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NO. 2019-79102
RALPH AUGUILLARD et al., IN THE DISTRICT COURT
Plaintiffs,
v. HARRIS COUNTY, TEXAS
CALTON & ASSOCIATES INC.,
WESTPARK WEALTH ADVISORS INC.,
and CHRISTOPHER D. GAMMON,
PO UN LN OD UP LO KD LP OP
Defendants. 125" JUDICIAL DISTRICT
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
Plaintiffs’ claims are unmeritorious and unsupportable and should be summarily
disposed. Defendants Calton & Associates Inc., Westpark Wealth Advisors Inc., and
Christopher D. Gammon move pursuant to Rules 166a(c) (traditional motion) and 166a(i) (no-
evidence motion) for summary disposition of Plaintiffs’ claims under the Texas Uniform
Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. CODE §24.001 ef seg. and for unjust
enrichment.
Grounds
Defendants move for traditional summary judgment on Plaintiffs’ claims and causes of
action, and disprove at least one element of each claim and cause of under TUFTA and for unjust
enrichment as a matter of law. Plaintiffs either cannot raise a genuine issue of material fact, or
any such fact issues raised by Plaintiffs are negated as a matter of law.
Defendants move for traditional summary judgment on their affirmative defenses of
limitations (as to Defendants Westpark and Gammon) and res judicata (as to Defendant
Gammon), and prove such affirmative defenses as a matter of law. Plaintiffs either cannot raise
a genuine issue of material fact, or any such fact issues raised by Plaintiffs are negated as a
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page | of 16matter of law.
Defendants move for no-evidence summary judgment on Plaintiffs’ claims and causes of
action under TUFTA and for unjust enrichment for which Plaintiffs have the burden of proof at
trial. Plaintiffs have had adequate time for discovery, and there is no evidence to support
Plaintiffs’ claims and causes of action.
Pertinent Procedural History Supported by Declaration
On June 16, 2016, Plaintiffs initiated FINRA Arbitration No. 16-01800 asserting claims
against IMS Securities Inc., Jackie Divono Wadsworth, Christopher D. Gammon, Michael J.
Spears, Joshua Patterson, and Stacey Rognon for negligence, gross negligence,
misrepresentation, omission of a material fact, failure to supervise, breach of fiduciary duty,
breach of contract, and control person liability related to alleged over-concentration of Plaintiffs’
retirement portfolios in illiquid alternative investments, annuities and private placements.
On October 31, 2017, following a FINRA arbitration hearing, a panel of three arbitrators
issued an Arbitration Award finding liability against IMS Securities Inc., Joshua Patterson, and
Stacey Rognon, but denying liability against Jackie Divono Wadsworth, Christopher D.
Gammon and Michael J. Spears.
On November 8, 2017, IMS Securities Inc. entered into a written agreement with Calton
& Associates Inc. for the purpose of transferring conditional rights to service retail customer
accounts.
On November 10, 2017, Calton & Associates Inc. delivered to IMS Securities Inc. a
check in the amount of $1,000.00.
On November 10, 2017, Plaintiffs initiated Cause No. 2017-75766 in the 157" Judicial
District Court, Harris County, Texas, for the purpose of confirming the Arbitration Award
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 2 of 16against IMS Securities Inc., Joshua Patterson, and Stacey Rognon.
On December 28, 2017, as a consequence of the Arbitration Award and pursuant to
FINRA Rule 9553, FINRA cancelled the membership of IMS Securities Inc.
On January 12, 2018, in Cause No. 2017-75766, the 157" Judicial District Court signed
an interlocutory “Order Confirming Award of Arbitrator and Judgment Against IMS Securities
Inc.”
On January 29, 2018, the U.S. Securities and Exchange Commission terminated the
registration status of IMS Securities Inc.
On March 20, 2018, in Cause No. 2017-75766, the 157" Judicial District Court signed an
order severing “Plaintiffs’ claims against IMS Securities Inc.” into a new Cause No. 2017-
75706A.
On July 13, 2018, IMS Securities Inc. filed a Certificate of Termination with the Texas
Secretary of State effectively terminating its existence.
On August 14, 2018, in Cause No. 2017-75766A, the 157" Judicial District Court entered
a Final Judgment in favor of Plaintiffs and against IMS Securities Inc.
On August 22, 2018, in Cause No. 2017-75766A, Plaintiffs filed a Motion to Compel
IMS Securities Inc. to Comply with Post-Judgment Discovery Requests.
On September 21, 2018, in Cause No. 2017-75766A, the 157" Judicial District Court
entered an Order Denying Plaintiffs’ Motion to Compel IMS Securities Inc. to Comply with
Post-Judgment Discovery Requests, but ordering the custodian of records for IMS Securities Inc.
to produce corporate records, following which the custodian of records for IMS Securities Inc.
produced 25,066 pages of corporate record to Plaintiffs.
On October 30, 2019, Plaintiffs initiated Cause No. 2019-79102 in the 125" Judicial
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 3 of 16District Court for the purpose of asserting claims against Defendants Calton & Associates Inc.,
Westpark Wealth Advisors Inc., and Christopher D. Gammon under the Texas Uniform
Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. Cope §24.001 ef seq., and for unjust
enrichment. In their Petition, Plaintiffs allege that they are judgment creditors of IMS Securities
Inc., and that on November 8, 2017, IMS Securities Inc. made a “fraudulent conveyance” to
Calton & Associates Inc.
Pertinent Facts Supported by Declaration
There is no evidence that IMS Securities Inc. transferred any of its assets in
November 2017 to Calton & Associates Inc., Westpark Wealth Advisors Inc., or
Christopher D. Gammon, such that, as a matter of fact and law there was no “fraudulent
transfer.” The following facts are dispositive:
+ IMS Securities Inc. (“IMS”) was a small “introducing broker dealer,” meaning
that it “introduced” its retail customer accounts to a “clearing” or “carrying”
broker dealer and custodian.
* Hilltop Securities Inc. (“Hilltop”), a Dallas-based multi-service wealth-
management company, was the “clearing” or “carrying” broker dealer and
custodian to which IMS introduced retail customer accounts.
+ As the “clearing” or “carrying” broker dealer and custodian for IMS, Hilltop
possessed and controlled all cash and securities owned by IMS retail
customers, maintained all retail customer accounts for IMS, cleared all trades
for such accounts, and sent to IMS retail customers all confirmations and
statements.
+ IMS retail customer accounts and assets were not owned by IMS, but were
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 4 of 16instead owned beneficially by the retail customers themselves, and were
possessed and controlled by Hilltop.
* Calton & Associates Inc. (“Calton”), a Florida-based “introducing broker
dealer,” also “introduces” its retail customer accounts to Hilltop.
* On November 8, 2017, Calton (as Buyer) entered into an Asset Purchase
Agreement with IMS (as Seller) providing that “The Buyer shall purchase
from the Seller all retail customer accounts of the Seller except for any
accounts that choose to transfer to another broker dealer” and that “The Buyer
shall pay to the Seller a total of $1,000 for all retail accounts that choose to
transfer to the Buyer.”
+ Although the agreement was entitled “Asset Purchase Agreement,” the
transaction did not involve the sale by IMS or the purchase by Calton of retail
customer assets, and could not have involved the sale or purchase of retail
customer assets, because (a) IMS did not own retail customer assets and
therefore could not have sold them, (b) retail customer assets are owned
beneficially by the retail customers themselves, and the retail customers did
not sell them, and (c) at the time of the transaction, any such retail customer
assets were in the possession, custody, and control of Hilltop.
+ Although the agreement was entitled “Asset Purchase Agreement,” the
transaction concerned a proposed transfer of a right to service IMS’s retail
customer accounts conditioned upon acceptance by IMS’s retail customers
following receipt of Hilltop’s “negative consent” letter and subject to FINRA
approval.
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 5 of 16* Following the transaction, Hilltop retained possession, custody and control of
any such retail customer assets unless the retail customers elected to move
such accounts and assets to a different “carrying broker dealer” or “clearing
broker dealer.”
+ The retail customer accounts that were the subject of the Asset Purchase
Agreement were not IMS assets, did not appear on IMS’s SEC Focus Reports
as assets, had no asset value to IMS, and cannot be the subject of a TUFTA
action.
+ Although the Asset Purchase Agreement provides for consideration to be paid
by the Buyer of $1,000, such consideration did not represent asset value (as no
assets were being transferred). Instead, such consideration was a nominal sum
required by FINRA to be included in the transaction.
+ A transfer of a conditional right to service customer accounts has no inherent
value, and is instead done to comply with financial industry regulations.
* A transfer of a conditional right to service customer accounts is within the
absolute control of the retail customer, the custodian, and FINRA, none of
whom are parties to this lawsuit.
+ The transfer of a proposed right to service IMS’s retail customer accounts did
not involve the sale of IMS assets, was not a sale of “virtually all assets of
IMS,” and IMS was not insolvent as a result of the transfer.
+ The transfer of a proposed right to service IMS’s retail customer accounts was
not made with the intent to hinder, delay or defraud creditors of IMS by
placing IMS assets beyond the reach of creditors, as the transfer was not a
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 6 of 16transfer of IMS assets.
Summary Judgment Evidence
Defendants attach and rely upon the following summary judgment evidence:
Declaration of Dwayne K. Calton attaching:
+ Asset Purchase Agreement (11/8/2017)
* Check (11/10/2017)
+ Hilltop “negative consent” letter (11/28/2017)
Declaration of Christopher D. Gammon attaching:
+ Hilltop “negative consent” letter (11/28/2017)
+ Hilltop Customer Statements for IMS (9/29/2017 to 1/31/2018)
+ SEC Focus Reports for IMS (7/1/2017 to 12/31/2017)
* Texas Capital Bank Account Statements for IMS (10/1/2017 to 1/31/2018)
Argument and Authorities
Plaintiffs allege (wrongfully) that a transaction occurring in November 2017 between
IMS Securities Inc. (the debtor) and Calton & Associates Inc. (the “transferee”) was
“fraudulent.” But the transaction did not involve the transfer of an “asset” and does not therefor
run afoul of TUFTA. Rather, the transaction concerned a proposed transfer of a right to service
IMS’s retail customer accounts conditioned upon acceptance by IMS’s retail customers
following receipt of Hilltop’s “negative consent” letter and subject to FINRA approval. IMS did
not own retail customer assets and therefore could not have sold them. Retail customer assets
are owned beneficially by the retail customers themselves, and the retail customers did not sell
them. At the time of the transaction, any such retail customer assets were in the possession,
custody, and control of Hilltop, and the proposed conditional transfer was within the absolute
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 7 of 16control of the retail customer, the custodian (i.e. Hilltop), and FINRA, none of whom are parties
to this lawsuit. The transfer had no realizable economic benefit, but was instead done to comply
with financial industry regulations. At FINRA’s request, the transaction was evidenced by
nominal consideration of $1,000.00.
The purpose of TUFTA is not to protect the debtor’s creditors from all transfers that have
no realizable economic benefit. The law actually tolerates such transfers. Janvey v. Golf
Channel Inc., 487 S.W.3d 560, 575-76 (Tex. 2016) (emphasizing that a transfer subject to
TUFTA must confer some direct or indirect economic benefit to the debtor, as opposed to
benefits conferred solely on a third party, transfers that are purely gratuitous, and transactions
that merely hold subjective value to the debtor or transferee).
Here, IMS did not transfer its “assets” to Calton or anyone else. Rather, IMS merely
transferred to Calton a conditional right to service retail customer accounts, subject to approval
by the retail customer, the custodian (i.e. Hilltop), and FINRA, none of whom are parties to this
lawsuit. The transfer became imperative because FINRA had given notice to IMS that its
FINRA membership was about to be terminated, an unfortunate consequence of the adverse
Arbitration Award dated October 31, 2017, in favor of these Plaintiffs, meaning that IMS would
no longer be allowed by FINRA to service retail customer accounts. The transfer thus became
imperative to protect the interests of third-party retail customers. The transaction was not
intended to move, and did not result in the movement of, IMS’s assets beyond the reach of
creditors. The transaction was not therefore subject to TUFTA.
Moreover, and importantly, these Plaintiffs would not, under any circumstances, have a
legitimate right or claim to any third-party retail customer accounts, regardless of whether such
accounts had been serviced by IMS or were transferred to another broker dealer. That these
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 8 of 16Plaintiffs would insinuate such a right or claim is a demonstration of the frivolousness of this
lawsuit. Nevertheless, if there is any doubt about whether TUFTA applies to the November
2017 transaction, all doubt should be removed because Plaintiffs cannot prove the essential
elements of a TUFTA claim against the Defendants.
While the November 2017 transfer did not confer a direct or indirect benefit to IMS
(other than a nominal $1,000.00 payment), the nominal consideration constituted objective value
at the time of the transfer even if it did not generate an asset or benefit that could be levied to
satisfy unsecured creditors, was the result of an arm’s length transaction, and was made in good
faith in the ordinary course of Calton’s business, thus satisfying TUFTA’s “reasonably
equivalent value” requirement. Janvey at 573 (TUFTA operates to prevent debtors from
defrauding creditors by placing assets beyond their reach, but it also protects transferees who
take in good faith and for a reasonably equivalent value), This is a complete defense, regardless
of the intent of the debtor. Jd.
As to Defendant Calton & Associates Inc. Plaintiffs purport to assert claims against
Calton for “actual fraudulent transfer” and “constructive fraudulent transfer” under TUFTA, and
for “unjust enrichment.” As to the claims for “actual fraudulent transfer,” Plaintiffs assert that a
purported transfer of an “asset” from IMS to Calton:
+ was “fraudulent as IMS received less than reasonably equivalent
value;”
* was made “with actual intent to hinder, delay, or defraud the creditors
or future creditors of IMS;”
+ “Plaintiffs have been harmed;” and
+ “Plaintiffs are entitled to avoid the transfer and to recover property or
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 9 of 16the value of the property transferred...”
While TUFTA provides that “a creditor, subject to the limitations in Section
24.009...may obtain...avoidance of the transfer or obligation to the extent necessary to satisfy
the creditor’s claim,” Plaintiffs (a) fail to cite relevant portions of TUFTA supporting claims for
“actual fraudulent transfer” or entitling Plaintiffs to the relief sought, and (b) fail to acknowledge
defenses and protections available to an alleged transferee. See Tex. Bus. & Com. CODE
§§24.008 (Remedies of Creditors) and 24.009 (Defenses, Liability, and Protection of
Transferee).
A TUFTA claim that the debtor (ie. IMS) made the transfer or incurred the obligation
“with actual intent to hinder, delay, or defraud any creditor of the debtor” would be a claim made
under Section 24.005(a)(1). However, any such transfer or obligation is not voidable against a
person who took in good faith and for a reasonably equivalent value. See TEx. Bus. & Com.
CoDE §24.009(a). Here, because the alleged “asset” was not owned by IMS, had no inherent
value to IMS, and was not listed as an “asset” on IMS’s Focus Reports filed with the SEC.
Here, there is no evidence that the transfer was made “with actual intent to hinder, delay,
or defraud any creditor of the debtor.” Because (a) Calton took in good faith, (b) the value of the
transaction was set by FINRA, and (c) IMS’s intent cannot be proven, Calton asserts an absolute
statutory defense under Section 24.009(a) to, and is entitled to summary judgment on, Plaintiffs’
claims for “actual fraudulent transfer.”
As to the claims for “constructive fraudulent transfer,” Plaintiffs assert that a purported
transfer from IMS Securities Inc. to Calton:
* “involved the sale of virtually all assets of IMS in exchange for less
than the reasonably equivalent value;”
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 10 of 16+ “IMS was insolvent at the time or became insolvent as result of the
transfer;”
* “Plaintiffs have been harmed;” and
+ “Plaintiffs are entitled to avoid the transfer and to recover property or
the value of the property transferred...”
While TUFTA provides that “a creditor, subject to the limitations in Section
24.009...may obtain...avoidance of the transfer or obligation to the extent necessary to satisfy
the creditor’s claim,” Plaintiffs (a) fail to cite relevant portions of TUFTA supporting claims for
“constructive fraudulent transfer” or entitling Plaintiffs to the relief sought, and (b) fail to
acknowledge defenses and protections available to an alleged transferee. See TEX. BUS. & COM.
CODE §§24.008 (Remedies of Creditors) and 24.009 (Defenses, Liability, and Protection of
Transferee).
Here, there is no evidence that the transfer of a conditional right to service retail customer
accounts “involved the sale of virtually all assets of IMS.” Nor is there evidence that “IMS was
insolvent at the time or became insolvent as a result of the transfer.” To the contrary, the SEC
Focus Report for IMS shows that, at the time of the transfer, IMS had Total Assets of
$427,466.00, none of which was transferred to Calton. See SEC Focus Report for the period
ending 10/31/17, attached to the Declaration of Christopher D. Gammon.
Here, because any such transfer or obligation is not voidable against Calton because
Calton took in good faith and for a reasonably equivalent value, because Calton does not have to
the burden to demonstrate whether or not IMS sold “virtually all assets” or “was insolvent,” and
because the evidence tends to show that IMS did not sell “virtually all assets” and was not
“insolvent” at the time of the transaction, Calton asserts an absolute statutory defense under
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 11 of 16Section 24.009(a) to, and is entitled to summary judgment on, Plaintiffs’ claims for “constructive
fraudulent transfer.”
As to Plaintiffs’ claims for “unjust enrichment,” there is disagreement among the courts
of appeals in Texas whether the restitutional theory of “unjust enrichment” stands an
independent cause of action. See Cristobal v. Allen, 2010 LEXIS 5829 *16 n.J (Tex. App.—
Houston [1st Dist.], no pet.) (noting that other courts of appeal have held that unjust enrichment
is not an independent cause of action); see also Lee v. Lee, 411 S.W.3d 95, 111-12 (Tex. App.—
Houston [1* Dist.] 2013, no pet.) (reasoning that a person is unjustly enriched when he obtains a
benefit from another by fraud, duress or the taking of undue advantage, but cautioning that unjust
enrichment is not a proper remedy merely because it might appear expedient or generally fair
that some recompense be afforded for an unfortunate loss or because the benefits to the person
sought to be charged amount to a windfall). Here, Plaintiffs have pleaded no facts or elements
demonstrating fraud, duress or the taking of undue advantage by Calton, and have failed to plead
a cause of action against Calton for unjust enrichment. TUFTA provides the exclusive statutory
remedy for fraudulent transfer, and a cause of action for unjust enrichment is not a proper
remedy. Calton is therefore entitled to summary judgment on Plaintiffs’ claims for “unjust
enrichment.”
As to Defendant Westpark Wealth Advisors Inc. Plaintiffs purport to assert claims
against Westpark for “actual fraudulent transfer” and “constructive fraudulent transfer” under
TUFTA, and for “unjust enrichment.” However, Plaintiffs assert no facts and provide no
evidence showing that Westpark was a transferee of any IMS asset. The court should dismiss
Plaintiffs’ claims against Westpark because Westpark is not a transferee or subsequent transferee
under TUFTA and cannot therefore be liable to Plaintiffs under TUFTA.
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 12 of 16To the extent that Plaintiffs contend that Westpark is an IMS “insider,” and that a transfer
made by IMS is fraudulent as to a creditor whose claim arose before the transfer was made if (a)
the transfer was made to an insider for an antecedent debt, (b) the debtor was insolvent at that
time, and (c) the insider had reasonable cause to believe that the debtor was insolvent, then any
such TUFTA claims against Westpark were extinguished one year after the alleged transfer. See
TEX. Bus. & Com. CODE §24.006(b) and §24.010(a)(3).
Further, Plaintiffs have pleaded no facts or elements demonstrating fraud, duress or the
taking of undue advantage by Westpark, and have thus failed to plead a cause of action against
Westpark for unjust enrichment. Westpark is therefore entitled to summary judgment on all
claims asserted by Plaintiffs.
As to Defendant Christopher D. Gammon. Plaintiffs purport to assert claims against
Gammon for “actual fraudulent transfer” and “constructive fraudulent transfer” under TUFTA,
and for “unjust enrichment.” However, Plaintiffs assert no facts and provide no evidence
showing that Gammon was a transferee of any IMS asset. The court should dismiss Plaintiffs’
claims against Gammon because Gammon is not a transferee or subsequent transferee under
TUFTA and cannot therefore be liable to Plaintiffs under TUFTA.
To the extent that Plaintiffs contend that Gammon is an IMS “insider,” and that a transfer
made by IMS is fraudulent as to a creditor whose claim arose before the transfer was made if (a)
the transfer was made to an insider for an antecedent debt, (b) the debtor was insolvent at that
time, and (c) the insider had reasonable cause to believe that the debtor was insolvent, then any
such TUFTA claims against Gammon were extinguished one year after the alleged transfer. See
Tex. Bus. & Com. CoDE §24.006(b) and §24.010(a)(3).
Further, Plaintiffs have pleaded no facts or elements demonstrating fraud, duress or the
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 13 of 16taking of undue advantage by Gammon, and have thus failed to plead a cause of action against
Gammon for unjust enrichment. Gammon is therefore entitled to summary judgment on all
claims asserted by Plaintiffs.
Further, Plaintiffs are barred and precluded by res judicata from litigating claims against
Gammon that (a) were actually litigated and disposed in the underlying arbitration, (b) arise from
the same transaction or “nucleus of operative facts” that could have been litigated and disposed
in the underlying arbitration, and (c) accrued before entry of the Order Confirming Award of
Arbitrator and Judgment Against IMS Securities Inc. dated January 12, 2018, the Order Granting
Motion to Sever dated March 20, 2018, and the Final Judgment dated April 8, 2019. Here, the
claims asserted by Plaintiffs against Gammon accrued in November 2017, and are therefore
barred.
Prayer
Defendants Calton & Associates Inc., Westpark Wealth Advisors Inc. and Christopher
Gammon request the court to find that:
+ This motion for summary judgment sets forth adequate grounds and is
supported by summary judgment proof;
* Defendants are not transferees of “assets” of IMS Securities Inc., such that
TUFTA does not apply;
* a transfer of a conditional right to service customer accounts is not a transfer
of an “asset” of the broker dealer and has no inherent value, and is instead
done to comply with financial industry regulations;
* a transfer of a conditional right to service customer accounts is within the
absolute control of the retail customer, the custodian, and FINRA, none of
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 14 of 16whom are parties to this lawsuit:
* Calton & Associates Inc. took from IMS Securities Inc. a conditional right to
service retail customer accounts in good faith and for a reasonably equivalent
value established by FINRA;
* Calton & Associates Inc., Westpark Wealth Advisors Inc. or Christopher D.
Gammon have disproven Plaintiffs’ assertions that “IMS received less than
reasonably equivalent value,” or that the transfer was made “with actual intent
to hinder, delay, or defraud” the creditors or future creditors of IMS,” or that
the transfer involved a sale of IMS assets, or that it was a sale of “virtually all
assets of IMS,” or that IMS was insolvent as a result of the transfer; such that
Defendants have proved a complete statutory defense under Tex. Bus. &
Com. CobE §24.009(a) protecting themselves and any subsequent transferee;
* there is no evidence supporting Plaintiffs’ claims against Calton & Associates
Inc., Westpark Wealth Advisors Inc. or Christopher D. Gammon for actual
fraudulent transfer or constructive fraudulent transfer or unjust enrichment;
and
+ any TUFTA claims against Westpark Wealth Advisors Inc. or Christopher D.
Gammon were extinguished no later than November 2018, and are thus barred
by limitations.
Defendants Calton & Associates Inc., Westpark Wealth Advisors Inc. and Christopher
Gammon request the court to enter an order granting their motion for summary judgment,
dismissing Plaintiffs’ claims with prejudice, and awarding Defendants all costs and reasonable
and necessary attorney fees incurred with respect to the challenged claims.
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 15 of 16Respectfully submitted,
/s/ K. B. Battaglini
K. B. Battaglini (kbattaglini@@strongpipkin.com)
Texas Bar No. 01918060
STRONG PIPKIN BISSELL & LEDYARD LLP
4900 Woodway Drive, Suite 1200
Houston, Texas 77056
713.210.4371 direct
ATTORNEYS FOR DEFENDANTS CALTON &
ASSOCIATES INC., WESTPARK WEALTH ADVISORS
INC. AND CHRISTOPHER D. GAMMON
Certificate of Service
This will certify that a true and correct copy of Defendants’ Motion for Summary
Judgment was served this 4" day of June, 2020 per on the attorneys for Plaintiffs per TEX. R.
Civ. P. 21 and 21a addressed as follows:
Ryan Cook (reook@sseklaw.com)
Shepherd Smith Edwards & Kantas LLP
1010 Lamar, Suite 900
Houston, Texas 77002
/s/ K. B. Battaglini
K. B. Battaglini
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
Page 16 of 16NO. 2019-79102
RALPH AUGUILLARD et al., IN THE DISTRICT COURT
Plaintiffs,
v. HARRIS COUNTY, TEXAS
CALTON & ASSOCIATES INC.,
WESTPARK WEALTH ADVISORS INC.,
and CHRISTOPHER D. GAMMON,
LUN LN LP UR EP LD RO? LOD HOD
Defendants. 125" JUDICIAL DISTRICT
DECLARATION OF DWAYNE K. CALTON
My name is Dwayne K. Calton. I serve as President of Calton & Associates Inc., a
broker dealer and investment advisory firm. I declare pursuant to TEX. Cly. PRAC. & REM. CODE
§132.001 (which provides that an unsworn declaration may be used in lieu of a written sworn
verification required by rule) under penalty of perjury that (a) I am authorized to make the
following statements on behalf of Calton & Associates Inc., (b) I have personal knowledge of the
facts set forth herein, (c) the factual statements set forth herein are true and correct, and (d) I
have personal knowledge of the documents attached to this Declaration, and (e) the documents
attached to this Declaration are true and correct copies of the originals.
1. On October 30, 2019, Plaintiffs initiated Cause No. 2019-79102 in the 125"
Judicial District Court for the purpose of asserting claims against Defendants Calton &
Associates Inc., Westpark Wealth Advisors Inc., and Christopher D. Gammon under the Texas
Uniform Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. Cope §24.001 e/ seq., and for
unjust enrichment.
2a In their Petition, Plaintiffs allege that they are creditors of IMS Securities Inc. on
the basis of the Arbitration Award dated October 31, 2017, and allege that Defendants Calton &
DECLARATION OF DWAYNE K. CALTON Page 1 of 4Associates Inc., Westpark Wealth Advisors Inc., and Christopher D. Gammon are transferees of
assets of IMS Securities Inc.
8: No assets of IMS Securities Inc. were transferred to Calton & Associates Inc.
4. IMS Securities Inc. (“IMS”) was a small “introducing broker dealer,” meaning
that it “introduced” its retail customer accounts to a “clearing” or “carrying” broker dealer and
custodian.
5. Hilltop Securities Inc. (“Hilltop”), a Dallas-based multi-service wealth-
management company, was the “clearing” or “carrying” broker dealer and custodian to which
IMS introduced retail customer accounts.
6. As the “clearing” or “carrying” broker dealer and custodian for IMS, Hilltop
possessed and controlled all cash and securities owned by IMS retail customers, maintained all
retail customer accounts for IMS, cleared all trades for such accounts, and sent to IMS retail
customers all confirmations and statements.
7. IMS retail customer accounts and assets were not owned by IMS, but were instead
owned beneficially by the retail customers themselves, and were possessed and controlled by
Hilltop.
8. Calton & Associates Inc. (“Calton”) also “introduces” its retail customer accounts
to Hilltop.
9. On November 8, 2017, Calton (as Buyer) entered into an Asset Purchase
Agreement with IMS (as Seller) providing that “The Buyer shall purchase from the Seller all
retail customer accounts of the Seller except for any accounts that choose to transfer to another
broker dealer” and that “The Buyer shall pay to the Seller a total of $1,000 for all retail accounts
that choose to transfer to the Buyer.”
DECLARATION OF DWAYNE K. CALTON Page 2 of 410. Although the agreement was entitled “Asset Purchase Agreement,” the transaction
did not involve the sale by IMS or the purchase by Calton of retail customer assets, and could not
have involved the sale or purchase of retail customer assets, because (a) IMS did not own retail
customer assets and therefore could not have sold them, (b) retail customer assets are owned
beneficially by the retail customers themselves, and the retail customers did not sell them, and
(c) at the time of the transaction, any such retail customer assets were in the possession, custody,
and control of Hilltop.
ll. Although the agreement was entitled “Asset Purchase Agreement,” the transaction
concerned a proposed transfer of a right to service IMS’s retail customer accounts conditioned
upon acceptance by IMS’s retail customers following receipt of Hilltop’s “negative consent”
letter and subject to FINRA approval.
12. Following the transaction, Hilltop retained possession, custody and control of any
such retail customer assets unless the retail customers elected to move such accounts and assets
to a different “carrying broker dealer” or “clearing broker dealer.”
13. The retail customer accounts that were the subject of the Asset Purchase
Agreement were not IMS assets, did not appear on IMS’s SEC Focus Reports as assets, and had
no asset value to IMS.
14. Although the Asset Purchase Agreement provides for consideration to be paid by
the Buyer of $1,000, such consideration did not represent asset value (as no assets were being
transferred). Instead, such consideration was a nominal sum required by FINRA to be included
in the transaction.
15. A transfer of a conditional right to service customer accounts has no inherent
value, and is instead done to comply with financial industry regulations.
DECLARATION OF DWAYNE K. CALTON Page 3 of 416. A transfer of a conditional right to service customer accounts is within the
absolute control of the retail customer, the custodian, and FINRA, none of whom are parties to
this lawsuit.
17. Attached hereto are true and correct copies of the following:
a. Asset Purchase Agreement (11/8/2017)
b. Check (11/10/2017)
c. Hilltop Securities Inc. “negative consent” letter (11/28/2017)
18. The “negative consent” letter demonstrates that Hilltop Securities Inc. had
possession, custody and control of IMS’s retail customer accounts.
Executed this 3" day of June, 2020, in @t2¢4AS __, Texas.
REA.
Dwayne K. Calton
DECLARATION OF DWAYNE K. CALTON Page 4 of 4ASSET PURCHASE AGREEMENT (the “Agreement
IMS Securities, Inc, ("IM
Calton & Associates, Inc. (”
ASSET PURCHASE AGREEMENT
”) dated this 8th day of November 2017 BETWEEN:
IS") af 10205 Westheimer, Suite $00, Houston, TX 77042 {the "Seller’)
AND
Calton”) of 2701 N. Rocky Point Drive Suite 1000, Tampa, FL 33607 (the
“Buyer”),
IN CONSIDERATION OF THE COVENANTS and agreements contained in this Purchase Agreement, the
parties to this Agreement agree as follows:
1)
2)
3)
IN WITNESS WHEREOF, the parties h.
PURCHASE OF ACCOUNTS: The Buyer shall purchase from the Seller all retail customer
accounts of the Seller except for any accounts that choose to transfer to another broker dealer
PURCHASE PRICE: The Buyer shall pay to the Seller a total of $1,000 for all retail accounts that
choese to transfer to the Buyer.
REGULATORY APPROVAL: Calton and IMS are securities broker dealers. As such, a transfer of
any customer accounts from iMS to Calton is subject to the guidelines and approval of the
Finsncial Industry Regulatory Authority (FINRA) and any other securities regulatory authorities,
WARRANTIES: Neither Buyer nor Seller make any warranties.
LIABILITIES: Seller shall be solely liable for all liabilities and obligations to the extent arising
from, or to the extent arising in connection with, ownership or operation of its business prior to
the date of this Agreement, whether or not reflected on its books and records, Buyer will not
assume any liability by virtue of this Agreement or the transactions cantemplated hereby or
otherwise, and wili have no liability for, any obligations and liabilities of Seller. Seller shall
remain solely liable for and obligated to discharge, all of their debts, contracts, agreements,
and other liabilities of any nature whatsoever, whether known or
'd, fixed or contingent, not expressly assumed by Buyer.
commitments, obligations
unknown, accrued or not accrue
eve executed and delivered this Agreement as of the date first
written above
IMS Securities, Inc , Seller
By:
tts:
Calton RK Assosigtes, Inc, I yer :
WES Leth daod
\-<2 € CA
ws CO _
IMS025067BANK OF AMERICA +
CALTON
CALTON & ASSOCIATES, INC. ; Boar ier
2701 NROCKY POINT ORIVE, SUITE 1000: . Check Number 30048 =
~TAMPAFLSSO07 + : ; ort
Memo;" - Asset Purchase Agreement Nw aonin
REQUIRES TWO SIGHATUNES I AMOUNT 6
‘Thousand and 00/400 Dollars, «NOY VAUD AFTER of OAYS ;
Inc.
TOTHE |
_IMS Securitie:
ORDER * "10205 Westheimer Rd.
Suite 500. ‘
» Houston, TX 77042
so Reo eS NTC A TAT
"QO 30048" 80631002778 OOLLO5353 b650"
IMS025068HiltopSecurities Se
AHilltop Holdings Company
November 28, 2017
Dear Client,
IMS Securities, Inc. has entered into an asset transfer agreement with Calton & Associates. Inc.
Accordingly, all IMS Securities, Inc. (“IMS”) brokerage accounts held at Hilltop Securities Inc.
(Hilltop”) will transfer to Calton & Associates, Inc. (“Calton”).
IMS has chosen to cease operating as a registered broker dealer serving retail clients. Calton
wishes to serve as your new brokerage firm, and to assign your account to the broker you
currently use with IMS. Your broker will continue to provide you with the same great service
that you have come to expect with minimal interruption in service.
Arranging for your account(s) to be moved to a firm that already has a clearing and custodial
relationship with Hilltop, is an important part of minimizing any disruption in your investment
activities. Here is how the transition will work:
On December 15, 2017, the assets in your brokerage account will be transferred from IMS to Calton.
Hilltop will continue to act as your clearing firm. Your account number will remain the same and all
historical information, Automated Clearing House (“ACH”) relationships with your bank account(s),
Vision checkbooks and/or Visa debit cards will transfer with your account to Calion, The Money
Market, Bank Insured Deposit, or Free Sweep options on your account will remain unchanged
Checks you wish to deposit into your account will still be made out to Hilltop. Jf your account is an
IRA account or other qualified retirement plan the trustee will also remain the same This transfer
will occur automatically and al no cost to you and does not require any further action on your part.
However, if you do not wish to have Calton & Associates, Inc. serve as your new brokerage
firm, please contact Hilltop Securities Inc. by mail at Hilltop Securities Inc., 1201 Elm Street,
Suite 3500 — Clearing Services, Dallas TX 75270 or fax to 214-859-1535 to object to the
transfer by December 8, 2017 and then make arrangements to transfer your account to another
brokerage firm at no cost to you.
Please be aware that if you decide not to transfer your account(s) to Calton you will only be
able to facilitate liquidating transactions until you are able to complete the transfer of your
account(s) to another brokerage firm.
There is no charge for you to transfer your account to Calton. However, you may incur a
$100.00 ACAT fee and $50 IRA Termination fee or $150.00 (non-ACAT) if you choose to
transfer your account(s) from Calton to another brokerage firm ninety days after the transfer
is complete on December 11, 2017.
As part of this transfer you will continue receiving statements from Hilltop as you always have.
IMS025069The Customer Information Brochure and Hilltop Securities Privacy Policy that you received when
you opened your account discuss the terms, fees, and provisions thal govem your accounl at Hilltop
in greater detail. If you would like additional copies, please contact Hilltop, and one will be provided
Hilltop Securities Inc., IMS Securities, Inc. and Calton & Associates, Inc. are in compliance with the
Securities and Exchange Commission Reg S-P, Privacy of Consumer Financial Information.
Your account assets will be protected by the Securities Investors Protection Corporation (“SIPC”)
and an additional policy purchased from Lloyd’s of London. The additional policy covers the net
equity of customers’ accounts up to an aggregate of $200 million, Neither SIPC protection, nor the
protection in excess of that provided by SIPC, coyers a decline in the value of a customer's assets
due to market loss. For more information about SIPC, please view the organization's web site:
org.
way
Should you have any questions or require assistance with any matter related to this transfer, you may
contact Hilllop at 214-859-9100 or by mail al 1201 Elm Street, Suite 3500 — Clearing Services,
Dallas TX 75270.
Sincerely,
Hilltop Sccurities Inc.
1MS025070NO. 2019-79102
RALPH AUGUILLARD et al., IN THE DISTRICT COURT
Plaintiffs,
v. HARRIS COUNTY, TEXAS
CALTON & ASSOCIATES INC.,
WESTPARK WEALTH ADVISORS INC.,
and CHRISTOPHER D. GAMMON,
PLR UP LD UP LD UD LP or UD
Defendants. 125" JUDICIAL DISTRICT
DECLARATION OF CHRISTOPHER D. GAMMON
My name is Christopher D. Gammon. | formerly served as Chief Financial Officer for
IMS Securities Inc., a defunct broker dealer, and currently serve as Chief Executive Officer of
Westpark Wealth Advisors Inc., a financial advisory firm. | declare pursuant to TEX. CIV. PRAC.
& Rem. CODE §132.001 (which provides that an unsworn declaration may be used in lieu of a
written sworn verification required by rule) under penalty of perjury that (a) I am authorized to
make the following statements on behalf of myself and Westpark Wealth Advisors Inc., (b) I
have personal knowledge of the facts set forth herein, (c) the factual statements set forth herein
are true and correct, and (d) I have personal knowledge of the documents attached to this
Declaration, and (e) the documents attached to this Declaration are true and correct copies of the
originals.
1. On June 16, 2016, Plaintiffs Ralph Auguillard e¢ a/. initiated FINRA Arbitration
No. 16-01800 asserting claims against IMS Securities Inc., Jackie Divono Wadsworth,
Christopher D. Gammon, Michael J. Spears, Joshua Patterson, and Stacey Rognon for
negligence, gross negligence, misrepresentation, omission of a material fact, failure to supervise,
breach of fiduciary duty, breach of contract, and control person liability related to alleged over-
DECLARATION OF CHRISTOPHER D. GAMMON Page | of 7concentration of Claimants’ retirement portfolios in illiquid alternative investments, annuities
and private placements.
2: On October 31, 2017, following a FINRA arbitration hearing, a panel of three
arbitrators issued an Arbitration Award finding liability against IMS Securities Inc., Joshua
Patterson, and Stacey Rognon, but denying liability against Jackie Divono Wadsworth,
Christopher D. Gammon and Michael J. Spears.
85 On November 8, 2017, IMS Securities Inc. entered into a written agreement with
Calton & Associates Inc. for the purpose of transferring conditional rights to service retail
customer accounts.
4. On November 10, 2017, Calton & Associates Inc. delivered to IMS Securities Inc.
a check in the amount of $1,000.00.
5. On November 10, 2017, Plaintiffs Ralph Auguillard e/ al. initiated Cause No.
2017-75766 in the 157" Judicial District Court, Harris County, Texas, for the purpose of
confirming the Arbitration Award against IMS Securities Inc., Joshua Patterson, and Stacey
Rognon.
6. On December 28, 2017, as a consequence of the Arbitration Award and pursuant
to FINRA Rule 9553, FINRA cancelled the membership of IMS Securities Inc.
7. On January 12, 2018, in Cause No. 2017-75766, the 157" Judicial District Court
signed an interlocutory “Order Confirming Award of Arbitrator and Judgment Against IMS
Securities Inc.”
8. On January 29, 2018, the U.S. Securities and Exchange Commission terminated
the registration status of IMS Securities Inc.
o On March 20, 2018, in Cause No. 2017-75766, the 157" Judicial District Court
DECLARATION OF CHRISTOPHER D. GAMMON Page 2 of 7signed an order severing “Plaintiffs’ claims against IMS Securities Inc.” into a new Cause No.
2017-75766A.
10. On July 13, 2018, IMS Securities Inc. filed a Certificate of Termination with the
Texas Secretary of State effectively terminating its existence.
11. On August 14, 2018, in Cause No. 2017-75766A, the 157" Judicial District Court
entered a Final Judgment in favor of Plaintiffs and against IMS Securities Inc.
12. On August 22, 2018, in Cause No. 2017-75766A, Plaintiffs filed a Motion to
Compel IMS Securities Inc. to Comply with Post-Judgment Discovery Requests.
13. On September 21, 2018, in Cause No. 2017-75766A, the 157" Judicial District
Court entered an Order Denying Plaintiffs’ Motion to Compel IMS Securities Inc. to Comply
with Post-Judgment Discovery Requests, but ordering the custodian of records for IMS
Securities Inc. to produce corporate records, following which Jackie D. Wadsworth, the
custodian of records for IMS Securities Inc., produced 25,066 pages of corporate records to
Plaintiffs.
14, On October 30, 2019, Plaintiffs initiated Cause No. 2019-79102 in the 125"
Judicial District Court for the purpose of asserting claims against Defendants Calton &
Associates Inc., Westpark Wealth Advisors Inc., and Christopher D. Gammon under the Texas
Uniform Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. CoDE §24.001 et seq., and for
unjust enrichment.
In their Petition, Plaintiffs allege that they are judgment creditors of IMS Securities Inc.,
and that on November 8, 2017, IMS Securities Inc. made a “fraudulent conveyance” to Calton &
Associates Inc.
15. No assets of IMS Securities Inc. were transferred to Calton & Associates Inc.,
DECLARATION OF CHRISTOPHER D. GAMMON Page 3 of 7Westpark Wealth Advisors Inc. or Christopher D. Gammon.
16. Calton & Associates Inc., Westpark Wealth Advisors Inc. and Christopher D.
Gammon are not transferees of assets of IMS Securities Inc.
17. IMS Securities Inc. (“IMS”) was a small “introducing broker dealer,” meaning
that it “introduced” its retail customer accounts to a “clearing” or “carrying” broker dealer and
custodian.
18. Hilltop Securities Inc. (“Hilltop”), a Dallas-based multi-service wealth-
management company, was the “clearing” or “carrying” broker dealer and custodian to which
IMS introduced retail customer accounts.
19. As the “clearing” or “carrying” broker dealer and custodian for IMS, Hilltop
possessed and controlled all cash and securities owned by IMS retail customers, maintained all
retail customer accounts for IMS, cleared all trades for such accounts, and sent to IMS retail
customers all confirmations and statements.
20. IMS retail customer accounts and assets were not owned by IMS, but were instead
owned beneficially by the retail customers themselves, and were possessed and controlled by
Hilltop.
21. Calton & Associates Inc. (“Calton”), a Florida-based “introducing broker dealer,”
also “introduces” its retai] customer accounts to Hilltop.
22. On November 8, 2017, Calton (as Buyer) entered into an Asset Purchase
Agreement with IMS (as Seller) providing that “The Buyer shall purchase from the Seller all
retail customer accounts of the Seller except for any accounts that choose to transfer to another
broker dealer” and that “The Buyer shall pay to the Seller a total of $1,000 for all retail accounts
that choose to transfer to the Buyer.”
DECLARATION OF CHRISTOPHER D. GAMMON Page 4 of 723. Although the agreement was entitled “Asset Purchase Agreement,” the transaction
did not involve the sale by IMS or the purchase by Calton of retail customer assets, and could not
have involved the sale or purchase of retail customer assets, because (a) IMS did not own retail
customer assets and therefore could not have sold them, (b) retail customer assets are owned
beneficially by the retail customers themselves, and the retail customers did not sell them, and
(c) at the time of the transaction, any such retail customer assets were in the possession, custody,
and control of Hilltop.
24. Although the agreement was entitled “Asset Purchase Agreement,” the transaction
concerned a proposed transfer of a right to service IMS’s retail customer accounts conditioned
upon acceptance by IMS’s retail customers following receipt of Hilltop’s “negative consent”
letter and subject to FINRA approval.
25, Following the transaction, Hilltop retained possession, custody and control of any
such retail customer assets unless the retail customers elected to move such accounts and assets
to a different “carrying broker dealer” or “clearing broker dealer.”
26. The retail customer accounts that were the subject of the Asset Purchase
Agreement were not IMS assets, did not appear on IMS’s SEC Focus Reports as assets, and had
no asset value to IMS.
27. Although the Asset Purchase Agreement provides for consideration to be paid by
the Buyer of $1,000, such consideration did not represent asset value (as no assets were being
transferred). Instead, such consideration was a nominal sum required by FINRA to be included
in the transaction.
28. A transfer of a conditional right to service customer accounts has no inherent
value, and is instead done to comply with financial industry regulations.
DECLARATION OF CHRISTOPHER D. GAMMON Page 5 of 729. A transfer of a conditional right to service customer accounts is within the
absolute control of the retail customer, the custodian, and FINRA, none of whom are parties to
this lawsuit.
30. The transfer of a proposed right to service IMS’s retail customer accounts did not
involve the sale of IMS assets, was not a sale of “virtually all assets of IMS,” and IMS was not
insolvent as a result of the transfer.
31. The transfer of a proposed right to service IMS’s retail customer accounts was not
made with the intent to hinder, delay or defraud creditors of IMS by placing IMS assets beyond
the reach of creditors, as the transfer was not a transfer of IMS assets.
32. Attached hereto are true and correct copies of the following:
a. Hilltop Securities Inc. “negative consent” letter (11/28/2017)
b. Hilltop Securities Inc. Customer Statements for IMS (9/29/2017 to 1/31/2018)
c. SEC Focus Reports for IMS (7/1/2017 to 12/31/2017)
d. Texas Capital Bank Account Statements for IMS (10/1/2017 to 1/31/2018)
33. The “negative consent” letter demonstrates that Hilltop Securities Inc. had
possession, custody and control of IMS’s retail customer accounts.
34. The Customer Statements demonstrates that Hilltop Securities Inc. reported retail
customer account information to IMS.
35. The SEC Focus Reports demonstrate that IMS did not carry its own retail
customer accounts, did not assign a value to retail customer accounts, and did not list retail
customer accounts as “assets.”
36. The SEC Focus Reports and the Texas Capital Bank Account Statements
demonstrate that IMS was not insolvent as a result of the November 2017 transfer.
DECLARATION OF CHRISTOPHER D. GAMMON Page 6 of 7Executed this 4" day of June, 2020. ~
Christopher D. Gammon
DECLARATION OF CHRISTOPHER D. GAMMON Page 7 of 7HilltopSecurities Si
Atilltop Holdings Company
November 28, 2017
Dear Client
Preview
NO. 2019-79102 RALPH AUGUILLARD et al., IN THE DISTRICT COURT Plaintiffs, v. HARRIS COUNTY, TEXAS CALTON & ASSOCIATES INC., WESTPARK WEALTH ADVISORS INC., and CHRISTOPHER D. GAMMON, PO UN LN OD UP LO KD LP OP Defendants. 125" JUDICIAL DISTRICT DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Plaintiffs’ claims are unmeritorious and unsupportable and should be summarily disposed. Defendants Calton & Associates Inc., Westpark Wealth Advisors Inc., and Christopher D. Gammon move pursuant to Rules 166a(c) (traditional motion) and 166a(i) (no- evidence motion) for summary disposition of Plaintiffs’ claims under the Texas Uniform Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. CODE §24.001 ef seg. and for unjust enrichment. Grounds Defendants move for traditional summary judgment on Plaintiffs’ claims and causes of action, and disprove at least one element of each claim and cause of under TUFTA and for unjust enrichment as a matter of law. Plaintiffs either cannot raise a genuine issue of material fact, or any such fact issues raised by Plaintiffs are negated as a matter of law. Defendants move for traditional summary judgment on their affirmative defenses of limitations (as to Defendants Westpark and Gammon) and res judicata (as to Defendant Gammon), and prove such affirmative defenses as a matter of law. Plaintiffs either cannot raise a genuine issue of material fact, or any such fact issues raised by Plaintiffs are negated as a DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page | of 16matter of law. Defendants move for no-evidence summary judgment on Plaintiffs’ claims and causes of action under TUFTA and for unjust enrichment for which Plaintiffs have the burden of proof at trial. Plaintiffs have had adequate time for discovery, and there is no evidence to support Plaintiffs’ claims and causes of action. Pertinent Procedural History Supported by Declaration On June 16, 2016, Plaintiffs initiated FINRA Arbitration No. 16-01800 asserting claims against IMS Securities Inc., Jackie Divono Wadsworth, Christopher D. Gammon, Michael J. Spears, Joshua Patterson, and Stacey Rognon for negligence, gross negligence, misrepresentation, omission of a material fact, failure to supervise, breach of fiduciary duty, breach of contract, and control person liability related to alleged over-concentration of Plaintiffs’ retirement portfolios in illiquid alternative investments, annuities and private placements. On October 31, 2017, following a FINRA arbitration hearing, a panel of three arbitrators issued an Arbitration Award finding liability against IMS Securities Inc., Joshua Patterson, and Stacey Rognon, but denying liability against Jackie Divono Wadsworth, Christopher D. Gammon and Michael J. Spears. On November 8, 2017, IMS Securities Inc. entered into a written agreement with Calton & Associates Inc. for the purpose of transferring conditional rights to service retail customer accounts. On November 10, 2017, Calton & Associates Inc. delivered to IMS Securities Inc. a check in the amount of $1,000.00. On November 10, 2017, Plaintiffs initiated Cause No. 2017-75766 in the 157" Judicial District Court, Harris County, Texas, for the purpose of confirming the Arbitration Award DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 2 of 16against IMS Securities Inc., Joshua Patterson, and Stacey Rognon. On December 28, 2017, as a consequence of the Arbitration Award and pursuant to FINRA Rule 9553, FINRA cancelled the membership of IMS Securities Inc. On January 12, 2018, in Cause No. 2017-75766, the 157" Judicial District Court signed an interlocutory “Order Confirming Award of Arbitrator and Judgment Against IMS Securities Inc.” On January 29, 2018, the U.S. Securities and Exchange Commission terminated the registration status of IMS Securities Inc. On March 20, 2018, in Cause No. 2017-75766, the 157" Judicial District Court signed an order severing “Plaintiffs’ claims against IMS Securities Inc.” into a new Cause No. 2017- 75706A. On July 13, 2018, IMS Securities Inc. filed a Certificate of Termination with the Texas Secretary of State effectively terminating its existence. On August 14, 2018, in Cause No. 2017-75766A, the 157" Judicial District Court entered a Final Judgment in favor of Plaintiffs and against IMS Securities Inc. On August 22, 2018, in Cause No. 2017-75766A, Plaintiffs filed a Motion to Compel IMS Securities Inc. to Comply with Post-Judgment Discovery Requests. On September 21, 2018, in Cause No. 2017-75766A, the 157" Judicial District Court entered an Order Denying Plaintiffs’ Motion to Compel IMS Securities Inc. to Comply with Post-Judgment Discovery Requests, but ordering the custodian of records for IMS Securities Inc. to produce corporate records, following which the custodian of records for IMS Securities Inc. produced 25,066 pages of corporate record to Plaintiffs. On October 30, 2019, Plaintiffs initiated Cause No. 2019-79102 in the 125" Judicial DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 3 of 16District Court for the purpose of asserting claims against Defendants Calton & Associates Inc., Westpark Wealth Advisors Inc., and Christopher D. Gammon under the Texas Uniform Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. Cope §24.001 ef seq., and for unjust enrichment. In their Petition, Plaintiffs allege that they are judgment creditors of IMS Securities Inc., and that on November 8, 2017, IMS Securities Inc. made a “fraudulent conveyance” to Calton & Associates Inc. Pertinent Facts Supported by Declaration There is no evidence that IMS Securities Inc. transferred any of its assets in November 2017 to Calton & Associates Inc., Westpark Wealth Advisors Inc., or Christopher D. Gammon, such that, as a matter of fact and law there was no “fraudulent transfer.” The following facts are dispositive: + IMS Securities Inc. (“IMS”) was a small “introducing broker dealer,” meaning that it “introduced” its retail customer accounts to a “clearing” or “carrying” broker dealer and custodian. * Hilltop Securities Inc. (“Hilltop”), a Dallas-based multi-service wealth- management company, was the “clearing” or “carrying” broker dealer and custodian to which IMS introduced retail customer accounts. + As the “clearing” or “carrying” broker dealer and custodian for IMS, Hilltop possessed and controlled all cash and securities owned by IMS retail customers, maintained all retail customer accounts for IMS, cleared all trades for such accounts, and sent to IMS retail customers all confirmations and statements. + IMS retail customer accounts and assets were not owned by IMS, but were DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 4 of 16instead owned beneficially by the retail customers themselves, and were possessed and controlled by Hilltop. * Calton & Associates Inc. (“Calton”), a Florida-based “introducing broker dealer,” also “introduces” its retail customer accounts to Hilltop. * On November 8, 2017, Calton (as Buyer) entered into an Asset Purchase Agreement with IMS (as Seller) providing that “The Buyer shall purchase from the Seller all retail customer accounts of the Seller except for any accounts that choose to transfer to another broker dealer” and that “The Buyer shall pay to the Seller a total of $1,000 for all retail accounts that choose to transfer to the Buyer.” + Although the agreement was entitled “Asset Purchase Agreement,” the transaction did not involve the sale by IMS or the purchase by Calton of retail customer assets, and could not have involved the sale or purchase of retail customer assets, because (a) IMS did not own retail customer assets and therefore could not have sold them, (b) retail customer assets are owned beneficially by the retail customers themselves, and the retail customers did not sell them, and (c) at the time of the transaction, any such retail customer assets were in the possession, custody, and control of Hilltop. + Although the agreement was entitled “Asset Purchase Agreement,” the transaction concerned a proposed transfer of a right to service IMS’s retail customer accounts conditioned upon acceptance by IMS’s retail customers following receipt of Hilltop’s “negative consent” letter and subject to FINRA approval. DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 5 of 16* Following the transaction, Hilltop retained possession, custody and control of any such retail customer assets unless the retail customers elected to move such accounts and assets to a different “carrying broker dealer” or “clearing broker dealer.” + The retail customer accounts that were the subject of the Asset Purchase Agreement were not IMS assets, did not appear on IMS’s SEC Focus Reports as assets, had no asset value to IMS, and cannot be the subject of a TUFTA action. + Although the Asset Purchase Agreement provides for consideration to be paid by the Buyer of $1,000, such consideration did not represent asset value (as no assets were being transferred). Instead, such consideration was a nominal sum required by FINRA to be included in the transaction. + A transfer of a conditional right to service customer accounts has no inherent value, and is instead done to comply with financial industry regulations. * A transfer of a conditional right to service customer accounts is within the absolute control of the retail customer, the custodian, and FINRA, none of whom are parties to this lawsuit. + The transfer of a proposed right to service IMS’s retail customer accounts did not involve the sale of IMS assets, was not a sale of “virtually all assets of IMS,” and IMS was not insolvent as a result of the transfer. + The transfer of a proposed right to service IMS’s retail customer accounts was not made with the intent to hinder, delay or defraud creditors of IMS by placing IMS assets beyond the reach of creditors, as the transfer was not a DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 6 of 16transfer of IMS assets. Summary Judgment Evidence Defendants attach and rely upon the following summary judgment evidence: Declaration of Dwayne K. Calton attaching: + Asset Purchase Agreement (11/8/2017) * Check (11/10/2017) + Hilltop “negative consent” letter (11/28/2017) Declaration of Christopher D. Gammon attaching: + Hilltop “negative consent” letter (11/28/2017) + Hilltop Customer Statements for IMS (9/29/2017 to 1/31/2018) + SEC Focus Reports for IMS (7/1/2017 to 12/31/2017) * Texas Capital Bank Account Statements for IMS (10/1/2017 to 1/31/2018) Argument and Authorities Plaintiffs allege (wrongfully) that a transaction occurring in November 2017 between IMS Securities Inc. (the debtor) and Calton & Associates Inc. (the “transferee”) was “fraudulent.” But the transaction did not involve the transfer of an “asset” and does not therefor run afoul of TUFTA. Rather, the transaction concerned a proposed transfer of a right to service IMS’s retail customer accounts conditioned upon acceptance by IMS’s retail customers following receipt of Hilltop’s “negative consent” letter and subject to FINRA approval. IMS did not own retail customer assets and therefore could not have sold them. Retail customer assets are owned beneficially by the retail customers themselves, and the retail customers did not sell them. At the time of the transaction, any such retail customer assets were in the possession, custody, and control of Hilltop, and the proposed conditional transfer was within the absolute DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 7 of 16control of the retail customer, the custodian (i.e. Hilltop), and FINRA, none of whom are parties to this lawsuit. The transfer had no realizable economic benefit, but was instead done to comply with financial industry regulations. At FINRA’s request, the transaction was evidenced by nominal consideration of $1,000.00. The purpose of TUFTA is not to protect the debtor’s creditors from all transfers that have no realizable economic benefit. The law actually tolerates such transfers. Janvey v. Golf Channel Inc., 487 S.W.3d 560, 575-76 (Tex. 2016) (emphasizing that a transfer subject to TUFTA must confer some direct or indirect economic benefit to the debtor, as opposed to benefits conferred solely on a third party, transfers that are purely gratuitous, and transactions that merely hold subjective value to the debtor or transferee). Here, IMS did not transfer its “assets” to Calton or anyone else. Rather, IMS merely transferred to Calton a conditional right to service retail customer accounts, subject to approval by the retail customer, the custodian (i.e. Hilltop), and FINRA, none of whom are parties to this lawsuit. The transfer became imperative because FINRA had given notice to IMS that its FINRA membership was about to be terminated, an unfortunate consequence of the adverse Arbitration Award dated October 31, 2017, in favor of these Plaintiffs, meaning that IMS would no longer be allowed by FINRA to service retail customer accounts. The transfer thus became imperative to protect the interests of third-party retail customers. The transaction was not intended to move, and did not result in the movement of, IMS’s assets beyond the reach of creditors. The transaction was not therefore subject to TUFTA. Moreover, and importantly, these Plaintiffs would not, under any circumstances, have a legitimate right or claim to any third-party retail customer accounts, regardless of whether such accounts had been serviced by IMS or were transferred to another broker dealer. That these DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 8 of 16Plaintiffs would insinuate such a right or claim is a demonstration of the frivolousness of this lawsuit. Nevertheless, if there is any doubt about whether TUFTA applies to the November 2017 transaction, all doubt should be removed because Plaintiffs cannot prove the essential elements of a TUFTA claim against the Defendants. While the November 2017 transfer did not confer a direct or indirect benefit to IMS (other than a nominal $1,000.00 payment), the nominal consideration constituted objective value at the time of the transfer even if it did not generate an asset or benefit that could be levied to satisfy unsecured creditors, was the result of an arm’s length transaction, and was made in good faith in the ordinary course of Calton’s business, thus satisfying TUFTA’s “reasonably equivalent value” requirement. Janvey at 573 (TUFTA operates to prevent debtors from defrauding creditors by placing assets beyond their reach, but it also protects transferees who take in good faith and for a reasonably equivalent value), This is a complete defense, regardless of the intent of the debtor. Jd. As to Defendant Calton & Associates Inc. Plaintiffs purport to assert claims against Calton for “actual fraudulent transfer” and “constructive fraudulent transfer” under TUFTA, and for “unjust enrichment.” As to the claims for “actual fraudulent transfer,” Plaintiffs assert that a purported transfer of an “asset” from IMS to Calton: + was “fraudulent as IMS received less than reasonably equivalent value;” * was made “with actual intent to hinder, delay, or defraud the creditors or future creditors of IMS;” + “Plaintiffs have been harmed;” and + “Plaintiffs are entitled to avoid the transfer and to recover property or DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 9 of 16the value of the property transferred...” While TUFTA provides that “a creditor, subject to the limitations in Section 24.009...may obtain...avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim,” Plaintiffs (a) fail to cite relevant portions of TUFTA supporting claims for “actual fraudulent transfer” or entitling Plaintiffs to the relief sought, and (b) fail to acknowledge defenses and protections available to an alleged transferee. See Tex. Bus. & Com. CODE §§24.008 (Remedies of Creditors) and 24.009 (Defenses, Liability, and Protection of Transferee). A TUFTA claim that the debtor (ie. IMS) made the transfer or incurred the obligation “with actual intent to hinder, delay, or defraud any creditor of the debtor” would be a claim made under Section 24.005(a)(1). However, any such transfer or obligation is not voidable against a person who took in good faith and for a reasonably equivalent value. See TEx. Bus. & Com. CoDE §24.009(a). Here, because the alleged “asset” was not owned by IMS, had no inherent value to IMS, and was not listed as an “asset” on IMS’s Focus Reports filed with the SEC. Here, there is no evidence that the transfer was made “with actual intent to hinder, delay, or defraud any creditor of the debtor.” Because (a) Calton took in good faith, (b) the value of the transaction was set by FINRA, and (c) IMS’s intent cannot be proven, Calton asserts an absolute statutory defense under Section 24.009(a) to, and is entitled to summary judgment on, Plaintiffs’ claims for “actual fraudulent transfer.” As to the claims for “constructive fraudulent transfer,” Plaintiffs assert that a purported transfer from IMS Securities Inc. to Calton: * “involved the sale of virtually all assets of IMS in exchange for less than the reasonably equivalent value;” DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 10 of 16+ “IMS was insolvent at the time or became insolvent as result of the transfer;” * “Plaintiffs have been harmed;” and + “Plaintiffs are entitled to avoid the transfer and to recover property or the value of the property transferred...” While TUFTA provides that “a creditor, subject to the limitations in Section 24.009...may obtain...avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim,” Plaintiffs (a) fail to cite relevant portions of TUFTA supporting claims for “constructive fraudulent transfer” or entitling Plaintiffs to the relief sought, and (b) fail to acknowledge defenses and protections available to an alleged transferee. See TEX. BUS. & COM. CODE §§24.008 (Remedies of Creditors) and 24.009 (Defenses, Liability, and Protection of Transferee). Here, there is no evidence that the transfer of a conditional right to service retail customer accounts “involved the sale of virtually all assets of IMS.” Nor is there evidence that “IMS was insolvent at the time or became insolvent as a result of the transfer.” To the contrary, the SEC Focus Report for IMS shows that, at the time of the transfer, IMS had Total Assets of $427,466.00, none of which was transferred to Calton. See SEC Focus Report for the period ending 10/31/17, attached to the Declaration of Christopher D. Gammon. Here, because any such transfer or obligation is not voidable against Calton because Calton took in good faith and for a reasonably equivalent value, because Calton does not have to the burden to demonstrate whether or not IMS sold “virtually all assets” or “was insolvent,” and because the evidence tends to show that IMS did not sell “virtually all assets” and was not “insolvent” at the time of the transaction, Calton asserts an absolute statutory defense under DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 11 of 16Section 24.009(a) to, and is entitled to summary judgment on, Plaintiffs’ claims for “constructive fraudulent transfer.” As to Plaintiffs’ claims for “unjust enrichment,” there is disagreement among the courts of appeals in Texas whether the restitutional theory of “unjust enrichment” stands an independent cause of action. See Cristobal v. Allen, 2010 LEXIS 5829 *16 n.J (Tex. App.— Houston [1st Dist.], no pet.) (noting that other courts of appeal have held that unjust enrichment is not an independent cause of action); see also Lee v. Lee, 411 S.W.3d 95, 111-12 (Tex. App.— Houston [1* Dist.] 2013, no pet.) (reasoning that a person is unjustly enriched when he obtains a benefit from another by fraud, duress or the taking of undue advantage, but cautioning that unjust enrichment is not a proper remedy merely because it might appear expedient or generally fair that some recompense be afforded for an unfortunate loss or because the benefits to the person sought to be charged amount to a windfall). Here, Plaintiffs have pleaded no facts or elements demonstrating fraud, duress or the taking of undue advantage by Calton, and have failed to plead a cause of action against Calton for unjust enrichment. TUFTA provides the exclusive statutory remedy for fraudulent transfer, and a cause of action for unjust enrichment is not a proper remedy. Calton is therefore entitled to summary judgment on Plaintiffs’ claims for “unjust enrichment.” As to Defendant Westpark Wealth Advisors Inc. Plaintiffs purport to assert claims against Westpark for “actual fraudulent transfer” and “constructive fraudulent transfer” under TUFTA, and for “unjust enrichment.” However, Plaintiffs assert no facts and provide no evidence showing that Westpark was a transferee of any IMS asset. The court should dismiss Plaintiffs’ claims against Westpark because Westpark is not a transferee or subsequent transferee under TUFTA and cannot therefore be liable to Plaintiffs under TUFTA. DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 12 of 16To the extent that Plaintiffs contend that Westpark is an IMS “insider,” and that a transfer made by IMS is fraudulent as to a creditor whose claim arose before the transfer was made if (a) the transfer was made to an insider for an antecedent debt, (b) the debtor was insolvent at that time, and (c) the insider had reasonable cause to believe that the debtor was insolvent, then any such TUFTA claims against Westpark were extinguished one year after the alleged transfer. See TEX. Bus. & Com. CODE §24.006(b) and §24.010(a)(3). Further, Plaintiffs have pleaded no facts or elements demonstrating fraud, duress or the taking of undue advantage by Westpark, and have thus failed to plead a cause of action against Westpark for unjust enrichment. Westpark is therefore entitled to summary judgment on all claims asserted by Plaintiffs. As to Defendant Christopher D. Gammon. Plaintiffs purport to assert claims against Gammon for “actual fraudulent transfer” and “constructive fraudulent transfer” under TUFTA, and for “unjust enrichment.” However, Plaintiffs assert no facts and provide no evidence showing that Gammon was a transferee of any IMS asset. The court should dismiss Plaintiffs’ claims against Gammon because Gammon is not a transferee or subsequent transferee under TUFTA and cannot therefore be liable to Plaintiffs under TUFTA. To the extent that Plaintiffs contend that Gammon is an IMS “insider,” and that a transfer made by IMS is fraudulent as to a creditor whose claim arose before the transfer was made if (a) the transfer was made to an insider for an antecedent debt, (b) the debtor was insolvent at that time, and (c) the insider had reasonable cause to believe that the debtor was insolvent, then any such TUFTA claims against Gammon were extinguished one year after the alleged transfer. See Tex. Bus. & Com. CoDE §24.006(b) and §24.010(a)(3). Further, Plaintiffs have pleaded no facts or elements demonstrating fraud, duress or the DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 13 of 16taking of undue advantage by Gammon, and have thus failed to plead a cause of action against Gammon for unjust enrichment. Gammon is therefore entitled to summary judgment on all claims asserted by Plaintiffs. Further, Plaintiffs are barred and precluded by res judicata from litigating claims against Gammon that (a) were actually litigated and disposed in the underlying arbitration, (b) arise from the same transaction or “nucleus of operative facts” that could have been litigated and disposed in the underlying arbitration, and (c) accrued before entry of the Order Confirming Award of Arbitrator and Judgment Against IMS Securities Inc. dated January 12, 2018, the Order Granting Motion to Sever dated March 20, 2018, and the Final Judgment dated April 8, 2019. Here, the claims asserted by Plaintiffs against Gammon accrued in November 2017, and are therefore barred. Prayer Defendants Calton & Associates Inc., Westpark Wealth Advisors Inc. and Christopher Gammon request the court to find that: + This motion for summary judgment sets forth adequate grounds and is supported by summary judgment proof; * Defendants are not transferees of “assets” of IMS Securities Inc., such that TUFTA does not apply; * a transfer of a conditional right to service customer accounts is not a transfer of an “asset” of the broker dealer and has no inherent value, and is instead done to comply with financial industry regulations; * a transfer of a conditional right to service customer accounts is within the absolute control of the retail customer, the custodian, and FINRA, none of DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 14 of 16whom are parties to this lawsuit: * Calton & Associates Inc. took from IMS Securities Inc. a conditional right to service retail customer accounts in good faith and for a reasonably equivalent value established by FINRA; * Calton & Associates Inc., Westpark Wealth Advisors Inc. or Christopher D. Gammon have disproven Plaintiffs’ assertions that “IMS received less than reasonably equivalent value,” or that the transfer was made “with actual intent to hinder, delay, or defraud” the creditors or future creditors of IMS,” or that the transfer involved a sale of IMS assets, or that it was a sale of “virtually all assets of IMS,” or that IMS was insolvent as a result of the transfer; such that Defendants have proved a complete statutory defense under Tex. Bus. & Com. CobE §24.009(a) protecting themselves and any subsequent transferee; * there is no evidence supporting Plaintiffs’ claims against Calton & Associates Inc., Westpark Wealth Advisors Inc. or Christopher D. Gammon for actual fraudulent transfer or constructive fraudulent transfer or unjust enrichment; and + any TUFTA claims against Westpark Wealth Advisors Inc. or Christopher D. Gammon were extinguished no later than November 2018, and are thus barred by limitations. Defendants Calton & Associates Inc., Westpark Wealth Advisors Inc. and Christopher Gammon request the court to enter an order granting their motion for summary judgment, dismissing Plaintiffs’ claims with prejudice, and awarding Defendants all costs and reasonable and necessary attorney fees incurred with respect to the challenged claims. DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 15 of 16Respectfully submitted, /s/ K. B. Battaglini K. B. Battaglini (kbattaglini@@strongpipkin.com) Texas Bar No. 01918060 STRONG PIPKIN BISSELL & LEDYARD LLP 4900 Woodway Drive, Suite 1200 Houston, Texas 77056 713.210.4371 direct ATTORNEYS FOR DEFENDANTS CALTON & ASSOCIATES INC., WESTPARK WEALTH ADVISORS INC. AND CHRISTOPHER D. GAMMON Certificate of Service This will certify that a true and correct copy of Defendants’ Motion for Summary Judgment was served this 4" day of June, 2020 per on the attorneys for Plaintiffs per TEX. R. Civ. P. 21 and 21a addressed as follows: Ryan Cook (reook@sseklaw.com) Shepherd Smith Edwards & Kantas LLP 1010 Lamar, Suite 900 Houston, Texas 77002 /s/ K. B. Battaglini K. B. Battaglini DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Page 16 of 16NO. 2019-79102 RALPH AUGUILLARD et al., IN THE DISTRICT COURT Plaintiffs, v. HARRIS COUNTY, TEXAS CALTON & ASSOCIATES INC., WESTPARK WEALTH ADVISORS INC., and CHRISTOPHER D. GAMMON, LUN LN LP UR EP LD RO? LOD HOD Defendants. 125" JUDICIAL DISTRICT DECLARATION OF DWAYNE K. CALTON My name is Dwayne K. Calton. I serve as President of Calton & Associates Inc., a broker dealer and investment advisory firm. I declare pursuant to TEX. Cly. PRAC. & REM. CODE §132.001 (which provides that an unsworn declaration may be used in lieu of a written sworn verification required by rule) under penalty of perjury that (a) I am authorized to make the following statements on behalf of Calton & Associates Inc., (b) I have personal knowledge of the facts set forth herein, (c) the factual statements set forth herein are true and correct, and (d) I have personal knowledge of the documents attached to this Declaration, and (e) the documents attached to this Declaration are true and correct copies of the originals. 1. On October 30, 2019, Plaintiffs initiated Cause No. 2019-79102 in the 125" Judicial District Court for the purpose of asserting claims against Defendants Calton & Associates Inc., Westpark Wealth Advisors Inc., and Christopher D. Gammon under the Texas Uniform Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. Cope §24.001 e/ seq., and for unjust enrichment. 2a In their Petition, Plaintiffs allege that they are creditors of IMS Securities Inc. on the basis of the Arbitration Award dated October 31, 2017, and allege that Defendants Calton & DECLARATION OF DWAYNE K. CALTON Page 1 of 4Associates Inc., Westpark Wealth Advisors Inc., and Christopher D. Gammon are transferees of assets of IMS Securities Inc. 8: No assets of IMS Securities Inc. were transferred to Calton & Associates Inc. 4. IMS Securities Inc. (“IMS”) was a small “introducing broker dealer,” meaning that it “introduced” its retail customer accounts to a “clearing” or “carrying” broker dealer and custodian. 5. Hilltop Securities Inc. (“Hilltop”), a Dallas-based multi-service wealth- management company, was the “clearing” or “carrying” broker dealer and custodian to which IMS introduced retail customer accounts. 6. As the “clearing” or “carrying” broker dealer and custodian for IMS, Hilltop possessed and controlled all cash and securities owned by IMS retail customers, maintained all retail customer accounts for IMS, cleared all trades for such accounts, and sent to IMS retail customers all confirmations and statements. 7. IMS retail customer accounts and assets were not owned by IMS, but were instead owned beneficially by the retail customers themselves, and were possessed and controlled by Hilltop. 8. Calton & Associates Inc. (“Calton”) also “introduces” its retail customer accounts to Hilltop. 9. On November 8, 2017, Calton (as Buyer) entered into an Asset Purchase Agreement with IMS (as Seller) providing that “The Buyer shall purchase from the Seller all retail customer accounts of the Seller except for any accounts that choose to transfer to another broker dealer” and that “The Buyer shall pay to the Seller a total of $1,000 for all retail accounts that choose to transfer to the Buyer.” DECLARATION OF DWAYNE K. CALTON Page 2 of 410. Although the agreement was entitled “Asset Purchase Agreement,” the transaction did not involve the sale by IMS or the purchase by Calton of retail customer assets, and could not have involved the sale or purchase of retail customer assets, because (a) IMS did not own retail customer assets and therefore could not have sold them, (b) retail customer assets are owned beneficially by the retail customers themselves, and the retail customers did not sell them, and (c) at the time of the transaction, any such retail customer assets were in the possession, custody, and control of Hilltop. ll. Although the agreement was entitled “Asset Purchase Agreement,” the transaction concerned a proposed transfer of a right to service IMS’s retail customer accounts conditioned upon acceptance by IMS’s retail customers following receipt of Hilltop’s “negative consent” letter and subject to FINRA approval. 12. Following the transaction, Hilltop retained possession, custody and control of any such retail customer assets unless the retail customers elected to move such accounts and assets to a different “carrying broker dealer” or “clearing broker dealer.” 13. The retail customer accounts that were the subject of the Asset Purchase Agreement were not IMS assets, did not appear on IMS’s SEC Focus Reports as assets, and had no asset value to IMS. 14. Although the Asset Purchase Agreement provides for consideration to be paid by the Buyer of $1,000, such consideration did not represent asset value (as no assets were being transferred). Instead, such consideration was a nominal sum required by FINRA to be included in the transaction. 15. A transfer of a conditional right to service customer accounts has no inherent value, and is instead done to comply with financial industry regulations. DECLARATION OF DWAYNE K. CALTON Page 3 of 416. A transfer of a conditional right to service customer accounts is within the absolute control of the retail customer, the custodian, and FINRA, none of whom are parties to this lawsuit. 17. Attached hereto are true and correct copies of the following: a. Asset Purchase Agreement (11/8/2017) b. Check (11/10/2017) c. Hilltop Securities Inc. “negative consent” letter (11/28/2017) 18. The “negative consent” letter demonstrates that Hilltop Securities Inc. had possession, custody and control of IMS’s retail customer accounts. Executed this 3" day of June, 2020, in @t2¢4AS __, Texas. REA. Dwayne K. Calton DECLARATION OF DWAYNE K. CALTON Page 4 of 4ASSET PURCHASE AGREEMENT (the “Agreement IMS Securities, Inc, ("IM Calton & Associates, Inc. (” ASSET PURCHASE AGREEMENT ”) dated this 8th day of November 2017 BETWEEN: IS") af 10205 Westheimer, Suite $00, Houston, TX 77042 {the "Seller’) AND Calton”) of 2701 N. Rocky Point Drive Suite 1000, Tampa, FL 33607 (the “Buyer”), IN CONSIDERATION OF THE COVENANTS and agreements contained in this Purchase Agreement, the parties to this Agreement agree as follows: 1) 2) 3) IN WITNESS WHEREOF, the parties h. PURCHASE OF ACCOUNTS: The Buyer shall purchase from the Seller all retail customer accounts of the Seller except for any accounts that choose to transfer to another broker dealer PURCHASE PRICE: The Buyer shall pay to the Seller a total of $1,000 for all retail accounts that choese to transfer to the Buyer. REGULATORY APPROVAL: Calton and IMS are securities broker dealers. As such, a transfer of any customer accounts from iMS to Calton is subject to the guidelines and approval of the Finsncial Industry Regulatory Authority (FINRA) and any other securities regulatory authorities, WARRANTIES: Neither Buyer nor Seller make any warranties. LIABILITIES: Seller shall be solely liable for all liabilities and obligations to the extent arising from, or to the extent arising in connection with, ownership or operation of its business prior to the date of this Agreement, whether or not reflected on its books and records, Buyer will not assume any liability by virtue of this Agreement or the transactions cantemplated hereby or otherwise, and wili have no liability for, any obligations and liabilities of Seller. Seller shall remain solely liable for and obligated to discharge, all of their debts, contracts, agreements, and other liabilities of any nature whatsoever, whether known or 'd, fixed or contingent, not expressly assumed by Buyer. commitments, obligations unknown, accrued or not accrue eve executed and delivered this Agreement as of the date first written above IMS Securities, Inc , Seller By: tts: Calton RK Assosigtes, Inc, I yer : WES Leth daod \-<2 € CA ws CO _ IMS025067BANK OF AMERICA + CALTON CALTON & ASSOCIATES, INC. ; Boar ier 2701 NROCKY POINT ORIVE, SUITE 1000: . Check Number 30048 = ~TAMPAFLSSO07 + : ; ort Memo;" - Asset Purchase Agreement Nw aonin REQUIRES TWO SIGHATUNES I AMOUNT 6 ‘Thousand and 00/400 Dollars, «NOY VAUD AFTER of OAYS ; Inc. TOTHE | _IMS Securitie: ORDER * "10205 Westheimer Rd. Suite 500. ‘ » Houston, TX 77042 so Reo eS NTC A TAT "QO 30048" 80631002778 OOLLO5353 b650" IMS025068HiltopSecurities Se AHilltop Holdings Company November 28, 2017 Dear Client, IMS Securities, Inc. has entered into an asset transfer agreement with Calton & Associates. Inc. Accordingly, all IMS Securities, Inc. (“IMS”) brokerage accounts held at Hilltop Securities Inc. (Hilltop”) will transfer to Calton & Associates, Inc. (“Calton”). IMS has chosen to cease operating as a registered broker dealer serving retail clients. Calton wishes to serve as your new brokerage firm, and to assign your account to the broker you currently use with IMS. Your broker will continue to provide you with the same great service that you have come to expect with minimal interruption in service. Arranging for your account(s) to be moved to a firm that already has a clearing and custodial relationship with Hilltop, is an important part of minimizing any disruption in your investment activities. Here is how the transition will work: On December 15, 2017, the assets in your brokerage account will be transferred from IMS to Calton. Hilltop will continue to act as your clearing firm. Your account number will remain the same and all historical information, Automated Clearing House (“ACH”) relationships with your bank account(s), Vision checkbooks and/or Visa debit cards will transfer with your account to Calion, The Money Market, Bank Insured Deposit, or Free Sweep options on your account will remain unchanged Checks you wish to deposit into your account will still be made out to Hilltop. Jf your account is an IRA account or other qualified retirement plan the trustee will also remain the same This transfer will occur automatically and al no cost to you and does not require any further action on your part. However, if you do not wish to have Calton & Associates, Inc. serve as your new brokerage firm, please contact Hilltop Securities Inc. by mail at Hilltop Securities Inc., 1201 Elm Street, Suite 3500 — Clearing Services, Dallas TX 75270 or fax to 214-859-1535 to object to the transfer by December 8, 2017 and then make arrangements to transfer your account to another brokerage firm at no cost to you. Please be aware that if you decide not to transfer your account(s) to Calton you will only be able to facilitate liquidating transactions until you are able to complete the transfer of your account(s) to another brokerage firm. There is no charge for you to transfer your account to Calton. However, you may incur a $100.00 ACAT fee and $50 IRA Termination fee or $150.00 (non-ACAT) if you choose to transfer your account(s) from Calton to another brokerage firm ninety days after the transfer is complete on December 11, 2017. As part of this transfer you will continue receiving statements from Hilltop as you always have. IMS025069The Customer Information Brochure and Hilltop Securities Privacy Policy that you received when you opened your account discuss the terms, fees, and provisions thal govem your accounl at Hilltop in greater detail. If you would like additional copies, please contact Hilltop, and one will be provided Hilltop Securities Inc., IMS Securities, Inc. and Calton & Associates, Inc. are in compliance with the Securities and Exchange Commission Reg S-P, Privacy of Consumer Financial Information. Your account assets will be protected by the Securities Investors Protection Corporation (“SIPC”) and an additional policy purchased from Lloyd’s of London. The additional policy covers the net equity of customers’ accounts up to an aggregate of $200 million, Neither SIPC protection, nor the protection in excess of that provided by SIPC, coyers a decline in the value of a customer's assets due to market loss. For more information about SIPC, please view the organization's web site: org. way Should you have any questions or require assistance with any matter related to this transfer, you may contact Hilllop at 214-859-9100 or by mail al 1201 Elm Street, Suite 3500 — Clearing Services, Dallas TX 75270. Sincerely, Hilltop Sccurities Inc. 1MS025070NO. 2019-79102 RALPH AUGUILLARD et al., IN THE DISTRICT COURT Plaintiffs, v. HARRIS COUNTY, TEXAS CALTON & ASSOCIATES INC., WESTPARK WEALTH ADVISORS INC., and CHRISTOPHER D. GAMMON, PLR UP LD UP LD UD LP or UD Defendants. 125" JUDICIAL DISTRICT DECLARATION OF CHRISTOPHER D. GAMMON My name is Christopher D. Gammon. | formerly served as Chief Financial Officer for IMS Securities Inc., a defunct broker dealer, and currently serve as Chief Executive Officer of Westpark Wealth Advisors Inc., a financial advisory firm. | declare pursuant to TEX. CIV. PRAC. & Rem. CODE §132.001 (which provides that an unsworn declaration may be used in lieu of a written sworn verification required by rule) under penalty of perjury that (a) I am authorized to make the following statements on behalf of myself and Westpark Wealth Advisors Inc., (b) I have personal knowledge of the facts set forth herein, (c) the factual statements set forth herein are true and correct, and (d) I have personal knowledge of the documents attached to this Declaration, and (e) the documents attached to this Declaration are true and correct copies of the originals. 1. On June 16, 2016, Plaintiffs Ralph Auguillard e¢ a/. initiated FINRA Arbitration No. 16-01800 asserting claims against IMS Securities Inc., Jackie Divono Wadsworth, Christopher D. Gammon, Michael J. Spears, Joshua Patterson, and Stacey Rognon for negligence, gross negligence, misrepresentation, omission of a material fact, failure to supervise, breach of fiduciary duty, breach of contract, and control person liability related to alleged over- DECLARATION OF CHRISTOPHER D. GAMMON Page | of 7concentration of Claimants’ retirement portfolios in illiquid alternative investments, annuities and private placements. 2: On October 31, 2017, following a FINRA arbitration hearing, a panel of three arbitrators issued an Arbitration Award finding liability against IMS Securities Inc., Joshua Patterson, and Stacey Rognon, but denying liability against Jackie Divono Wadsworth, Christopher D. Gammon and Michael J. Spears. 85 On November 8, 2017, IMS Securities Inc. entered into a written agreement with Calton & Associates Inc. for the purpose of transferring conditional rights to service retail customer accounts. 4. On November 10, 2017, Calton & Associates Inc. delivered to IMS Securities Inc. a check in the amount of $1,000.00. 5. On November 10, 2017, Plaintiffs Ralph Auguillard e/ al. initiated Cause No. 2017-75766 in the 157" Judicial District Court, Harris County, Texas, for the purpose of confirming the Arbitration Award against IMS Securities Inc., Joshua Patterson, and Stacey Rognon. 6. On December 28, 2017, as a consequence of the Arbitration Award and pursuant to FINRA Rule 9553, FINRA cancelled the membership of IMS Securities Inc. 7. On January 12, 2018, in Cause No. 2017-75766, the 157" Judicial District Court signed an interlocutory “Order Confirming Award of Arbitrator and Judgment Against IMS Securities Inc.” 8. On January 29, 2018, the U.S. Securities and Exchange Commission terminated the registration status of IMS Securities Inc. o On March 20, 2018, in Cause No. 2017-75766, the 157" Judicial District Court DECLARATION OF CHRISTOPHER D. GAMMON Page 2 of 7signed an order severing “Plaintiffs’ claims against IMS Securities Inc.” into a new Cause No. 2017-75766A. 10. On July 13, 2018, IMS Securities Inc. filed a Certificate of Termination with the Texas Secretary of State effectively terminating its existence. 11. On August 14, 2018, in Cause No. 2017-75766A, the 157" Judicial District Court entered a Final Judgment in favor of Plaintiffs and against IMS Securities Inc. 12. On August 22, 2018, in Cause No. 2017-75766A, Plaintiffs filed a Motion to Compel IMS Securities Inc. to Comply with Post-Judgment Discovery Requests. 13. On September 21, 2018, in Cause No. 2017-75766A, the 157" Judicial District Court entered an Order Denying Plaintiffs’ Motion to Compel IMS Securities Inc. to Comply with Post-Judgment Discovery Requests, but ordering the custodian of records for IMS Securities Inc. to produce corporate records, following which Jackie D. Wadsworth, the custodian of records for IMS Securities Inc., produced 25,066 pages of corporate records to Plaintiffs. 14, On October 30, 2019, Plaintiffs initiated Cause No. 2019-79102 in the 125" Judicial District Court for the purpose of asserting claims against Defendants Calton & Associates Inc., Westpark Wealth Advisors Inc., and Christopher D. Gammon under the Texas Uniform Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. CoDE §24.001 et seq., and for unjust enrichment. In their Petition, Plaintiffs allege that they are judgment creditors of IMS Securities Inc., and that on November 8, 2017, IMS Securities Inc. made a “fraudulent conveyance” to Calton & Associates Inc. 15. No assets of IMS Securities Inc. were transferred to Calton & Associates Inc., DECLARATION OF CHRISTOPHER D. GAMMON Page 3 of 7Westpark Wealth Advisors Inc. or Christopher D. Gammon. 16. Calton & Associates Inc., Westpark Wealth Advisors Inc. and Christopher D. Gammon are not transferees of assets of IMS Securities Inc. 17. IMS Securities Inc. (“IMS”) was a small “introducing broker dealer,” meaning that it “introduced” its retail customer accounts to a “clearing” or “carrying” broker dealer and custodian. 18. Hilltop Securities Inc. (“Hilltop”), a Dallas-based multi-service wealth- management company, was the “clearing” or “carrying” broker dealer and custodian to which IMS introduced retail customer accounts. 19. As the “clearing” or “carrying” broker dealer and custodian for IMS, Hilltop possessed and controlled all cash and securities owned by IMS retail customers, maintained all retail customer accounts for IMS, cleared all trades for such accounts, and sent to IMS retail customers all confirmations and statements. 20. IMS retail customer accounts and assets were not owned by IMS, but were instead owned beneficially by the retail customers themselves, and were possessed and controlled by Hilltop. 21. Calton & Associates Inc. (“Calton”), a Florida-based “introducing broker dealer,” also “introduces” its retai] customer accounts to Hilltop. 22. On November 8, 2017, Calton (as Buyer) entered into an Asset Purchase Agreement with IMS (as Seller) providing that “The Buyer shall purchase from the Seller all retail customer accounts of the Seller except for any accounts that choose to transfer to another broker dealer” and that “The Buyer shall pay to the Seller a total of $1,000 for all retail accounts that choose to transfer to the Buyer.” DECLARATION OF CHRISTOPHER D. GAMMON Page 4 of 723. Although the agreement was entitled “Asset Purchase Agreement,” the transaction did not involve the sale by IMS or the purchase by Calton of retail customer assets, and could not have involved the sale or purchase of retail customer assets, because (a) IMS did not own retail customer assets and therefore could not have sold them, (b) retail customer assets are owned beneficially by the retail customers themselves, and the retail customers did not sell them, and (c) at the time of the transaction, any such retail customer assets were in the possession, custody, and control of Hilltop. 24. Although the agreement was entitled “Asset Purchase Agreement,” the transaction concerned a proposed transfer of a right to service IMS’s retail customer accounts conditioned upon acceptance by IMS’s retail customers following receipt of Hilltop’s “negative consent” letter and subject to FINRA approval. 25, Following the transaction, Hilltop retained possession, custody and control of any such retail customer assets unless the retail customers elected to move such accounts and assets to a different “carrying broker dealer” or “clearing broker dealer.” 26. The retail customer accounts that were the subject of the Asset Purchase Agreement were not IMS assets, did not appear on IMS’s SEC Focus Reports as assets, and had no asset value to IMS. 27. Although the Asset Purchase Agreement provides for consideration to be paid by the Buyer of $1,000, such consideration did not represent asset value (as no assets were being transferred). Instead, such consideration was a nominal sum required by FINRA to be included in the transaction. 28. A transfer of a conditional right to service customer accounts has no inherent value, and is instead done to comply with financial industry regulations. DECLARATION OF CHRISTOPHER D. GAMMON Page 5 of 729. A transfer of a conditional right to service customer accounts is within the absolute control of the retail customer, the custodian, and FINRA, none of whom are parties to this lawsuit. 30. The transfer of a proposed right to service IMS’s retail customer accounts did not involve the sale of IMS assets, was not a sale of “virtually all assets of IMS,” and IMS was not insolvent as a result of the transfer. 31. The transfer of a proposed right to service IMS’s retail customer accounts was not made with the intent to hinder, delay or defraud creditors of IMS by placing IMS assets beyond the reach of creditors, as the transfer was not a transfer of IMS assets. 32. Attached hereto are true and correct copies of the following: a. Hilltop Securities Inc. “negative consent” letter (11/28/2017) b. Hilltop Securities Inc. Customer Statements for IMS (9/29/2017 to 1/31/2018) c. SEC Focus Reports for IMS (7/1/2017 to 12/31/2017) d. Texas Capital Bank Account Statements for IMS (10/1/2017 to 1/31/2018) 33. The “negative consent” letter demonstrates that Hilltop Securities Inc. had possession, custody and control of IMS’s retail customer accounts. 34. The Customer Statements demonstrates that Hilltop Securities Inc. reported retail customer account information to IMS. 35. The SEC Focus Reports demonstrate that IMS did not carry its own retail customer accounts, did not assign a value to retail customer accounts, and did not list retail customer accounts as “assets.” 36. The SEC Focus Reports and the Texas Capital Bank Account Statements demonstrate that IMS was not insolvent as a result of the November 2017 transfer. DECLARATION OF CHRISTOPHER D. GAMMON Page 6 of 7Executed this 4" day of June, 2020. ~ Christopher D. Gammon DECLARATION OF CHRISTOPHER D. GAMMON Page 7 of 7HilltopSecurities Si Atilltop Holdings Company November 28, 2017 Dear Client