim or cause of action was involved in both cases. Retractable Techs., Inc. v. 

Becton Dickinson & Co., 842 F.3d 883, 898 (5th Cir. 2016). The district court 

determined neither the first nor the fourth element was met.

The court used the wrong res judicata standard. Texas law, not federal 

law, applies when a federal court determines the preclusive effect of a Texas 

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judgment. Basic Cap., 976 F.3d at 591.

6 And the Texas standard is articulated 

in a slightly different way, requiring: “(1) a prior final judgment on the merits 

by a court of competent jurisdiction; (2) identity of the parties or those in 

privity with them; and (3) a second action based on the same claims as were 

raised or could have been raised in the first action.” Cox v. Nueces Cnty., 839 

F.3d 418, 421 (5th Cir. 2016) (quoting Amstadt v. U.S. Brass Corp., 919 

S.W.2d 644, 652 (Tex. 1996)). The Hyland Defendants assert that the 

district court erred by requiring them to show the parties were “identical” 

and the claims were the “same.”7 Under either the state or federal standard, 

a privity relationship may satisfy the identity requirement. Ibid.; see also 

Bradley v. Armstrong Rubber Co., 130 F.3d 168, 179 (5th Cir. 1997) (“Parties 

in privity count as identical parties for federal res judicata purposes.”). Under 

Texas law, the claims need not be the same so long as those brought in the 

second action are “based on” those in the first or “could have been raised” 

then. Cox, 839 F.3d at 421. Nevertheless, the district court did not err by 

rejecting the Hyland Defendants’ preclusion argument. The Hyland 

Defendants cannot show that (1) they were in privity with 3 Star and (2) the 

claims here are based on the “same claims” as those that were or could have 

been raised in Tarrant County.

As to privity, the Hyland Defendants first contend SED should be 

bound by its multiple concessions that the Hyland Defendants were in privity 

with 3 Star. In the Harris County suit, SED asserted res judicata to preclude

Biltmore and TM Property from relitigating the issues already decided in 

Tarrant County—that 3 Star had attempted to sell assets it did not own, and 

that the 3 Star-SED LSA was invalid. Thus, the Hyland Defendants say, SED 

6 See also Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 381–83 (1985); 

Matter of Miller, 156 F.3d 598, 601 (5th Cir. 1998) (citing 28 U.S.C. § 1738).

7 The parties do not dispute the first element.

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already admitted that the Hyland Defendants were in privity with 3 Star and 

should be judicially estopped from changing its position. Judicial estoppel 

“protect[s] the integrity of the judicial process by prohibiting parties from 

deliberately changing positions according to the exigencies of the moment.” 

New Hampshire v. Maine, 532 U.S. 742, 749–50 (2001) (cleaned up) (citations 

omitted). The doctrine is guided by several factors, including whether “a 

party’s later position [is] ‘clearly inconsistent’ with its earlier position,” 

“whether the party has succeeded in persuading a court to accept that party’s 

earlier position,” and whether absent estoppel “the party seeking to assert 

an inconsistent position would derive an unfair advantage or impose an unfair 

detriment on the opposing party.” Id. at 750–51 (citations omitted).

We conclude judicial estoppel does not apply. To begin with, the 

Harris County court never accepted SED’s argument that Biltmore and TM 

Property were in privity with 3 Star. And the parties did not rely upon the 

premise that a privy relationship existed, nor did the Harris County court bar

Biltmore and TM Property from proceeding as intervenors in that litigation.

8

Moreover, SED’s position in the Tarrant County suit is not “clearly 

inconsistent” with its position here. See Transclean Corp. v. Jiffy Lube Int’l, 

Inc., 474 F.3d 1298, 1307 (Fed. Cir. 2007) (judicial estoppel precludes a party 

from “revers[ing] course . . . late in the proceedings simply because it now 

realizes its litigation strategy was unsuccessful”). The two lawsuits involved 

8 This case is therefore distinguishable from Transclean Corp. v. Jiffy Lube Int’l, Inc., 

474 F.3d 1298 (Fed. Cir. 2007), on which the Hyland Defendants rely. There, the Federal 

Circuit invoked judicial estoppel to hold Transclean to its concession before the district 

court that its opponent was in privity with a nonparty against whom Transclean had 

obtained a judgment in an earlier lawsuit. The court decided to hold Transclean to its 

concession because to hold otherwise would have been “clearly inconsistent with the 

position [Transclean] advocated before the trial court,” which “[t]he trial court accepted 

. . . and the defendants relied on . . . during both the trial and appellate phases of this 

litigation.” Id. at 1307.

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different parts of the 3 Star-SED transaction. The Tarrant County judgment 

centered on the Biltmore II loans, while the district court here focused on the 

Biltmore and TM Property loans—that is, the loans not at issue in the Tarrant 

County judgment. SED’s “admissions” therefore do not prevent it from 

contesting privity here.

Nor have the Hyland Defendants shown that privity exists. “Texas 

courts have been clear that there is no categorical rule for privity; instead the 

courts look to ‘the circumstances of each case.’” EEOC v. Jefferson Dental 

Clinics, PA, 478 F.3d 690, 694 (5th Cir. 2007) (quoting Getty Oil Co. v. Ins. 

Co. of N. Am., 845 S.W.2d 794, 800 (Tex. 1992)). “There are at least three 

ways in which parties can be in privity under Texas law: (1) ‘they can control 

an action even if they are not parties to it; (2) their interests can be 

represented by a party to the action; or (3) they can be successors in interest, 

deriving their claims through a party to the prior action.’” Id. (quoting 

Amstadt, 919 S.W.2d at 653). The Hyland Defendants essentially contend 

that, throughout, SED and the court treated them and 3 Star as 

“functionally” the same because Mark Hyland controlled all of the Hyland 

Defendants and had some influence over 3 Star. But the principal Fifth 

Circuit case on which they rely, Lubrizol Corp. v. Exxon Corp., 871 F.2d 1279, 

1288 (5th Cir. 1989), involved parties who were related by vicarious liability 

to the party with whom they sought to establish privity. This relationship, we 

said, “form[ed] the only asserted basis” for privity, and “we ma[d]e no broad 

pronouncements about the doctrines of mutuality or privity in this circuit.” 

Id. at 1289. So, we see no basis to conclude that Hyland’s involvement in 3 

Star’s fraudulent dealings somehow created privity between 3 Star and the 

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other entities involved in the fraud.9 Because they have not shown privity, res 

judicata does not apply. Amstadt, 919 S.W.2d at 652. 

Moreover, the Hyland Defendants fail to show the second action was 

based on the “same claims as were raised or could have been raised in the 

first action.” Cox, 839 F.3d at 421 (quotation omitted). Under Texas courts’

transactional approach, “a judgment in an earlier suit ‘precludes a second 

action by the parties and their privies not only on matters actually litigated, 

but also on causes of action . . . which arise out of the same subject matter and 

which might have been litigated in the first suit.’” Harmon v. Dallas Cnty., 

927 F.3d 884, 890 (5th Cir. 2019) (quoting Getty Oil Co., 845 S.W.2d at 798). 

The Hyland Defendants contend that as an intervenor, SED could have

raised its claims in the first suit. Yet res judicata does not bar a defendant in 

one action from later bringing a claim it was not required to bring previously. 

Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203, 207 (Tex. 1999), 

disagreed with on other grounds by In re J.B. Hunt Transp., Inc., 492 S.W.3d 

287, 292 & n. 5 (Tex. 2016). This makes sense. Res judicata “ensure[s] that a 

9 Similarly, the Hyland Defendants argue their alleged status as co-conspirators 

establishes privity for res judicata purposes, but they point to no binding precedent to 

support this proposition. In the lone circuit-court case they cite, Gambocz v. Yelencsics, 468 

F.2d 837, 840–42 (3d Cir. 1972), privity existed when defendants in the second suit were 

alleged coconspirators of those named in the first, “some of whom had been named in the 

original complaint as participating in the conspiracy but had not been named as parties 

defendant at that time.” Even were we inclined to follow it, Gambocz is distinguishable. 

There, “the essential allegations of the second complaint parallel[led] those of the first” 

and “the relationship of the additional parties to the second complaint was so close to 

parties to the first that the second complaint was merely a repetition of the first.” Id. at 

842. But SED’s suit against the Hyland Defendants is not “merely a repetition” of 

Biltmore II’s suit against 3 Star, in which SED intervened, such that the second suit is a 

slight variation on the first. The Hyland Defendants have not shown that they “share [with 

3 Star] an identity of interests in the basic legal right that is the subject of litigation,” as is 

required to establish privity. Amstadt, 919 S.W.2d at 653. At most, 3 Star’s interest in 

asserting ownership over the Biltmore II loans and the Hyland Defendants’ interest in 

asserting they were not involved in any fraud are related but distinct. 

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defendant is not twice vexed for the same acts” and “achieve[s] judicial 

economy by precluding those who have had a fair trial from relitigating 

claims.” Amstadt, 919 S.W.2d at 653. Those purposes are not served by

penalizing a party for not bringing claims it was not required to bring. 

Texas law does not require a defendant to assert a cross-claim against 

a co-defendant “simply because it arises from the same subject matter as 

[the] plaintiff’s claim.” Getty Oil Co., 845 S.W.2d at 800 (emphasis added). 

“Where two parties are aligned in the first action and no issues are drawn 

between them, the judgment in that action does not preclude later claims 

between those parties.” Ibid. SED intervened as a defendant aligned with 3 

Star, in the sense that it did not assert a claim against its co-party. See ibid. It 

therefore is not barred from later bringing a claim against 3 Star (or its 

privies), “unless the claim was compulsory in the earlier action.” IngersollRand Co., 997 S.W.2d at 207. And cross-claims against co-parties are 

permissive under Texas law, not compulsory. TEX. R.CIV. P. 97(e). Because 

SED intervened as a defendant and did not assert a claim against its codefendant, it was not required to assert its fraud claims as cross-claims, even 

if they arose from the same subject matter. See Getty Oil Co., 845 S.W.2d at 

800. In sum, res judicata does not bar SED’s claims and the district court did 

not err by denying the Hyland Defendants’ motion for JMOL on that basis.10

10 Given our ruling on the res judicata issue, we reject the Hyland Defendants’ related 

challenge to the court’s excluding various exhibits, including the Biltmore II-SED 

settlement agreement. The Hyland Defendants contend the court erred because the 

exhibits were relevant to “a controlling issue in the case,” that is, “whether res judicata 

bars SED’s claims.” Because the court correctly rejected the res judicata defense, however, 

the excluded exhibits could not have been relevant evidence and the court did not abuse its 

discretion in excluding them. Tex. R. Evid. 401, 402; see Taylor-Travis v. Jackson State 

Univ., 984 F.3d 1107, 1114 (5th Cir. 2021), cert. docketed, 20-1715 (U.S. June 11, 2021).

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2. Merits

Turning to the merits, we examine the Hyland Defendants’ 

challenges to the denial of their JMOL and new trial motions. They argue the 

district court erred in denying their motions as to SED’s conspiracy and 

fraudulent transfer claims. We review de novo denial of a JMOL motion, 

reversing only if the jury’s factual findings are unsupported by substantial 

evidence or “the legal conclusions implied from the jury’s verdict cannot in 

law be supported by those findings.” Williams v. Manitowoc Cranes, L.L.C., 

898 F.3d 607, 614 (5th Cir. 2018) (citation omitted). We review denial of a

new trial motion for abuse of discretion, Jordan v. Maxfield & Oberton 

Holdings, L.L.C., 977 F.3d 412, 417 (5th Cir. 2020), which we will not find

unless “there [was] an absolute absence of evidence to support the jury’s 

verdict.” Williams, 898 F.3d at 614 (citation omitted).

a. Insufficiency of the Evidence: Fraudulent Transfer Claim

The Hyland Defendants maintain there was insufficient evidence to 

show they were responsible for fraudulent transfer under the Texas Uniform 

Fraudulent Transfer Act (TUFTA). See Tex. Bus. & Com. Code

§ 24.001 et seq. The verdict form asked the jury whether each Hyland 

Defendant “transfer[red] any of the assets listed below with actual intent to 

hinder, delay, or defraud SED.” The “asset[] listed below” was “SED’s 

payments to 3 Star, totaling $4,372,739.” The jury marked “yes” as to each 

Hyland Defendant. On appeal, the Hyland Defendants argue the jury’s 

conclusion was unfounded because SED failed to show the transferred 

money was not subject to a valid lien, which would preclude its recovery 

under TUFTA. We disagree.

Under TUFTA, a creditor may reclaim assets transferred “with 

actual intent to hinder, delay, or defraud any creditor of the debtor.” Tex. 

Bus. & Com. Code § 24.005(a)(1). TUFTA “prevent[s] debtors from 

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defrauding creditors by placing assets beyond their reach.” Challenger 

Gaming Sols., Inc. v. Earp, 402 S.W.3d 290, 293 (Tex. App.—Dallas 2013, no 

pet.). SED claimed the Hyland Defendants fraudulently transferred roughly 

$4 million from 3 Star, rendering it insolvent, in exchange for worthless loans. 

The jury agreed with SED. Now, the Hyland Defendants argue that TUFTA 

does not apply because the money did not constitute an “asset” within the 

meaning of the statute. An “asset” is “property of a debtor” excluding 

“property . . . encumbered by a valid lien,” Tex. Bus. & Com. Code § 

24.002(2)(A), and a “valid lien” is “a lien that is effective against the holder 

of a judicial lien subsequently obtained . . . ,” id. § 24.002(13). The Hyland 

Defendants argue TM Property’s and Biltmore’s sales of their loans to 3 Star

created a security interest in the $4 million SED paid 3 Star. This “lien,”

they claim, meant that the money was not an “asset” and therefore that there 

was no fraudulent transfer. See Retamco Operating, Inc. v. Republic Drilling 

Co., 278 S.W.3d 333, 341 (Tex. 2009) (“Without an asset, no fraudulent 

transfer can occur under the [T]UFTA.”). 

We disagree. A security interest that is “part of [a] fraudulent transfer 

of assets” is “voidable,” that is, not a “valid lien” because it is not “effective 

against the holder of a judicial lien.” Tel. Equip. Network, Inc. v. TA/Westchase 

Place, Ltd., 80 S.W.3d 601, 609 (Tex. App.—Houston [1st Dist.] 2002, no 

pet.). TUFTA’s definition of “transfer” includes the “creation of a lien,” 

which means the creation of a lien may be a “fraudulent transfer.”

§ 24.002(12). That is what happened here. Though the agreements made by

TM Property and the Biltmore entities in combination with the LSA created 

a “lien” for those three entities in 3 Star’s assets (the $4 million paid to it by 

SED), 3 Star was never entitled to that money because it was transferred in 

payment for loans 3 Star never owned. The security interests were therefore

not valid liens but rather instruments of the fraudulent transfer. Accordingly, 

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the district court correctly denied the Hyland Defendants’ renewed JMOL 

as to the fraudulent transfer claim.

b. Insufficiency of the Evidence: Conspiracy Claim

The Hyland Defendants next dispute the sufficiency of the evidence 

to support the conspiracy judgment. Under Texas law, civil conspiracy is not 

an independent tort but rather a “‘derivative’” one that “depends on some 

underlying tort or other illegal act.” Agar Corp. v. Electro Circuits Int’l, LLC, 

580 S.W.3d 136, 141–42 (Tex. 2019) (citations omitted). Civil conspiracy 

requires “(1) two or more persons; (2) an object to be accomplished; (3) a 

meeting of minds on the object or course of action; (4) one or more unlawful, 

overt acts; and (5) damages as the proximate result.” Id. at 141 (citation 

omitted). The damages “come from the underlying act, not the conspiracy 

itself.” Id. at 142. The Hyland Defendants rely on the principle that because 

conspiracy is a “derivative” tort, it “survives or fails alongside” the 

underlying tort. Id. at 141; see also Grant Thornton LLP v. Prospect High Income 

Fund, 314 S.W.3d 913, 931 (Tex. 2020). They contend there was insufficient 

evidence to support the underlying torts and, by extension, the conspiracy.

The court instructed the jury that it had already found 3 Star and 

Johnson liable for fraud and fraud by nondisclosure. Directly below this 

instruction on the verdict form was the question whether any of the 

defendants were “part of a conspiracy that caused the damages to SED 

Holdings.” Accordingly, the Hyland Defendants reason that the tort 

underlying the conspiracy claim must have been either fraud or fraud by 

nondisclosure and that a judgment premised on either tort cannot stand 

because neither is supported by the evidence. We disagree.

As noted, the standard for reviewing the denial of a new trial is 

demanding:reversal requires “an absolute absence of evidence to support the 

jury’s verdict.” Williams, 898 F.3d at 614 (citation omitted). We review 

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verdict forms “‘in the context of the instructions as a whole and the trial 

record,’” “evaluat[ing] the combined effect on the jury.” United States v. 

Fairley, 880 F.3d 198, 208 (5th Cir. 2018) (citation omitted). In light of the 

entire charge, a jury could have understood the referenced “conspiracy” as 

encompassing any of the conduct related to the “fraud perpetrated against 

[SED] by 3 Star . . . and . . . Johnson.” That includes SED’s fraudulent 

transfer claim, which can serve as the underlying tort for conspiracy. See Chu 

v. Hong, 249 S.W.3d 441, 444 (Tex. 2008). The Hyland Defendants cannot 

show the “absolute absence of evidence” to support SED’s conspiracy

claim, see Williams, 898 F.3d at 614, when there is a valid verdict against them 

for fraudulent transfer, see supra Section 2(a). The district court properly 

denied their new trial motion as to the conspiracy claim. 

c. Jury Instructions

The Hyland Defendants’ challenge to the jury instructions is twofold. 

They contend the district court abused its discretion, first, by rejecting their 

proposed instruction and verdict form language on the fraudulent transfer 

claim, and, second, by asking the jury to consider whether each defendant 

transferred the total amount ($4,372,739) rather than asking the jury to 

consider specific transfers. Neither argument is persuasive. 

We “review challenges to jury instructions for abuse of discretion and 

afford the trial court great latitude in the framing and structure of jury 

instructions.” Young v. Bd. of Supervisors, 927 F.3d 898, 904 (5th Cir. 2019) 

(citation omitted). “Verdict forms are considered part of the jury 

instruction,” Fairley, 880 F.3d at 208, and we consider them “in light of the 

entire jury instruction,” Jones v. United States, 527 U.S. 373, 393 (1999) 

(citation omitted). We ask not whether the court gave “every correct 

instruction offered by the parties,” but rather whether it “correctly and 

adequately instruct[ed] the jury as to the law to be followed in deciding the 

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issues.” Alexander v. Conveyors & Dumpers, Inc., 731 F.2d 1221, 1227 (5th Cir. 

1984) (per curiam). “[T]he party challenging the instruction must

demonstrate that the charge as a whole creates substantial and ineradicable 

doubt whether the jury has been properly guided in its deliberations.” Young, 

927 F.3d at 904 (cleaned up) (citation omitted). 

The district court did not commit reversible error in instructing the 

jury on the fraudulent transfer claim. Under TUFTA, a creditor may reclaim 

assets that the debtor transferred with fraudulent intent. Tex. Bus. & 

Com. Code §§ 24.005(a)(1), 24.008(a)(1). TUFTA defines an “asset” as 

“property of a debtor” that is not “encumbered by a valid lien.” 

§ 24.002(2)(A). The jury was instructed that an “asset” means “property of 

a party.” The Hyland Defendants objected to this definition as incomplete. 

Consistent with their argument that the transferred $4 million was not an 

“asset” under TUFTA because the funds were subject to Biltmore’s and 

TM Property’s security interests (which, they argue, were “valid liens”),

they requested the court instruct the jury that “‘asset’ means property of the 

debtor, but the term does not include property that is encumbered by a valid 

lien.” The court rejected the proposed instruction on the ground that a 

security interest is not a “valid lien” under TUFTA because it is not a 

“perfected judicial lien.”11

11 The relevant portion of the hearing transcript reads:

[DEFENSE COUNSEL]: The term [“asset”] does not include 

“property that is encumbered by a valid lien.”

THE COURT: . . . [T]he security agreement . . . is not synonymous 

with a valid lien under the Texas Business and Commerce Code. They’re 

not synonymous. Just because you have a security interest doesn’t mean 

you have a perfected judicial lien. It’s two completely different things. And 

I did not see any evidence of a perfected judicial lien.

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TUFTA defines a “lien” not only as “a judicial lien obtained by legal 

or equitable process or proceedings,” but also as “a security interest created 

by agreement.” Tex. Bus. & Com. Code § 24.002(8). The district court

therefore erred by concluding that a “valid lien” under the statute must be a 

judicial lien, and its rejection of the Hyland Defendants’ proposed 

instruction rested on this error and was therefore an abuse of discretion. 

Heinsohn v. Carabin & Shaw, P.C., 832 F.3d 224, 233 (5th Cir. 2016). 

Nevertheless, the error was harmless. As discussed, the evidence showed the 

security interests in the transferred funds were not “valid liens” as that term 

is statutorily defined. See Tel. Equip. Network, Inc., 80 S.W.3d at 608–09 

(security interest that is “part of [a] fraudulent transfer of assets” is not a 

“valid lien” because it is voidable and thus not “effective against the holder 

of a judicial lien”). No reasonable jury could have found the funds were 

subject to a “valid lien” and therefore not “assets” under TUFTA. 

Accordingly, the failure to give the requested instruction, although an abuse 

of discretion, was harmless. Eastman Chem. Co. v. Plastipure, Inc., 775 F.3d 

230, 240 (5th Cir. 2014). 

The Hyland Defendants’ next challenge also fails. They contend the 

jury was improperly asked whether each of the Hyland Defendants 

transferred the $4,372,739 with fraudulent intent, a question tying each 

defendant to the entire amount rather than asking the jury to evaluate specific 

transfers. In their view, insufficient evidence supported a finding that “each

Hyland Defendant fraudulently transferred or received $4,372,739” because 

such a finding would require SED to prove that each “had legal dominion 

and control over every single dollar of those transfers.” See Newsome v. 

Charter Bank Colonial, 940 S.W.2d 157, 165–66 (Tex. App.—Houston [14th 

Dist.] 1996, writ denied) (defining transferee under TUFTA as “a party who 

has legal dominion or control over the funds”). 

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The Hyland Defendants’ proposed instructions tracked their theory 

of the case—that each transferred or received (at most) certain transfers from 

the escrow account. But SED’s theory was different: it was not that these 

defendants were responsible only for the transfers each received from the 

escrow account, but instead that “the transfer of SED’s $4,000,000 by 

Dykes . . . [from the escrow fund] to [Mark] Hyland’s affiliates” was 

fraudulent. In other words, SED claimed the Hyland Defendants not only

received the funds but also exercised “dominion and control” over the 

escrow account. This was the claim submitted to the jury, and the evidence 

supported its finding. It showed that 3 Star was a shell company and that 

Hyland controlled the details of the LSA and subsequent transactions, 

purported to represent Biltmore and TM Property, and directed the 

distribution of money from the escrow account. In light of this evidence, the 

district court did not abuse its discretion by declining to ask the jury whether 

subsequent transfers out of the escrow account were fraudulent, when those 

transfers were not at issue. It was appropriate to ask the jury to determine

whether the transfer of $4,372,739 intothe account was fraudulent, since that 

was the basis of SED’s claims. See Alexander, 731 F.2d at 1226–27 (“Given 

the evidence presented at trial, the jury instruction was proper.”).12

12 The Hyland Defendants also submit that the court’s equitable subordination 

judgment and its judgments against 3 Star and Johnson should be reversed. We need not 

address those arguments because they depend on our reversing some part of the judgment 

against the Hyland Defendants, which we decline to do. To the extent the Hyland 

Defendants challenge the equitable subordination judgment independent of their other 

challenges to the judgment, that argument is waived for inadequate briefing. Roy v. City of 

Monroe, 950 F.3d 245, 251 (5th Cir. 2020) (“Failure adequately to brief an issue on appeal 

constitutes waiver of that argument.” (citation omitted)). 

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d. Excessiveness of the Verdict

The Hyland Defendants next challenge the jury award of $10.68 

million in compensatory damages and, correspondingly, the court’s denial of 

their motions for JMOL and new trial on that basis. They assert that amount 

is excessive, disproportionate to SED’s injuries, and motivated by “passion 

or prejudice.” We review the denial of new trial or remittitur for abuse of 

discretion. Thomas v. Tex. Dep’t of Crim. Just., 297 F.3d 361, 368 (5th Cir. 

2002). Although only “the strongest of showings” will justify overturning or 

reducing a jury’s damages award for excessiveness, GlobeRanger Corp. v. 

Software AG United States of America, Inc., 836 F.3d 477, 500 (5th Cir. 2016)

(citation omitted), the Hyland Defendants have made that showing here.

Responding to the question of what sum would compensate SED for 

the actual damages it incurred, the jury answered: “$10,650,000.” In its 

post-trial response to the Hyland Defendants’ motion for new trial, SED 

argued the amount was supported by:

These numbers correspond to the amount SED’s counsel requested from the 

jury in closing arguments: $10,679,739.

Three errors render the award excessive. First, the approximately

$10.68 million total appears to be the result of double-counting. SED sought 

to recover the approximately $4 million it paid into the escrow accounts as 

an initial payment for the loans. The second $2 million tranche was part of 

that $4 million. SED does not offer an alternate source for the $2 million 

included in the total award, and indeed acknowledges that if the reward is 

$4,372,739 Amount SED paid in for the loans

$4,000,000 Amount SED expected in return on its investment

$307,000 Amount SED expended in other costs associated with LSA

$2,000,000 SED’s tranche payment

$10,679,739 Total 

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reduced, it is appropriate to subtract “the $2 million that the Hyland Group 

contends is counted twice.” Remittitur is warranted “only if some portion is 

so factually insufficient or so against the great weight and preponderance of 

the evidence as to be manifestly unjust,” Pope v. Moore, 711 S.W.3d 622, 624 

(Tex. 1986). However, “[a] party is not entitled to a double recovery,” Waite 

Hill Servs., Inc. v. World Class Metal Works, Inc., 959 S.W.2d 182, 184 (Tex. 

1998), and SED has offered no other explanation for the amount. The award 

therefore “exceeds the bounds of any reasonable recovery” with respect to 

that $2 million. GlobeRanger, 836 F.3d at 500 (citation omitted). 

Second, the award unreasonably included $4 million in lost profits. In 

Texas, “[r]ecovery for lost profits does not require that the loss be 

susceptible of exact calculation,” but the injured party must show “the 

amount of the loss . . . by competent evidence with reasonable certainty.” 

Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992). The only 

evidence SED identifies to show an anticipated $4 million profit is the 

testimony of its president, Chris Edens. But “[a] party’s bare assertion” of a 

loss “does not establish lost profits with reasonable certainty.” Horizon 

Health Corp. v. Acadia Healthcare Co., Inc., 520 S.W.3d 848, 860 (Tex. 2017). 

Rather, “[a]s a minimum, opinions or estimates of lost profits must be based 

on objective facts, figures, or data from which the amount of lost profits can 

be ascertained.” Heine, 835 S.W.2d at 84. SED points to no objective 

evidence to support the figure. Edens’s “testimony is legally insufficient 

because it does not provide any indication of how [Edens] determined what 

the[] lost profits were.” Id. Therefore the award of $4 million for lost profits

also “exceeds the bounds of any reasonable recovery.” See GlobeRanger, 836 

F.3d at 500; Pope, 711 S.W.2d at 624. 

Third, the award compensated SED for its losses related to all three 

pools of loans it purportedly purchased from 3 Star. But SED had already 

recovered part of its losses when it settled with Biltmore II in Tarrant County

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and received $551,578.17 from the sale of those loans. The Biltmore II-SED 

settlement was not admitted into evidence and thus could not have factored 

into the jury’s decision. However, during trial, the court assured the parties

it would not permit SED to “double dip” on that amount. Nonetheless, the 

court did not offset the jury award accordingly. The Hyland Defendants 

raised the issue of double recovery in their renewed motions for JMOL and 

new trial, thereby preserving it for review. See Jang Won Cho v. Kun Sik Kim, 

572 S.W.3d 783, 805 (Tex. App.—Houston [14th Dist.] 2019, no pet.).

Remittitur in the amount of the Biltmore II-SED settlement is 

appropriate. The district court’s exercise of discretion in denying a motion 

for new trial or remittitur “can be set aside only upon a clear showing of 

abuse.” Eiland v. Westinghouse Elec. Corp., 58 F.3d 176, 183 (5th Cir. 1995). 

“However, when this court is left with the perception that the verdict is 

clearly excessive, deference must be abandoned.” Id. The court’s denial of 

remittitur allowed SED to recover twice for the damages related to the 

Biltmore II pool of loans, and again, SED concedes as much. It is undisputed 

that SED received $551,578.17 from settling with Biltmore II and that the $4 

million SED paid to 3 Star was an initial payment for all of the loans 3 Star 

purported to sell—including the Biltmore II loans. The award was therefore 

“contrary to right reason” because it included a double recovery. See Consol. 

Cos., Inc. v. Lexington Ins. Co., 616 F.3d 422, 435 (5th Cir. 2020) (citation 

omitted). 

Because the “defects in the award are readily identifiable and 

measurable,” remittitur ordinarily would be appropriate. Brunnemann v. 

Terra Int’l, Inc., 975 F.2d 175, 179 (5th Cir. 1992). However, it is unclear 

whether other settlements may need to be taken into account. For instance, 

SED reached a $425,000 settlement agreement with Dykes and concedesthe 

Hyland Defendants are entitled to a credit in that amount. Remand is 

therefore appropriate so that the judgment may be calculated with precision.

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We instruct the district court, however, to subtract at least the following

three identifiable amounts from the jury award: (1) the double-counted $2 

million; (2) the $4 million in lost profits; and (3) the $551,578.17 already 

recovered from the Biltmore II settlement (in total, $6,551,578.17).

B. Home Servicing’s Claims

1. Appeal of the Denial of New Trial

Home Servicing also moved for a new trial and now appeals the 

district court’s denial of that motion. We review for abuse of discretion, 

Jordan, 977 F.3d at 417, and will reverse “only when there is an absolute 

absence of evidence to support the jury’s verdict.” Williams, 898 F.3d at 614 

(citation omitted). When reviewing a jury’s conclusions, “we are bound to 

view the evidence and all reasonable inferences in the light most favorable to 

the jury’s determination.” Rideau v. Parkem Indus. Servs., Inc., 917 F.2d 892, 

897 (5th Cir. 1990). “We are especially deferential to jury verdicts,” Shell 

Offshore, Inc. v. Tesla Offshore, L.L.C., 905 F3d 915, 923 (5th Cir. 2018) 

(cleaned up), and interpret them “most favorabl[y] to upholding the jury’s 

decision by a finding of consistency.” Merritt Hawkins & Assocs., L.L.C. v. 

Gresham, 861 F.3d 143, 154 (5th Cir. 2017) (cleaned up).

The jury found for SED on its claim that Home Servicing breached

“the Servicing Agreement.” But that cannot be, says Home Servicing, 

because the agreement to service the loans—the RSSA—was between Home 

Servicing and TM Property Solutions, not SED. So, Home Servicing urges,

SED cannot recover for breach of a contract it was not party to. This

argument is couched in terms of estoppel; Home Servicing asserts that SED 

has always maintained it was never party to the RSSA and cannot now change 

its tune. We agree with Home Servicing.

SED had good reason to argue it was not party to the RSSA: that 

written agreement contained a jury waiver. SED contends it is not bound by 

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the waiver, however, because it sued Home Servicing for breaching a 

separate agreement between SED and Home Servicing that Home Servicing 

would service the loans. Some testimony suggested that such an agreement 

existed. Witnesses for both sides stated the two parties had a “verbal 

agreement” that Home Servicing would service the loans. But the jury was 

not asked whether Home Servicing breached some nebulous oral agreement. 

It was asked whether “Home Servicing breach[ed] the Servicing Agreement 

with SED Holdings.” And the jury charge identified the “Servicing 

Agreement” to which it referred: “the existing agreement to service SED 

Holding’s (sic) loans under the contract between Home Servicing and TM 

Property Solutions.” Even if that instruction can plausibly be read another 

way—namely, to refer to an “existing agreement” between Home Servicing 

and SED requiring Home Servicing to service the loans as it had done under 

the RSSA—SED has not explained why it should be permitted to hold Home 

Servicing to the terms of the RSSA without itself being bound.

Because no evidence supports the jury’s conclusion that Home 

Servicing breached “the Servicing Agreement with SED Holdings,” a new 

trial is warranted. We therefore vacate the judgment as to SED’s breach of 

contract claim against Home Servicing and remand for a new trial.

13

C. SED’s Cross Appeal Against Nations Law Firm

Finally, we review de novo SED’s cross-appeal challenging the district 

court’s grant of summary judgment in favor of Nations. Renfroe v. Parker, 974 

F.3d 594, 599 (5th Cir. 2020).14 Summary judgment is proper if “there is no 

13 We therefore need not reach Home Servicing’s additional arguments challenging 

various evidentiary rulings by the district court.

14 SED also argues on cross-appeal that the district court improperly dismissed its 

conspiracy claims against Home Servicing and St. John. However, we need not address 

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genuine dispute as to any material fact and the movant is entitled to judgment 

as a matter of law.” Fed. R. Civ. P. 56(a). A genuine dispute exists when, 

construing “all facts and reasonable inferences . . . in favor of the 

nonmovant,” “the evidence is such that a reasonable jury could return a 

verdict for the non-moving party.” Renfroe, 974 F.3d at 599 (citation 

omitted). 

SED asserted claims against Nations based on various alleged 

misdeeds perpetrated by Dykes, the escrow agent for the funds SED paid to 

3 Star pursuant to the LSA. The district court granted summary judgment 

for Nations, reasoning that SED failed to establish Nations’ vicarious liability

for Dykes’s actions. On appeal, SED presses its argument that Nations is 

liable under an apparent liability theory. 

A principal may be liable under the doctrine of apparent authority if it

“knowingly permit[s] an agent to hold himself out as having authority or . . . 

[takes] actions which lack such ordinary care as to clothe an agent with the 

indicia of authority, thus leading a reasonably prudent person to believe that 

the agent has the authority he purports to exercise.” Gaines v. Kelly, 235 

S.W.3d 179, 182 (Tex. 2007) (citation omitted) (cleaned up). To show 

Nations was liable under an apparent authority theory, SED must establish:

(1) “a reasonable belief in the agent’s authority”; (2) “generated by some 

holding out or neglect of the principal”; and (3) “justifiable reliance on the 

authority.” 2616 S. Loop L.L.C. v. Health Source Home Care, Inc., 201 S.W.3d 

349, 356 (Tex. App.—Houston [14th Dist.] 2006, no pet.)). Here, the second 

element is dispositive: “The principal must have affirmatively held out the 

agent as possessing the authority or must have knowingly and voluntarily 

those claims because they are contingent on our reversing the judgment against Home 

Servicing, which we decline to do. 

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permitted the agent to act in an unauthorized manner.” NationsBank, N.A. 

v. Dilling, 922 S.W.2d 950, 953 (Tex. 1996). Even assuming SED reasonably 

believed and justifiably relied on the perception that Dykes acted under the 

law firm’s auspices, it has not shown a material factual dispute that Nations, 

through some act or omission, led SED to believe Dykes acted as its agent.

SED contends that Nations “knowingly permitted Dykes to hold 

himself out as Nations’ agent or employee” because Nations held out Dykes 

as a lawyer working for the firm and allowed him to engage in his own escrow 

practice while working out of its offices and using its equipment, email, and 

letterhead. Despite its knowledge of Dykes’s outside practice, SED asserts, 

Nations never forbade him from “indiscriminately hold[ing] himself out as a 

Nations lawyer.” Yet “apparent authority is limited to the scope of 

responsibility that is apparently authorized.” First Valley Bank of Los Fresnos 

v. Martin, 144 S.W.3d 466, 471 (Tex. 2004). That Nations knew Dykes held 

himself out as a Nations lawyer generally does not “clothe [Dykes] with the 

indicia of authority” as to any work he performed. See Gaines, 235 S.W.3d at 

182. “The relevant issue is not merely the existence of an agency 

relationship, but rather the scope of that agency.” Amerigroup Texas, Inc. v. 

True View Surgery Ctr., L.P., 490 S.W.3d 562, 566 (Tex. Ct. of App.—

Houston [14th Dist.] 2016, no pet.). “The principal’s full knowledge of all 

material facts is essential to establish a claim of apparent authority.” Id.

Though SED maintains that Nations had “complete knowledge of Dykes’ 

escrow practice,” it has established only that Nations knew Dykes was 

engaged in some outside work from his Nations office, not that it knew he 

was engaged in escrow work or that he held himself out as Nations’ agent in 

his relationship with SED and 3 Star. Thus, SED has not shown a fact dispute 

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as to Nations’ “full knowledge of all material facts”15 and the district court 

did not err by granting summary judgment to Nations. 

III. Conclusion

We AFFIRM the district court’s liability judgment as to the Hyland 

Defendants in all respects except the damages award.16 We REMAND for 

REMITTITUR of that award consistent with this opinion. We VACATE

the judgment against Home Servicing and REMAND for a new trial on the

breach of contract claim.

15 See Neubaum v. Buck Glove Co., 302 S.W.3d 912, 919 (Tex. App.—Beaumont 2009, 

pet. denied) (principal’s knowledge that purported agent held himself out as such in one 

matter did not prove principal knew of unrelated instance of similar conduct).

16 The Hyland Defendants urge us to reverse the judgment against 3 Star and Johnson, 

who are not parties to this appeal. We may alter a judgment in favor of a non-appealing 

party only under circumstances not present here. See Cooper v. Tex. Alcoholic Beverage 

Comm’n, 820 F.3d 730, 739 (5th Cir. 2016). We therefore decline to do so.

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