                 United States Court of Appeals,

                         Fifth Circuit.

                          No. 96-21001.

    David ASKANASE, Trustee;   Fitness Corporation of America,
Plaintiffs-Appellants,

                                v.

                Tom J. FATJO, et al., Defendants,

 Tom J. Fatjo, Jr.; C.A.J.A. Enterprises, Inc.; Bayou Park Club
Partnership, A Texas General Partnership;     Criterion Research,
Inc.; Elstead Investment Co., A Texas General Partnership; Ron
Hemelgarn; Air 500 Ltd.; Beechmont Partnership; Coordinated Spa
Services, Inc.;     Deluxe Office Products;      Fitness Research
International; Great Lakes Leasing Agency; H & C International;
Hemelgarn Racing, Inc.;        Management Computer;      Newtowne
Enterprises, Inc.; Quad Cities Ltd.; Spa One Advertising; Spa
Computer; Spa Janatorial; Spa Lady, Inc.; Spa Printing; Twenty-
First Century;      WHM Enterprises;     Watson Melby Hemelgarn
Partnership; Westchester Spa Partnership; Ernst & Young, formerly
known as Ernst & Whinney; Housprops, Inc., A Texas Corporation;
Houstonian Holdings Partnership, A Texas Partnership; Peter M.
Jackson;   Ahmed Mannai;   Fitness Investment N V, A Netherlands
Antilles Corporation; Fitness Investment (Texas), Inc., A Texas
Corporation; Houstonian Estates Investment Co. N V, A Netherlands
Antilles Corporation; Mannai Investment Company, Inc., C, A
Delaware Corporation;    Xantor, Inc., A Panamanian Corporation;
Parkgate Associated Ltd.; Parkgate, Inc., A Corporation; Roger A.
Ramsey;    John Snideman, doing business as Financial Services
Corporation;     John Snideman, doing business as Management
Accounting, Inc.; Gerald M. H. Stein; Joseph J. Zilber; JZL
Ltd., A Nevada Corporation;       ZL Company, Inc., A Delaware
Corporation; Zilber, Inc.; Zilber Ltd., A Nevada Corporation;
Financial Services Corporation; Management Accounting, Inc.;
Hfund, Inc.;      Corporate Communications Center, Defendants-
Appellees.

           In the Matter of: LIVINGWELL, INC., Debtor.

               David ASKANASE, Trustee, Appellant,

                                v.

                  Tom J. FATJO, Jr., Appellee.

In the Matter of: LIVINGWELL (NORTH), INC.; LivingWell (Midwest),
Inc., Debtors.


                                 1
                    David ASKANASE, Appellant,

                                  v.

                  M W B LEASING, INC., Appellee.

 In the Matter of: LIVINGWELL (MIDWEST), INC.; LivingWell, Inc.,
Debtors.

                  David J. ASKANASE, Appellant,

                                  v.

        TOWNE REALTY, INC.;    Joseph J. Zilber, Appellees.

           In the Matter of: LIVINGWELL, INC., Debtor.

                  David J. ASKANASE, Appellant,

                                  v.

           ZILBER LTD.;     Joseph J. Zilber, Appellees.

                            Dec. 23, 1997.

Appeal from the United States District Court for the Southern
District of Texas.

Before GARWOOD, DUHÉ and DeMOSS, Circuit Judges.

     DUHÉ, Circuit Judge:

      Appellant, the Bankruptcy Trustee of LivingWell, Inc. and

related companies, appeals from a take nothing judgment in favor of

the Defendants, Ernst & Young, LivingWell's auditors, and Tom Fatjo

et al., who are either former directors, officers, or shareholders

of LivingWell, Inc. or separate businesses owned by these officers,

directors, or shareholders.    The fifteen issues asserted on appeal

basically involve five claims.    First, the Trustee argues that he

may recover money LivingWell paid its subsidiaries, officers and

directors, and their related businesses.      He does so under the

trust fund doctrine, which prohibits an insolvent corporation from


                                  2
paying money or distributing assets to its directors in preference

to creditors.     Second, the Trustee sues the directors alleging

misconduct and breach of the duty of loyalty and care and their

fiduciary duty.     Third, the Trustee claims that the directors

fraudulently caused LivingWell to transfer money and assets to

themselves and unlawfully redeemed LivingWell stock.            Fourth, the

Trustee sues the majority shareholder, Ahmed Mannai, for damages on

the basis that Mannai controlled the board of directors through his

two agents and is therefore responsible as a director.               Last, the

Trustee sues Ernst & Young, who audited LivingWell, for breach of

contract, negligence, gross negligence, fraud, and fraud based

conspiracy.    We affirm.

                                      I

     In October of 1983, three Texas limited partnerships, the

Houstonian    Properties,   Ltd.("HPLtd"),        the   Houstonian    Estates,

Ltd.,("HELtd")    and   LivingWell,       Ltd.,   and   one   Texas    general

partnership, Houstonian General Partnership ("HGP") combined to

form the Houstonian, Inc., a Texas Corporation.            The Houstonian's

major assets were:      the Houstonian Properties Hotel, Conference

Center, and Club, the Manor and Ambassador Houses, twenty-nine

condominium units in the Houstonian Estates Condominiums, a 4.8

acre parcel of land adjacent to the Club and Condominium, the

Houstonian Preventive Medicine Center and its exclusive rights to

market, develop, and sell the LivingWell Programs and related

operating assets.       In exchange for these assets HPLtd received

Houstonian Inc. common stock;     HGP received common stock which it


                                      3
distributed to HELtd;     LivingWell received common stock.              In 1985,

the Houstonian was merged into LivingWell.1

     In   1984,   LivingWell    purchased      82    fitness     clubs    in   the

southeastern United States for over $10 million cash, shares of its

common stock, and an agreement that, if, over the next five years,

the clubs achieved certain earnings goals, then the sellers would

receive additional consideration up to $10 million (50% in cash and

50% in value of common stock).      Ron Hemelgarn, one of the principal

shareholders of the seller, became a LivingWell director.

     In   March   of   1985,   LivingWell     acquired    over    200    fitness

facilities nationwide for $15.5 million cash, 1,774,750 shares of

LivingWell common stock and 68,572 shares of LivingWell's Series C

Convertible   Preferred    Stock.        As   an    additional    part    of   the

transaction, LivingWell could issue up to 750,000 shares of common

stock over the next five years if one of the acquired groups

reached specified earnings levels.

     On March 29, 1985, Zibler, Ltd., purchased 50,000 shares of

LivingWell's Series D Convertible Preferred Stock for $5 million.

Zibler, Ltd., loaned an additional $10 million to LivingWell and

Zibler had the option to acquire warrants to purchase 3,233,790

shares of common stock at prices of $4 to $8 per share.

A. Source of Capital

     In September of 1985, LivingWell sold $16.1 million of 12%

convertible, subordinated debentures.              Net proceeds were used to


      1
      "LivingWell" will refer to the Houstonian both before and
after the merger.

                                     4
pay existing debt and increase capital.                     Through 1985 and into

1986, LivingWell successfully converted preferred stock into common

stock thereby raising additional funds in the public markets.                      In

May 1986, LivingWell sold $52 million of subordinated debentures

and warrants.       Of the nearly $51 million in net proceeds, $40.15

million was used to retire outstanding debts.

B. Relevant Transactions

1. PAC

     In    June    1986,    LivingWell      and    certain     of   its   individual

shareholders      created    a   separate        financing    company,     Paramount

Acceptance Corporation ("PAC"), a Delaware corporation, to collect

LivingWell's receivables.         PAC had its own officers and directors.

Prior to PAC's creation, LivingWell collected its receivables (club

and membership fees and dues) through its regional subsidiaries (LW

North, LW South, and LW Midwest).

2. Sale of Clubs

     During 1986, LivingWell sold 41 clubs to Powercise, Inc., a

corporation       formed    by   some    LivingWell         employees.        Shortly

thereafter,       T.H.E.   Fitness      Centers,     Inc.,     an   outside    group,

acquired other of LivingWell's small clubs.                  As part of the deal,

T.H.E.    received    rights     to   the       Powercise    technology    owned   by

LivingWell and LivingWell received equivalent stock in T.H.E.

3. Hfund Transaction

     When the Houstonian Hotel and Conference Center experienced

financial difficulty that threatened foreclosure, a new entity,

called Hfund, Inc., was created. LivingWell exchanged its interest


                                            5
in the Houstonian fitness operations for preferred stock in the

newly formed Hfund, Inc., a Delaware corporation.            Pursuant to the

exchange, additional cash was made available to the mortgage holder

thereby avoiding foreclosure.

4. Bankruptcy Filing

        When the prospect of bankruptcy became apparent LivingWell

attempted to restructure its organization.              LivingWell continued

its operations and in 1988 generated $136 million in revenues.

From 1988 through most of 1989, LivingWell attempted to restructure

its debt.       In the meantime, Powercise, T.H.E., and Hfund failed.

LivingWell then filed for bankruptcy protection in late 1989.2             In

October 1990, LivingWell ceased to operate and converted from a

chapter 11 to a chapter 7 filing.           David Askanase was appointed

Trustee for LivingWell and FCA3, a wholly owned subsidiary of

LivingWell.

        The Trustee sued most of LivingWell's directors, certain

officers and control persons, LivingWell's auditors, Ernst & Young,

and certain related parties.             The Trustee sought damages and

recovery of sums paid to the directors and their businesses during

periods    of    alleged   insolvency.      He   also   claimed:    1)   that

LivingWell and its subsidiaries had made fraudulent transfers to

directors and their businesses for less than fair value;             2) that


    2
     LivingWell and its three wholly-owned subsidiaries, LW North,
LW South, LW Midwest, filed for bankruptcy.
    3
     Although FCA (Fitness Corporation of America) never filed for
bankruptcy, the Trustee brings claims on behalf of FCA. His
authority to do so is neither explained nor questioned.

                                     6
the defendant directors and officers had breached their duties of

due care and loyalty as well as their fiduciary duty;                3) that

there was a fraud based conspiracy;                4) breach of contract,

negligence, fraud and fraud based conspiracy against Ernst & Young;

5) that the directors and Ahmed Mannai, a large shareholder, had

unlawfully redeemed stock.       When LivingWell became insolvent was

central to the determination of certain claims so the district

court bifurcated    the     trial.    In   Phase    One,   which   determined

solvency, the court granted LivingWell's Rule 50(a) motion for a

judgment as a matter of law finding that LivingWell was not

insolvent before December 31, 1986.          The question of insolvency

thereafter was submitted to the jury, and it found that LivingWell

was continuously insolvent from December 31, 1986 until it filed

for bankruptcy in 1989.      Because the Trustee failed to submit the

issue of the LivingWell subsidiaries' solvency to the jury and no

jury finding was made, the district court deemed those claims

waived   and   determined     that   subsidiaries     were   solvent    until

bankruptcy was filed.       Based on the jury verdict and the court's

finding that the subsidiaries were not insolvent until filing, the

Appellees filed a series of motions for summary judgment which the

trial court granted.      Thus, this appeal results from the district

court's rulings during the insolvency trial and its rulings on

defendants' motions made after the jury finding.

                                     II

     We turn first to the claims dismissed by summary judgment

based on limitations.


                                      7
A. Standard of Review

        Summary judgment is reviewed de novo and the evidence is

viewed in the light most favorable to the motion's opponent.

Gremillion v. Gulf Coast Catering Co., 904 F.2d 290, 292 (5th

Cir.1990)   Summary     judgment    is       inappropriate      when    conflicting

inferences and interpretations may be drawn from the evidence.

James v. Sadler, 909 F.2d 834, 836-37 (5th Cir.1990).

B. Limitations

     The trial court found that limitations barred the Trustee's

trust fund claims, the director misconduct claims, the fraudulent

transfers claim, and the negligence claims against Ernst & Young.

The Trustee argues that the district court erred because either the

court    misconstrued      the    applicable       law     of    limitations     or

alternatively did not toll the period.

1. Trust fund claims

        The Trustee sued LivingWell's directors on the basis of the

trust fund theory of Texas law claiming that the directors breached

their fiduciary duty to LivingWell when they caused LivingWell and

its subsidiaries      to   make    certain      payments   to    them    and   their

businesses.    The Trustee contends that the district court erred in

granting summary judgment against all trust fund claims arising

before October 27, 19874 because it applied a two year period of

limitations.    Incredibly, the Trustee argues that in Texas a four

year statute of limitations applies because four years is the

    4
     LivingWell filed for bankruptcy October 27, 1989; therefore
a two year statute of limitations would bar all claims arising
before October 27, 1987.

                                         8
limitations   period   for   the   recovery    of   monies    paid   to   a

director/officer-trustee based on a breach of fiduciary duty. Peek

v. Berry, 143 Tex. 294, 184 S.W.2d 272, 275 (1944).          Additionally,

Appellant contends that the four year limit should apply because

that is the limit for a breach of fiduciary duty claim which

subsumes a constructive fraud claim. Spangler v. Jones, 797 S.W.2d

125, 132 (Tex.App.—Dallas 1990, writ denied).

     The district court was correct.          The applicable period of

limitations is two years.    Appellant relies heavily on Spangler v.

Jones, 797 S.W.2d 125 (Tex.App.—Dallas 1990, writ denied) and our

cases that follow its reasoning.       See e.g., Sheet Metal Workers

Local No. 54 v. E.F. Etie Sheet Metal Co., 1 F.3d 1464, 1469 (5th

Cir.1993), cert. denied, 510 U.S. 1117, 114 S.Ct. 1067, 127 L.Ed.2d

386 (1994).   However, we rejected the reasoning of Spangler and our

cases that followed it in Kansa Reinsurance v. Congressional Mortg.

Corp., 20 F.3d 1362, 1374 (5th Cir.1994):

          [I]n Williams [v. Khalaf, 802 S.W.2d 651 (Tex.1990) ],
     Texas' highest court expressly stated that: "... In general,
     torts developed from the common law action for "trespass', and
     a tort not expressly covered by a limitation provision nor
     expressly held by this court to be governed by a different
     provision would presumptively be a "trespass' for limitations
     purposes. The same common law development simply does not
     apply to fraud as to most other torts."      [Id.] at 654-55.
     Breach of fiduciary duty is clearly a "tort" under Texas law
     and thus, would appear to fall within this reasoning.
     Moreover, the Texas Supreme Court declined to overrule prior
     decisions setting forth a two-year statute of limitations for
     certain similar tort claims, such as legal malpractice and
     breach of the duty of good faith and fair dealing, which had
     been raised as analogies for employing the two-year statute of
     limitations for fraud. Williams, 802 S.W.2d at 654 n. 2. For
     these reasons, we do not find persuasive the reasoning in
     Spangler that Williams dictates the application of the
     four-year statute of limitations for fiduciary duty claims and
     decline to follow the opinions of this court which rely upon

                                   9
       Spangler.

Moreover, Smith v. Chapman, 897 S.W.2d 399 (Tex.App.-Eastland 1995)

held that the trust fund theory puts directors in a fiduciary

relationship to the creditors.        Id. at 402.     A breach of that duty

gives rise to the cause of action and is subject to a two year

statute of limitations.        Id. Thus, the statute of limitations for

the trust fund claim is two years.

       The Trustee further argues that even if the applicable period

is two years, limitations is tolled because the discovery rule

applies. The discovery rule, which applies to both the act and the

injury, requires that a claim be (a) inherently undiscoverable and

(b)    objectively    verifiable.      S.V.    v.   R.V.,    933   S.W.2d   1,6

(Tex.1996).    Moreover, the Trustee contends, even if the discovery

rule    does   not    apply,   the   adverse    domination     theory   tolls

limitations.       For this tolling principle to apply, the interested

directors must constitute a majority of the board of directors,

FDIC v. Henderson, 61 F.3d 421, 428 (5th Cir.1995), and the Trustee

must show intentional misconduct by the directors.              RTC v. Acton,

49 F.3d 1086, 1091 (5th Cir.1995).

        Neither the discovery rule nor the adverse domination theory

tolls limitations in this case.           The discovery rule assumes that

the wrongful act is inherently undiscoverable.              S.V. v. R.V., 933

S.W.2d at 6. This assumption is in direct conflict with the general

rule that courts are to impute an officer/director's knowledge to

the corporation.      See FDIC v. Ernst & Young, 967 F.2d 166, 170 (5th

Cir.1992)(imputing a bank officer's knowledge to the bank).             Texas


                                     10
law applies the imputation principle to determine when the statute

of limitations begins to run on a corporation's claim.              FDIC v.

Shrader & York, 991 F.2d 216, 222 (5th Cir.1993), cert. denied, 512

U.S. 1219, 114 S.Ct. 2704, 129 L.Ed.2d 832 (1994).             Courts will

impute knowledge to the corporation as long as the officer/director

is acting on the corporation's behalf.     FDIC v. Ernst & Young, 967

F.2d at 171.      As this sentence implies and as the Appellees

acknowledge there is an exception to imputation.         If the plaintiff

can show that the officer/director was acting adversely to the

corporation and entirely for his own or another's purpose, then

limitations will be tolled.    FDIC v. Shrader & York, 991 F.2d at

223-24.    The   officer/director,    though,    must   act   so   that   his

endeavors are so incompatible that they destroy the agency.               Id.

Appellant has made no showing that the Appellees acted entirely for

their own purpose.    Appellant argues that the Appellees breached

their fiduciary duty by unlawfully preferring themselves; however,

while there is some evidence that the corporation overpaid for some

transactions, we agree with the district court that this evidence

does not raise a material fact issue that the Appellees acted

entirely for their own purposes.

      Nor does the adverse domination exception toll the statute.

Assuming that the interested directors are a majority, the Trustee

must also prove intentional misconduct.         RTC v. Acton, 49 F.3d at

1090-91.   In Acton, this Court held that mere negligence was

insufficient to trigger adverse domination.         Id. There had to be

active participation in wrongdoing.       In FDIC v. Dawson, 4 F.3d


                                 11
1303, 1312 (5th Cir.1993), cert. denied, 512 U.S. 1205, 114 S.Ct.

2673, 129 L.Ed.2d 809, this Court implied that breach of fiduciary

duty was not sufficient to trigger adverse domination:

     "We do not believe that Texas courts would extend the "very
     narrow doctrine', Shrader & York, 991 F.2d at 227, of adverse
     domination to cases in which the wrongdoing by a majority of
     the board amounts to mere negligence.        To do so would
     effectively eliminate the statute of limitations in all cases
     involving a corporation's claims against its directors."

There must be active participation in wrongdoing or fraud.                       Id.

Even gross negligence is not enough.                  RTC v. Acton, 49 F.3d at

1091.         Moreover,     in   RTC   v.   Bright,      872   F.Supp.   1551,   1565

(N.D.Tex.1995), the court found that breach of fiduciary duty does

not satisfy Dawson 's active fraud requirement.                     As the district

court explained, under Texas law, breach of fiduciary duty is

constructive        fraud    by    virtue    of    the     breach   itself.      Id.

Constructive fraud does not require active participation because a

duty may be breached through mere negligence. Here, as the Trustee

alleges in his Second Amended Complaint, he seeks to recover all

preferential payments made to Appellees "regardless of whether the

payment was for a lawful purpose or [a] permissible debt owing by

the Company to the director."                    Such a claim does not allege

intentional wrongdoing.

     We affirm the district court's grant of summary judgment

against all trust fund claims that arose before October 27, 1987.5

2. Director misconduct claims

            Again, the Trustee contends that the district court erred in

        5
      We address the remaining trust fund claims in section III C
hereof.

                                            12
granting    summary   judgment    based    on    a    two    year   statute    of

limitations.     He argues that the misconduct was a breach of

fiduciary duty and intentional wrongdoing which entitled him to a

four year limitations period.        For the reasons stated above, we

disagree.

     In response to the claim of intentional misconduct, the

Appellees argue that the Trustee did not allege fraud in Count I

(corporate waste, mismanagement, negligence, gross negligence, and

breach of fiduciary duty of officers and directors) of the First

Amended Complaint.    Nor did the Trustee add any new allegations in

the Second Amended Complaint. In fact, in the Plaintiff's Response

and Opposition to Defendant's Rule 9, 12(e), and 12(b) Motions to

Dismiss, Appellant     stated    that    "five   of    the   six    claims    that

collectively comprise Count I are not even arguably fraud based."

While Appellant acknowledged that breach of fiduciary duty is

constructive fraud, he argued vociferously that constructive fraud

is not actual fraud and thus, his claim is not fraud based.                   The

Trustee stated in his Response:

     As they did in their original motion to dismiss, the
     defendants further devote a considerable portion of their
     efforts to the proposition that fraud pleadings must
     sufficiently specify which defendants committed which
     fraudulent acts ... This proposition remains undoubtedly true
     and especially so in cases alleging common law fraud,
     securities fraud, and/or RICO violations, all of which are
     subject to Rule 9(b)'s heightened pleading requirements. This
     case, however, invokes none of those types of claims.
     (emphasis in the original)

     The Trustee contends in this Court that his response in the

district court to the First Amended Complaint cannot be used

against him because he made new allegations of fraud in the

                                    13
Supplemental Complaint.       He contends that he clearly stated that

Appellees    joined   Ernst   &   Young    in   a   fraud-based       conspiracy;

therefore, the period of limitations is four years.              This argument

ignores, however, the fact that the conspiracy claim was brought

against Ernst & Young only.          The Trustee brought no new claims

against the LivingWell directors.          We affirm the district court's

finding that the period of limitations is two years.

       The   Trustee   again      argues   that     even   if   the    period   of

limitations is two years, the adverse domination theory tolls the

statute.     For the reasons stated in section 1 above, adverse

domination does not toll the statute.               Therefore, we affirm the

trial court's finding that the director misconduct claims that

arose before October 27, 1987 are time barred.

3. Fraudulent transfers

     Both Appellant and Appellee agree that the limitations period

for fraudulent transfers is four years and that no claim after

October 27, 1985 is barred.        The Trustee claims, however, that the

claims before October 27, 1985 are not barred because the discovery

rule applies.    Additionally, the Trustee argues that the district

court erred by ruling that the adverse domination theory did not

apply because the Trustee could not show that the directors were

active participants in wrongdoing.          For the reasons discussed in

section 1 above, we affirm the district court's ruling that all

fraudulent transfer claims arising before October 27, 1985 are

barred.

      We also affirm the district court's finding that limitations


                                      14
had run on all of FCA's6 transfers made before October 25, 1987.7

All issues not briefed are waived.       Villanueva v. CNA Ins. Co., 868

F.2d 684, 687 n. 5 (5th Cir.1989);       Cinel v. Connick, 15 F.3d 1338,

1345 (5th Cir.1994).        Here, the Appellant does not contest this

finding in his brief.

4. Negligence claim against Ernst & Young

            The statute of limitations for negligence in Texas is two

years from the time the tort was committed.       TEX. CIV. & REM. CODE

§ 16.003(a) (Vernon 1994);       Kansa, 20 F.3d at 1372.   Here, Ernst &

Young completed its allegedly negligent audit opinion March 31,

1987, and LivingWell did not file for bankruptcy until October 27,

1989;       therefore the claim was already time barred at the time of

bankruptcy. Thus, unless the Trustee can show that the statute was

tolled, the negligence claim against Ernst & Young is time barred.

     The Trustee argues that the discovery rule tolls the statute

of limitations and that the directors were unaware of the allegedly

negligent audit;       however, this argument is specious.   The Trustee

contradicts himself in his own brief.       He argues that the directors

had knowledge of the allegedly negligent audit and intended that

the audit be inaccurate when he argues the fraud and conspiracy

claims against Ernst & Young. When he argues the negligence claim,

however, the Trustee asks this Court to disregard his claims of

            6
        FCA, Fitness Corporation of America, is a wholly owned
subsidiary of LivingWell. The Trustee filed its suit against the
Appellees on behalf of LivingWell and FCA.
        7
      FCA never filed for bankruptcy; however, the Trustee filed
this suit on FAC's behalf October 25, 1991. Thus, the four year
statute bars all claim arising before October 25, 1987.

                                    15
knowledge and intent.         He cannot have it both ways.               If the

directors had the requisite knowledge and intent for the fraud and

conspiracy    claims,   then     that    knowledge       is   imputed   to   the

corporation    unless   the    Appellant     makes   a   showing   of   adverse

interest.     See FDIC v. Shrader & York, 991 F.2d at 223-24.                 As

previously noted, Appellant has made no showing that the directors

acted entirely for their own interest and against the interests of

the corporation; therefore, Appellant has failed to make a showing

of adverse interest.

     In the alternative, the Trustee argues that Ernst & Young

fraudulently concealed its wrongdoing and that the LivingWell

directors conspired with Ernst & Young to conceal their misconduct.

Again, this argument is contradictory.           Either the directors knew

or they did not know of the allegedly bad audit.              If the directors

knew, then the knowledge is imputed to the corporation.                 See FDIC

v. Shrader & York, 991 F.2d at 223-24.

      Moreover, even if the directors were unaware that the audit

was performed negligently, the discovery rule would still not

apply. As stated earlier, the discovery rule requires (a) inherent

undiscoverability and (b) objectively verifiable evidence. S.V. v.

R.V., 933 S.W.2d at 6. Objectively verifiable evidence is the key

factor for determining the discovery rule's applicability. Id. The

Trustee states that he has a "plethora of contemporaneous records"

verifying Ernst & Young's misconduct, but the only evidence of

these records is a cite to the record that does not exist.

Trustee's Reply Brief p. 43-44, citing R. 58/15791.


                                        16
      Finally, in the face of directly contrary authority, the

Trustee claims that the statute is tolled by the doctrines of

repeated reassurance and continuous representation.           The Trustee

contends   that   the   Texas    Supreme   Court   adopted   the   rule   of

continuous representation in Hughes v. Mahaney & Higgins, 821

S.W.2d 154, 157 (Tex.1991), Gulf Coast Inv. Corp. v. Brown, 821

S.W.2d 159, 160 (Tex.1991), and Rowntree v. Hunsucker, 833 S.W.2d

103, 104-08 (Tex.1992);     however, the Trustee is incorrect in his

understanding of these cases.       Hughes and Gulf Coast stand for the

proposition that when an attorney commits malpractice, the statute

of limitations is tolled on the malpractice claim until all appeals

on the underlying claim are exhausted.       Hughes, 821 S.W.2d at 157;

Gulf Coast Inv. Corp., 821 S.W.2d at 160.          Rowntree is a medical

malpractice case that decides when a continuing course of treatment

ended for tolling purposes.       Rowntree, 833 S.W.2d at 106-08.

     Not only does Appellant incorrectly interpret the above cases,

but the Texas Supreme Court in Willis v. Maverick, 760 S.W.2d 642

(Tex.1988) held that the continuous representation doctrine does

not apply in Texas.     There, the court held that the discovery rule

was more in line with previous Texas cases and better balanced the

policies underlying the statute of limitations.         Id. at 645 n. 2.

Therefore,   we   affirm   the   district   court's   holding      that   the

Trustee's negligence claim against Ernst & Young is barred.

                                    III

     We review now claims not disposed of by limitations.

A. Standard of Review


                                    17
            As before, claims decided on summary judgment are reviewed de

novo.        Decisions to admit or exclude evidence are reviewed for

abuse of discretion.             Kelly v. Boeing Petroleum Services, Inc., 61

F.3d 350, 356 (5th Cir.1995).                   Findings on choice of law, the

definition of insolvency, the applicability of the trust fund

doctrine, the motions to strike, the Rule 49(a), Rule 50(a), Rule

12(b)(6) and Rule 9(b) motions to dismiss are also reviewed de

novo.        Pullman-Standard v. Swint, 456 U.S. 273, 287, 102 S.Ct.

1781, 1789, 72 L.Ed.2d 66 (1982);                   Joslyn Mfg. Co. v. Koppers Co.,

40 F.3d 750, 753 (5th Cir.1994);                    Little v. Liquid Air Corp., 37

F.3d 1069 (5th Cir.1994) (en banc );                   Conkling v. Turner, 18 F.3d

1285 (5th Cir.1994).             Admissibility of expert witness testimony is

reviewed for manifest error.                    Christophersen v. Allied Signal

Corp., 939 F.2d 1106, 1109-10 (5th Cir.1991) (en banc ).

B. Insolvency on a Consolidated Basis

            Following the trial on insolvency, the Appellees moved for

summary judgment on the fraudulent conveyance and trust fund claims

asserted        against    the       subsidiaries.        The   Trustee    argued     that

LivingWell and its subsidiaries were a single business enterprise,

and the jury's finding that LivingWell was insolvent as of December

31, 1986 was the same as finding LivingWell and the subsidiaries

insolvent        as   a   single       business      enterprise.8        The   Appellees

countered        by   filing     a    Rule   49(a)    motion     requesting    that    the

district        court     find       that    LivingWell    and     its    wholly    owned


        8
      We do not address the single business enterprise theory for
reasons explained below.

                                               18
subsidiaries were not insolvent on a consolidated basis at any time

before October 27, 1989.        Under Rule 49(a), if the court requires

the jury to return only a special verdict in the form of a special

written finding upon each issue of fact and the verdict omits any

issue of fact raised by the pleadings or evidence, then each party

waives the right to a jury determination of the omitted issue.               The

court is then free to supply the finding on the issue.                   FED. R.

CIV. P. 49(a).

        The district court granted both the summary judgment motions

and the Rule 49(a) motion.           In granting summary judgment, the

district court stated that Appellant had failed to raise his single

business enterprise theory during the insolvency trial.              Appellant

had, instead, treated the subsidiaries as separate from LivingWell.

The court held that the evidence, therefore, failed to establish

the subsidiaries' insolvency and so found the subsidiaries solvent

at all relevant times.         Because they were solvent at all relevant

times   and   because    the    record    indicated    that   the   businesses

maintained separate books, the court found the single business

enterprise theory inapplicable.           Thus, the court granted summary

judgment   for   all    preference   and       fraudulent   conveyance    claims

against the LivingWell subsidiaries.             While it is unclear why the

district court granted both the motion for summary judgment and the

Rule 49(a) finding, we hold that the district court did not err in

making the Rule 49(a) finding.                Having made that finding, the

Trustee's single business enterprise theory is deprived of a

factual basis upon which to stand, and we do not address it.


                                         19
      Appellant correctly states that a Rule 49(a) finding cannot

be inconsistent with the jury verdict. McDaniel v. Anheuser-Busch,

Inc., 987 F.2d 298, 306-307 (5th Cir.1993).          The Appellant argues

that the Rule 49(a) finding is inconsistent because, since the jury

found LivingWell insolvent, then by definition LivingWell on a

consolidated basis was insolvent.          In support, the Trustee points

out that LivingWell's assets included the stock of its three wholly

owned subsidiaries:        LW North, LW South, and LW Midwest.               In

calculating the effect of the subsidiaries' stock on LivingWell's

worth, the Trustee argues that the subsidiaries assets have a

positive value when their fair market value exceed liabilities and

a zero value when liabilities exceed assets.            Thus, LivingWell's

balance sheet solvency necessarily determines the solvency of its

subsidiaries.

     We   reject   the   Trustee's    arguments.      The    finding   is   not

inconsistent with the verdict.         As the Appellees point out, the

Trustee cites no legal or accounting authority for his argument

that LivingWell's solvency necessarily determines the solvency of

its subsidiaries.        For   example,    the   Trustee    argues   that   the

subsidiaries' stock value was equal to their assets minus their

liabilities.    Stock, however, is not valued so easily.             There are

other factors to take into account such as the type of stock and

its marketability.       See S. Ritchie and J. Lamberth, The Valuation

Process of Closely Held Corporate Stock, 54 Tex. B.J. 548, 550-54

(1991).    Moreover,      according   to   accounting      standards   of   the

Financial Accounting Standards Board, intercompany balances and


                                      20
transactions      are   eliminated     when    considering    a   company      on   a

consolidated basis.        These intercompany balances and transactions

include    open    account    balances,       security   holdings,    sales     and

purchases, interest, and dividends. Intercompany loss or profit is

not    considered.         GENERAL    STANDARDS,    Consolidation      Procedure

Generally, § C51.109 (Financial Accounting Standards Bd.1986).

Additionally, it could be that LivingWell's subsidiaries were

solvent but that LivingWell's debts were so great that LivingWell

on a consolidated basis is insolvent.             Thus, LivingWell's balance

sheet solvency does not necessarily determine the solvency of its

subsidiaries; therefore, we affirm the district court's Rule 49(a)

finding that LivingWell and its subsidiaries were not insolvent on

a consolidated basis until October 27, 1989.

C. LivingWell's Insolvency

1. Choice of Law

        Federal courts sitting in Texas apply the law of the state of

incorporation when a corporation's internal affairs are implicated.

Maher v. Zapata Corp., 714 F.2d 436, 464 (5th Cir.1983).                        The

Trustee contends that the court erred in deciding that Texas law

controlled all trust fund claims.             He contends that because trust

fund    doctrine    claims    cannot     exist    unless   the    payee   of    the

challenged transaction is a director of an insolvent company, the

trust     fund    claims    here     implicate    the    internal    affairs        of

LivingWell. Further, because LivingWell reincorporated in Delaware

June 12, 1985, Delaware law should control all trust fund claims

arising after that date.


                                         21
     In Edgar v. MITE Corp., 457 U.S. 624, 645, 102 S.Ct. 2629,

2642, 73 L.Ed.2d 269 (1982), the Supreme Court defined the internal

affairs of a corporation as "matters peculiar to the relationships

among    or   between     the    corporation        and   its   current   officers,

directors, and shareholders[.]"                The question, here, then is

whether allegedly preferential transfers in a bankruptcy context

are matters peculiar to the relationship between a corporation and

its directors and officers.         We hold they are not.          Here, the trust

fund claims involve the rights of third party creditors.                      These

claims,    then,    are   not     peculiar     to    the   relationship     between

LivingWell and its officers and directors.

         Having decided that the place of incorporation does not

decide necessarily which law to apply to the trust fund claims

arising as of June 12, 1985, we must still decide what law does

apply.    To do so, we look to the Restatement (Second) of Conflict

of Laws. Section 301 states that when a corporation acts in a way

that an individual can, the choice of law principles that apply to

non-corporate      parties      apply   to    the    corporation.     RESTATEMENT

(SECOND) OF CONFLICT OF LAWS § 301 (1971).                      Those principles,

referred to as the "most significant relationship" test, are stated

in § 69, and Texas has adopted and applies that test.                     Duncan v.

     9
        § 6 Choice-of-law Principles states in pertinent part:

          (2) When there is no [statutory] directive, the factors
     relevant to the choice of the applicable rule of law include

                   (a) the needs of the interstate and international
              systems,

                   (b) the relevant policies of the forum,

                                         22
Cessna Aircraft Co., 665 S.W.2d 414, 421 (Tex.1984).            Thus, we

apply that test. Here, LivingWell's only tie with Delaware is that

it   was   incorporated   there;   however,   its   principal   place   of

business was in Texas, the challenged payments were made from

Texas, LivingWell's board met in Texas, and LivingWell's principal

asset, the Houstonian, was in Texas.          Therefore, we affirm the

district court's holding that Texas law and not Delaware law

applies.

2. The Merits

       To bring a trust fund claim in Texas, the corporation must be

insolvent and have ceased doing business when the challenged

transactions occurred.     Mancuso v. Champion (In re Dondi Financial

Corp.), 119 B.R. 106, 111 (Bankr.N.D.Tex.1990).

      The Trustee makes several claims as to both elements.       First,

he argues that the district court erroneously restricted his proof

of insolvency to the balance sheet test which focuses on whether

liabilities exceeded assets at a fair valuation.        See 11 U.S.C. §

101(32).    Rather, the Trustee, pointing to Fagan v. La Gloria Oil



                 (c) the relevant policies of other interested states
            and the relative interest of those states in the
            determination of the particular issue,

                 (d) the protection of justified expectations,

                 (e) the basic policies underlying the particular
            field of law,

                 (f) certainty, predictability and uniformity of
            result, and

                 (g) ease in the determination and application of the
            law to be applied.

                                   23
& Gas Co., 494 S.W.2d 624, 629 (Tex.Civ.App.-Houston (14th Dist.)

1973), claims that he was entitled to prove insolvency either

through the balance sheet test or by showing that LivingWell was

unable to meet currently maturing debts in the ordinary course of

business. Assuming arguendo that the Trustee is correct, the error

is harmless.       The Trustee wants to use the second definition of

insolvency to prove that LivingWell was insolvent before December

31, 1986;     however, Appellant's trust fund claims arising before

October 27, 1987 are time barred.           Thus, the error is harmless.

       Second,   the    Trustee   contends       that    the    court   erroneously

excluded     evidence     which   he   contends         would   have    shown    that

LivingWell was insolvent before December 31, 1986. Again, assuming

arguendo that the court erred, the error is harmless since all

claims arising before October 27, 1987 are time barred.

       Third, the Trustee contends that the district court erred in

granting the Rule 50(a) motion finding that LivingWell was, as a

matter of law, solvent for all periods before December 31, 1986.

Again, the error was harmless for the reasons stated above.

       The Trustee's final argument concerning trust fund claims is

that   the   district     court   erred     in    granting      summary    judgment

dismissing the remaining trust fund doctrine claims.                    As mentioned

above, to pursue a successful trust fund claim, one must prove that

a corporation is a) insolvent and b) ceased to do business at the

time of the challenged transaction.          Fagan v. La Gloria, 494 S.W.2d

at   628.     If    the   plaintiff,    however,         cannot   show    that   the

corporation has ceased doing business, his claim may still succeed


                                       24
if the plaintiff can show that the corporation has ceased doing

business in good faith.      Id. at 631.   Here, the Trustee claims that

there was substantial evidence that the Appellees acted in bad

faith.     In support of his argument, the Trustee refers to his

summary of evidence and the testimony of three witnesses: Knepper,

Harris, and Schwartz.       This evidence however is not sufficient to

overcome summary judgment.      The summary of evidence is nothing but

a summation of conclusory affidavit testimony, and the testimony of

the first two witnesses was inadmissible for reasons explained

below in section III E. As for the third witness, Schwartz, he

merely states that certain data suggest that one transaction was

suspect.     Therefore, we affirm the district court's dismissal of

the trust fund claims.

D. The Subsidiaries' Insolvency

         The district court granted Appellee's 50(a) motion finding

that   the   subsidiaries    were   solvent   until    October   27,   1989.

Appellant argues that this finding was error because he had both

direct and indirect evidence of the subsidiaries, insolvency under

either the balance sheet or the equity test.          The Trustee, however,

points to no evidence the subsidiaries' liabilities were greater

than their assets.    Rather, he discusses LivingWell's insolvency.

As previously noted, the fact that LivingWell was insolvent does

not necessarily show the subsidiaries' insolvency.

       In arguing that the subsidiaries were insolvent under the

equity test because they were unable to pay their debts as they

matured, the only evidence the Trustee offers is the testimony of


                                     25
Randy Watson who testified that "We showed nice profits, but cash

flow-wise,       we   were     broke."      This      testimony   concerned    only

LivingWell South and is not enough to overturn the Rule 50(a)

finding.       We affirm the district court's finding that LivingWell's

subsidiaries were not insolvent before October 27, 1989.

         The    Trustee      contends    that   the    district   court    erred   in

refusing to allow the Trustee to recover payments FCA made as a

nominee for LivingWell.          The district court found, and the Trustee

does not dispute, that the statute of limitations barred the

recovery of transfers of money that belonged exclusively to FCA.10

While Appellant argued he could still recover transfers FCA made as

a nominee of LivingWell, the court rejected that argument stating

this claim fell within the "single business enterprise" claims

which the court had already rejected.              The Trustee argues that the

"single business enterprise" theory is irrelevant as recovery is

simply a matter of agency or nominee relationship.                        Appellant,

though, does not offer this Court any evidence of agency or a

nominee relationship;           therefore, we have no basis upon which to

reverse the district court.             We affirm the district court's grant

of summary judgment on all trust fund claims based upon transfers

FCA made before October 27, 1989.

E. Director Misconduct

     Appellant argues that the district court erroneously excluded


    10
      FCA never filed for bankruptcy so § 108(a) of the Bankruptcy
Code does not apply. The statute of limitations is two years and
this suit was filed October 25, 1991; thus, all claims arising
before October 25, 1989 are barred.

                                          26
or ignored his evidence of director misconduct.             In the case of

William Knepper, one of Appellant's experts, the court ruled the

proffered testimony inadmissible because Knepper was a lawyer and

his testimony would be conclusory and cumulative.               The Trustee

argues that this was manifest error because the fact that Knepper

is a lawyer does not per se disqualify him as an expert witness.

Rather, the issue is whether Knepper had specialized training,

education, and experience that would enable him to assist the jury

in determining issues of director misconduct. The Trustee contends

that Knepper has the necessary training, education, and experience

because Knepper has been practicing law for 60 years, 25 of which

were in the fields of corporate officer and director liability,

director's and officer's indemnity insurance, and professional

liability insurance.

        We agree that merely being a lawyer does not disqualify one

as an expert witness.       Lawyers may testify as to legal matters when

those matters involve questions of fact.            See e.g., Huddleston v.

Herman & MacLean, 640 F.2d 534, 552 (5th Cir. Unit A March 1981),

aff'd in part, rev'd in part on other grounds, 459 U.S. 375, 103

S.Ct. 683, 74 L.Ed.2d 548 (1983)(lawyer could testify that language

in a boilerplate contract was standard because the effect of the

language went to scienter).        However, "it must be posited as an a

priori assumption [that] there is one, but only one, legal answer

for every cognizable dispute.          There being only one applicable

legal   rule   for   each   dispute   or   issue,   it   requires   only   one

spokesman of the law, who of course is the judge."                  Specht v.


                                      27
Jensen, 853 F.2d 805, 807 (10th Cir.1988) (internal citations

omitted).

     The Specht case involved a warrantless search.      There, the

plaintiff's expert witness testified that warrantless searches were

unlawful, that the defendants committed a warrantless search, that

the only possible exception was unavailable, and that the acts of

an individual could be imputed to the accompanying officer under §

1983.   Id. at 808.   The Tenth Circuit held that such testimony was

not only inadmissible but harmful.      The Court stated that while

experts could give their opinions on ultimate issues, our legal

system reserves to the trial judge the role of deciding the law for

the benefit of the jury.       Id. at 808-09.    Moreover, allowing

attorneys to testify to matters of law would be harmful to the

jury.   Id. at 809.   First, the jury would be very susceptible to

adopting the expert's conclusion rather making its own decision.

There is a certain mystique about the word "expert" and once the

jury hears of the attorney's experience and expertise, it might

think the witness even more reliable than the judge.    Id. Second,

if an expert witness were allowed to testify to legal questions,

each party would find an expert who would state the law in the

light most favorable to its position.    Such differing opinions as

to what the law is would only confuse the jury.       Id. Thus, the

issue here is whether Knepper is testifying to purely legal matters

or legal matters that involve questions of fact.

     In the report that Knepper submitted to Appellant, he stated

that he would give his opinion on "[w]hether LivingWell's officers


                                  28
and directors fulfilled their fiduciary duties to the Company, its

creditors, and shareholders.          If not, how and to what extent did

[they] breach their fiduciary duties."            Such testimony is a legal

opinion and inadmissible.            Whether the officers and directors

breached their fiduciary duties is an issue for the trier of fact

to decide.    It is not for Knepper to tell the trier of fact what to

decide.      Therefore,   the   trial    court    did   not   err   in   finding

Knepper's testimony inadmissible.

      Even without Knepper's testimony, the Trustee argues he could

still prove director misconduct through his summary of evidence,

through the testimony of other expert witnesses, and through the

affidavit of a former LivingWell employee, Russell Harris.

      Most of the "substantial evidence" in the summary of evidence

was either based on claims that were time barred or based on

conclusory statements in affidavits.             The evidence that does not

fall within these two categories, such as statements that the board

of   LivingWell   declined      to   issue   written     directions      to   its

consultants, is not sufficient to overcome summary judgment.

       As for the testimony of the other expert witnesses, their

opinions either were based on claims that are time barred or were

tentative and preliminary and therefore insufficient to overcome

summary judgment.    Moreover, the district court properly sustained

the objection to Russell Harris' affidavit.             While it purports to

show personal knowledge on its face, there is sufficient sworn

testimony to show that he does not have personal knowledge.

      For the above reasons we affirm the district court's grant of


                                       29
summary judgment on the director misconduct claims.

F. The Fraudulent Transfers

        The Trustee brings his fraudulent transfer claims under TEX.

BUS. & COM. CODE § 24.006(a) which requires the claimant to prove

that the transferor was (1) insolvent at the time of the transfer

and (2) received less than fair value for the consideration it

paid.        We assume, and the Appellees do not contest, that the

Trustee has standing to avoid the preferences LivingWell made.11

     The district court dismissed both LivingWell's fraudulent

transfer       claims   arising   before   December   31,   1986   and   the

subsidiaries' claims arising before October 27, 1989. The Trustee

argues that this was error because there was substantial evidence

that LivingWell and its subsidiaries transferred money and assets

while insolvent for less than fair value.              To prove that the

district court erred where the subsidiaries are concerned, the

Trustee again argues the single business enterprise theory.              For

the reasons stated above in section III D, we reject that theory

and affirm the district court's finding that the subsidiaries were

solvent at all times before October 27, 1989.

        As for LivingWell, the Trustee argues that the finding that

LivingWell was not bankrupt before December 31, 1986 was error.           We

agree.       TEX. BUS. & COM. CODE § 1.201 states that unless otherwise

provided the definition of "insolvent" is either a person who has

        11
       We do affirm, however, the trial court's holding that the
Trustee does not have standing to bring FCA's fraudulent transfer
claims. While the Trustee argues that he has standing because FCA
is a nominee of LivingWell, that argument fails for the reasons
stated in section III D hereof.

                                      30
ceased to pay bills in the ordinary course of business or cannot

pay debts as they come due or is insolvent within the meaning of

the federal bankruptcy code.         TEX. BUS. & COM. CODE § 1.201(23).

Appellees argue that this is not the correct definition because

until 1993 the definition was "generally unable to pay debts" not

cannot pay    debts.      Assuming    arguendo     that    the    Appellees       are

correct, the trial court still erroneously limited the definition

of insolvency to the balance sheet test.             The error, however, was

harmless because the Trustee has not raised an issue of fact as to

lack of fair value.

       The   Trustee     has    preserved    error    with   regard        to    four

transactions:     the Gold Membership, the advertising fees paid to

Hemelgarn    Racing,   the     equipment    rental   payments      made     to   MWB

Leasing, and the payments to the Officer & Director ("O & D")

insurance    trust.       While    the     Trustee    does       mention    "other

transactions" such as salary and consulting fees, he does not tell

this Court either the place in the record to find the evidence or

what the evidence is that supports his claim of excessive fees and

salaries.    Both are required.          Moore v. FDIC, 993 F.2d 106, 107

(5th Cir.1993).

      The    Appellees    argue    that    the   claim    regarding    the       Gold

Membership is baseless because the transferee is not a party to the

appeal.   Because the Trustee had settled with the transferee, the

Trustee can no longer pursue this fraudulent transfer claim.                      The

Trustee did not respond to this argument so we assume that the

Trustee was made whole by the settlement.


                                      31
      As for the advertising fees paid to Hemelgarn Racing, Inc.,

the Trustee relies wholly upon an expert witness report.                  The

expert's report, though, states that his conclusions are "tentative

and preliminary".      Such evidence is not sufficient to overcome

summary judgment.     The same problem afflicts the expert report on

the value of the lease payments made to MWB Leasing.               There, the

expert states that his opinion is only preliminary and is subject

to a full appraisal report.      In fact, he only states "the actual

payments appear to be excessive in the range of approximately 20%

over fair market value" (emphasis added).        Again, such evidence is

not sufficient to overcome summary judgment.

     The Trustee's final fraudulent transfer claim involves the O

& D insurance trust fund.     This claim also fails.        The sole basis

for the Trustee's claim that no value was received for the transfer

was the testimony of the lawyer, Knepper.            For reasons which we

explained above, Knepper's testimony was excluded.                Because the

evidence supporting the O & D insurance trust fund claim fails, the

claim also fails.     Therefore, we affirm the district court's grant

of summary judgment for the fraudulent transfer claims.

G. Unlawful Stock Redemption

      The   Trustee    alleges   that   on   March   31,   1988    LivingWell

redeemed some of its stock by reacquiring LivingWell common stock

owned by Hfund.       Because LivingWell is a Delaware corporation,

Delaware law controls. Section § 160(a)(1) of the Delaware General

Corporation Law states in pertinent part:

     Every corporation may ... redeem ... its own shares;
     provided, however, that no corporation shall: (1) ... redeem

                                   32
     its own shares of capital stock for cash or other property
     when the capital of the corporation is impaired or when such
     ... redemption would cause any impairment of the capital of
     the corporation[.] DEL. CODE ANN. tit. 8, § 160(a)(1) (1996).

The purpose of the statute is to protect creditors.                   In re Reliable

Manufacturing Corporation, 703 F.2d 996, 1001 (7th Cir.1983).                     The

statute is designed to prevent a corporation from rearranging its

capital structure so as to alter the assumed basis upon which

creditors have extended credit.            Id. In other words, the statute

prevents     a    corporation     from        defrauding      its     creditors   by

redistributing assets to its shareholders.                 Id.

     We assume without deciding that there was a redemption.

Moreover, LivingWell, by jury finding, was insolvent when the

assumed redemption occurred.         Thus the corporation was impaired.

The issue, however, is whether LivingWell redeemed the stock to

defraud its creditors.         The Trustee does not show this Court how

the redemption defrauded LivingWell's creditors.                    On the contrary,

the Appellees offer evidence that the redemption was part of

dispute settlement and enabled LivingWell to pay off certain

existing debts.        LivingWell's redemption does not fall within the

purposes of § 160;       therefore, we affirm summary judgment.

H. Claims Against Majority Shareholder Mannai

     There       are   three    claims        the   Trustee      alleges    against

LivingWell's majority shareholder, Ahmed Mannai, and his companies.

First, that Mannai himself participated in intentional misconduct,

fraud-based conspiracy, and wrongdoing.               Second, that Mannai and

his companies received payment for the unlawful stock redemption,

and third, that Mannai is liable as a director because of his

                                         33
control    over   LivingWell's     board   of    directors,      including   the

placement of his agents on the board. The district court dismissed

the first two claims for being inadequately pled because they were

not specified in the Second Amended Complaint and because the

Trustee stated in his deposition that the agency theory was the

exclusive basis for suing Mannai.12        The Trustee contends that this

was error because a theory of recovery does not have to be stated

specifically;       rather, the pleadings only have to give adequate

notice.     The Trustee, however, does not show this Court how his

Second Amended Complaint gives adequate notice.                  We affirm the

dismissal of the first two claims.

         The sole issue, then, is whether the district court erred in

granting summary judgment on the Trustee's agency claim.                      The

Trustee    argues    that   a   shareholder     who   controls    an   insolvent

corporation stands in a fiduciary relationship to the corporation.

12B FLETCHER, CYCLOPEDIA OF LAW OF PRIVATE CORPORATIONS § 5765

(rev.perm. ed.1990).        The Trustee contends that Mannai controlled

the board of directors because he helped create LivingWell, was its

largest shareholder, participated in the decision to create PAC and

through one of his companies, to pledge LivingWell stock to borrow

money through PAC. Moreover, he participated in the decision to

create Hfund and owned 100% of the equity in that company.                   Most

important, he controlled LivingWell by placing two of his agents on

the board of LivingWell and Hfund.              Assuming arguendo that all

    12
      In his deposition, the Trustee states that the sole basis for
his allegation that Mannai was part of the directors who controlled
LivingWell was his conservations with his counsel.

                                      34
these statements are true, they do not show that Mannai completely

dominated the board of LivingWell. As Appellees point out, and the

Trustee does not contradict, during the periods that Mannai's two

"agents" served concurrently on LivingWell's board, the LivingWell

board had no fewer than eight members.     Thus, they were never a

majority of the board and Mannai could not have exercised complete

domination.    Therefore, we affirm the district court's grant of

summary judgment for the claims against Mannai.

I. The Ernst & Young Claims

        The Trustee's claims against Ernst & Young are for breach of

contract, fraud, and fraud based conspiracy.       The Trustee, to

support the contract claim, merely tells this court that the trial

court's 12(b)(6) dismissal of the claim was error and that he is

entitled to recover the fees paid for the audit.    As Ernst & Young

correctly points out, we decided in FDIC v. Ernst & Young, 967 F.2d

166, 172 (5th Cir.1992) that Texas law does not permit a breach of

contract claim based upon accounting malpractice.     Therefore, we

affirm the dismissal of the breach of contract claim.

        In deciding the fraud and fraud based conspiracy claim, we

address the fraud claim first because it is the underlying basis

for the conspiracy claim.     The trial court dismissed that fraud

claim under Rule 9(b) which states that conclusory allegations of

fraud are not sufficient to survive dismissal.      FED. R. CIV. P.

9(b).    The court found that the trustee had failed to plead facts

to support his allegation of detrimental reliance.      The Trustee

argues that this was error because while Rule 9(b) has a heightened


                                 35
standard of pleading, the challenged conduct involves so many

complex transactions that less specificity is required.                          The

Supplemental      Complaint   satisfies        the    purposes     underlying    Rule

9(b)'s heightened pleading requirement because it states who, what,

when, where, why, and how the false statements were made and to

whom they were made.       Ernst & Young challenges the statement that

the   Supplemental     Complaint    advances         a   theory    of   detrimental

reliance but for the purpose of this opinion, we assume it does.

The     Trustee   argues   that    but        for    Ernst   &    Young's   alleged

misrepresentations, LivingWell would not have continued to exist,

could not have incurred more debt, and would not have lost more

money.

        This theory of detrimental reliance is insufficient.                    Under

Texas law, a cause of action is legally insufficient if the

defendant's alleged conduct did no more than furnish the condition

that made the plaintiff's injury possible.                       Union Pump Co. v.

Allbritton, 898 S.W.2d 773, 776 (Tex.1995).                  The Trustee's theory

would make Ernst & Young an insurer of LivingWell because Ernst &

Young would be liable for LivingWell's losses no matter what

created LivingWell's losses, i.e. a recession or a decline in the

fitness industry.      Because the Trustee does not adequately allege

detrimental reliance, his fraud claim must fail. Moreover, because

the fraud claims fails the fraud based conspiracy claim must fail

also.    Thus, we affirm the dismissal of the claims against Ernst &

Young.

                                  CONCLUSION


                                         36
     For the reasons stated above, we AFFIRM the take nothing

judgment against the Trustee.




                                37
