Bethlyn Krakauer, Andrew B. Baron, David C. Barski, David K. Bennett, Mark A. Brown, Walter Burgess, Leigh A. Chura, William L. Fortune, III, American Direct Merchant Systems, Inc., Gary and Jane Holcombe v. Wells Fargo Bank, N.A., Wells Fargo Bank South Central, N.A., Wells Fargo Financial Bank, and Wells Fargo Financial Texas, Inc.
02-14-00273-CV
| Tex. App. | Oct 6, 2016Background
- A group of investors sued Wells Fargo and Metro Buys Homes (and principals David and Teisha Boles), alleging Metro operated a Ponzi-like investment scheme and investor funds were deposited into Metro/David accounts at Wells Fargo and used for personal and bank obligations.
- Investors alleged claims including wrongful offset, unjust enrichment, money had and received, accounting, knowing participation in breach of fiduciary duty, and statutory real estate fraud (Tex. Bus. & Com. Code § 27.01(d)).
- Wells Fargo moved for traditional and no-evidence summary judgment on all claims. The Investors amended their petition after the motion to add trust-fund-based claims (wrongful offset, unjust enrichment, money had and received) and an accounting. The bank filed a reply and argued the funds were ordinary deposits (not trust funds).
- The trial court granted summary judgment for Wells Fargo (order did not state grounds) and severed claims against Teisha; Investors appealed only select claims listed above.
- The Court of Appeals reviewed no-evidence and traditional summary judgment standards, ultimately affirming because Wells Fargo negated essential elements of the Investors’ theories and the trust-fund doctrine did not apply to ordinary deposit accounts absent a pre-deposit trust arrangement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of the "trust fund doctrine" (wrongful offset, unjust enrichment, money had and received, accounting) | Investors: Wells Fargo knew/should have known deposited funds were investor (fiduciary) funds and therefore could not offset/pay debtor obligations from those accounts. | Wells Fargo: Accounts were ordinary deposit accounts; no pre-deposit trust arrangement or designation as trust/fiduciary accounts, so trust-fund doctrine does not apply. | Held: Affirmed for Wells Fargo. Knowing the source (investors) is insufficient; no evidence of pre-deposit trust arrangement; doctrine inapplicable. |
| Whether summary judgment improperly decided claims the bank did not move on (investors’ amended trust-fund claims) | Investors: Bank did not move on newly pleaded claims; court erred by granting summary judgment on them. | Wells Fargo: Although not moved on directly, bank moved on a common element (nature of the funds) that disposes of those claims; any error was harmless. | Held: Any error harmless because Wells Fargo’s motion negated the common-element (funds were ordinary deposits). |
| Knowing participation in breach of fiduciary duty | Investors: Wells Fargo knowingly participated in David/Metro’s misappropriation because bank personnel knew deposits came from investors. | Wells Fargo: No evidence of knowing participation; moved on traditional and no-evidence grounds. | Held: Affirmed. Investors did not challenge the no-evidence ground on appeal; summary judgment stands. |
| Statutory real estate fraud (Tex. Bus. & Com. Code § 27.01(d)) | Investors: Bank had actual awareness of falsity, failed to disclose, and benefited—actionable under § 27.01(d). | Wells Fargo: Not involved in any relevant real estate transaction; lacked the requisite actual awareness and nondisclosure. | Held: Affirmed. Trial court’s unchallenged finding of no fraud by nondisclosure makes any omission harmless; summary judgment for bank affirmed. |
Key Cases Cited
- Mauriceville Nat’l Bank v. Zernial, 892 S.W.2d 858 (Tex. 1995) (distinguishes ordinary deposit accounts from cases involving pre-deposit trust arrangements)
- G & H Towing Co. v. Magee, 347 S.W.3d 293 (Tex. 2011) (error in granting summary judgment on claims not presented is harmless if other raised grounds preclude the omitted claim)
- S. Cent. Livestock Dealers, Inc. v. Sec. State Bank of Hedley, Tex., 551 F.2d 1346 (5th Cir. 1977) (bank with pre-deposit knowledge of fiduciary character may not apply funds to depositor’s debt)
- Steere v. Stockyards Nat’l Bank, 256 S.W. 586 (Tex. 1923) (bank conversion where deposited funds were known to belong to third parties)
- Cont’l Nat’l Bank v. Great Am. Mgmt. & Inv., Inc., 606 S.W.2d 346 (Tex. Civ. App.—Fort Worth 1980) (conversion where bank had pre-deposit knowledge funds were advanced for a specific purpose)
- Mary E. Bivins Found. v. Highland Capital Mgmt., 451 S.W.3d 104 (Tex. App.—Dallas 2014) (knowledge of source of funds alone does not establish fiduciary duty or that funds were held in trust)