                                                                              United States Court of Appeals
                                                                                       Fifth Circuit
                                                                                    F I L E D
                          UNITED STATES COURT OF APPEALS
                                                                                      June 23, 2003
                                FOR THE FIFTH CIRCUIT
                               _______________________                          Charles R. Fulbruge III
                                                                                        Clerk
                                     No. 02-10940
                               _______________________

                      IN RE: ERSTMARK CAPITAL CORPORATION

                                           Debtor,

                          ------------------------------

                          WILLIAM H. RANDALL; T.A. TORO,

                                                                                Appellants,

                                            versus

                          ERSTMARK CAPITAL CORPORATION,

                                                        Appellee.
________________________________________________________________

           Appeal from the United States District Court
                for the Northern District of Texas
                    Civil Docket 3:01-CV-2524-M
_________________________________________________________________


Before JONES and CLEMENT, Circuit Judges and FELDMAN, District
Judge.*

PER CURIAM:**

              This appeal arises out of an adversary proceeding brought

by Erstmark Capital Corporation (“Erstmark”) against William H.

Randall, Theodore A. Toro, Erstmark Merchant Bankers (“EMB”), and


       *
     District Judge of the Eastern District of Louisiana,
sitting by designation.
       **
         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 R. 47.5, the Court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
Erstmark Mortgage       Corporation    (“Mortgage”).        Erstmark       brought

several claims against Randall and Toro, including claims for

avoidance    of   fraudulent    transfers,    avoidance      of     preferential

transfers, and breach of fiduciary duty.                 The bankruptcy court

entered judgment in favor of Erstmark on its claims.                    The court

awarded Erstmark $1,449,494,83 in damages (including $50,000 in

exemplary    damages)    against   Randall.        The    court    also    awarded

Erstmark    $242,000    in   damages   (including    $50,000       in   exemplary

damages) against Toro.         On appeal, the district court affirmed.

            Randall and Toro incorporated Erstmark.                Toro was the

Chairman of the Board, Secretary, and Treasurer of Erstmark.

Randall was President, Chief Executive Officer, and a director of

Erstmark.     The   bankruptcy     court   found    that    Randall       and   Toro

transferred money from Erstmark to themselves or otherwise used

Erstmark funds to pay their personal obligations.                 The bankruptcy

court rejected Randall’s and Toro’s contention that these transfers

were repayments of loans made by Randall and Toro to Erstmark.

            Specifically, the bankruptcy court found that in the four

years prior to the filing of the bankruptcy petition, Randall had

withdrawn $126,321.97 from Erstmark’s accounts via checks made

payable to cash and another $650,273.32 by counter withdrawals.

Also, the bankruptcy court identified $622,899.54 of Erstmark’s

funds that were used to pay Randall’s personal obligations.                      The




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bankruptcy court also identified $192,000 paid by Erstmark to Toro

that was not supported by any business purpose.

            “Bankruptcy court rulings and decisions are reviewed by

a court of appeals under the same standards employed by the

district    court       hearing   the    appeal   from    bankruptcy   court;

conclusions of law are reviewed de novo, findings of fact are

reviewed for clear error, and mixed questions of fact and law are

reviewed de novo.”        Century Indem. Co. v. NGC Settlement Trust (In

re National Gypsum Co.), 208 F.3d 498, 504 (5th Cir. 2000).             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.”          Walker v. Cadle Co. (In re Walker),

51 F.3d 562, 565 (5th Cir. 1995) (quoting Allison v. Roberts (In re

Allison), 960 F.2d 481, 483 (5th Cir.1992)).             This court must give

"due regard . . . to the opportunity of the [bankruptcy] court to

judge the credibility of the witnesses."             Hibernia Nat’l Bank v.

Perez (In re Perez), 954 F.2d 1026, 1027 (5th Cir. 1992) (quoting

Fed. R. Civ. P. 52(a)).

            The bankruptcy court found that the transfers to Randall

and Toro were avoidable transfers under Tex. Bus. & Com. Code Ann.

§§ 24.005(a)(1), 24.006(a), 24.006(b), and 11 U.S.C. §§ 547-548.

Randall    and   Toro    appeal   the   bankruptcy   court’s    findings   and

conclusions as to each of these bases for recovery.




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          Randall   and   Toro   challenge   the   bankruptcy   court’s

conclusion that the conveyances to them were fraudulent under

section 24.006(a) which provides that

     [a] transfer made . . . by a debtor is fraudulent as to
     a creditor whose claim arose before the transfer was made
     . . . if the debtor made the transfer . . . without
     receiving a reasonably equivalent value in exchange for
     the transfer . . . and the debtor was insolvent at that
     time or the debtor became insolvent as a result of the
     transfer. . .

Tex. Bus. & Com. Code Ann. § 24.006(a) (Vernon 2002).      Randall and

Toro argue that the bankruptcy court erred in finding that Erstmark

was insolvent at the time of the transfers and that Erstmark did

not receive reasonably equivalent value for the transfers.

          Under the Texas Uniform Fraudulent Transfer Act “[a]

debtor is insolvent if the sum of the debtor's debts is greater

than all of the debtor's assets at a fair valuation.”      Tex. Bus. &

Com. Code Ann. § 24.003(a) (Vernon 2002).           The fair value is

determined by “estimating what the debtor’s assets would realize if

sold in a prudent manner in current market conditions.”           Orix

Credit Alliance, Inc. v. Harvey (In re Lamar Haddox Contractor,

Inc.), 40 F.3d 118, 121 (5th Cir. 1994) (quoting Pembroke Dev.

Corp. v. Commonwealth Sav. & Loan Ass’n, 124 B.R. 398, 402 (Bankr.

S.D. Fla. 1991)).   An asset’s fair value may not be equivalent to

its book value on an entity’s balance sheets.      Id.; see also Lawson

v. Ford Motor Co. (In re Roblin Indus., Inc.), 78 F.3d 30, 36 (2d




                                   4
Cir. 1996).     Insolvency is a finding of fact reviewed for clear

error.    Orix Credit Alliance, Inc., 40 F.3d at 120.

            We hold that the bankruptcy court did not clearly err in

finding that Erstmark was insolvent at the time of the transfers.

Randall and Toro argue the bankruptcy court erred because the only

evidence proffered by Erstmark as to its insolvency was Erstmark’s

balance sheets contained in its federal tax returns filed from 1994

forward showing that its liabilities were greater than its assets.

While the balance sheets alone may not be sufficient evidence to

support    an   insolvency    finding,    they    can   provide,    “in    some

circumstances, competent evidence from which inferences about a

debtor’s insolvency may be drawn.”         Lawson, 78 F.3d at 36.

            In this case, the balance sheets indicate that Erstmark’s

liabilities consistently exceeded its assets.           Additionally, Steve

Gummer, Erstmark’s Chief Financial Officer, testified that Erstmark

had been insolvent from 1993 forward.            Gummer also testified that

starting in 1993 Erstmark’s expenses exceeded its revenue and

prevented Erstmark from purchasing new notes which it could then

resell.   Thus, Erstmark’s financial situation became more and more

precarious.     Erstmark also notes that when it filed its Amended

Summary    of   Schedules    with   the   bankruptcy     court,    it     listed

liabilities of $8.2 million and assets of $1.8 million on the

petition date.    Id. at 24-25.     The schedules require that assets be

listed at market value, not book value.            Sleepy Valley, Inc., 93



                                      5
B.R. at 928 n.5.      Based on this evidence, we cannot say that the

bankruptcy   court    clearly     erred    in   finding   that    Erstmark   was

insolvent at the time of the transfers.

            Randall and Toro also argue that the bankruptcy court

erred in refusing to find that the payments made by Erstmark were

repayments of loans they made, and the loans constituted reasonably

equivalent value for the transfers. Specifically, Randall and Toro

argue that they in fact loaned $3.3 million to Erstmark over the

years. A finding regarding reasonably equivalent value is reviewed

for clear error.      Texas Truck Ins. Agency v. Cure (In re Dunham),

110 F.3d 286, 289 (5th Cir. 1997).

            The bankruptcy court did not clearly err on this point.

First, there is no documentation to support the existence of loans

by Randall and Toro to Erstmark.           The written promissory notes to

which appellants point were executed about 1990 with a three-year

maturity date.      At trial, Gummer testified that the transfers to

Randall and Toro were booked in Erstmark’s records to accounts for

loans made by Randall and Toro.            Gummer testified, however, that

while Randall and Toro did provide some funds to Erstmark, the

transfers from Erstmark to them exceeded any amounts they put into

Erstmark.    Finally, Erstmark’s tax returns for 1992-1994 and 1996

indicate there were no outstanding loans from Randall and Toro to

Erstmark.     The    bankruptcy    court    was   entitled   to    credit    this

evidence over that furnished by appellants.



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          Since the bankruptcy court did not clearly err in its

factual findings, its judgment in favor of Erstmark comports with

section 24.006(a). Thus, we need not address appellants’ arguments

regarding the alternative bases upon which the bankruptcy court

entered judgment except for Erstmark’s breach of fiduciary duty

claim, which is the sole basis to support the award of exemplary

damages in favor of Erstmark.

          Randall and Toro argue that the judgment cannot be

sustained based upon Erstmark’s breach of fiduciary duty theory.

They make two arguments.   First, they argue that the transfers of

money to them from Erstmark were repayment for loans they had

previously made to Erstmark.    This argument fails for the reasons

already noted.

          Randall and Toro also argue that many of the challenged

transfers occurred outside the then-applicable two-year statute of

limitations for breach of fiduciary duty.    See Kansas Reinsurance

Co. v. Congressional Mortgage Corp., 20 F.3d 1362, 1374 (5th Cir.

1994) (Texas statute of limitations for breach of fiduciary duty is

two years).   This argument is incorrect.   In 1999, Texas enacted a

statute stating that the statute of limitations for breach of

fiduciary duty is four years.         Tex. Civ. Prac. & Rem. Code

§ 16.004(a)(5) (Vernon 2002). Under Texas law section 16.004(a)(5)

is retroactive.   Rice v. Louis A. Williams & Assocs., 86 S.W.3d

329, 335-36 (Tex. App. – Texarkana 2002, pet. denied).   Therefore,



                                  7
the statute of limitations did not bar recovery for breach of

fiduciary duty based upon the transfers, and it did not err in

awarding exemplary damages.

          For the foregoing reasons, we affirm the judgment in

favor of Erstmark.

          AFFIRMED.




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