InterFirst Bank Dallas, N.A. v. Risser

• Decision Date: 19 August 1987
• Docket Number: No. 9421,9421
• Citation: 739 S.W.2d 882
• Parties: INTERFIRST BANK DALLAS, N.A., et al., Appellants, v. Sara RISSER, et al., Appellees.
• Court: Texas Court of Appeals

Page 882

739 S.W.2d 882

INTERFIRST BANK DALLAS, N.A., et al., Appellants, v. Sara RISSER, et al., Appellees.

No. 9421.

Court of Appeals of Texas Texarkana.

Aug. 19, 1987.

Rehearing Denied Nov. 10, 1987.

Michael Byrd, Akin, Gump, Strauss, Hauer & Feld, Dallas, David C. Turner, Bonham, for appellants.

Ben L. Krage, Dallas, Ed T. Smith, Bonham, for appellees.

GRANT, Justice.

InterFirst Bank Dallas, N.A., appeals an adverse judgment in a suit brought against it as trustee by the beneficiaries of two trusts. (We shall refer to InterFirst Bank as InterFirst or as the trustee and to the appellees as the beneficiaries.)

Dr. Joe Risser, Sr., a resident of Bonham, died in 1974. In his will, he set up two trusts named after his son and daughter--the Marien Louise Poston trust and the Joe A. Risser, Jr. trust. InterFirst was named substitute or successor trustee under the will, after the original trustee, R. Eugene Risser, Jr., who was Dr. Risser's brother. The primary beneficiaries of the trusts are the son and daughter for which the trusts were named and Dr. Risser's wife, Sara Risser. The children of the son and daughter (Dr. Risser's grandchildren) are the secondary beneficiaries. The trusts are to continue as long as either the son or daughter and Sara Risser live. The annual income of the trusts was to be distributed one-fifth to Sara Risser (from each trust) and the remainder to the son and daughter out of their respective trusts, with contingencies for secondary beneficiaries. The daughter, Marien Poston, died in 1976, leaving a young child, Joseph Benjamin Poston, who receives his mother's portion of the income from the trust as a secondary beneficiary. The appellees are Sara Risser, Joe R. Risser, Jr., Bennie W. Poston as guardian of Joseph Benjamin Poston, and the other grandchildren of Dr. Risser, being Robbi Jo Wray (by Carolyn Wray as next friend) and Rikki Amelia Wray.

Among the assets of Dr. Risser's estate which were to be divided evenly between the trusts were 968.5 shares of stock in Southwest Pump Company. (The 968.5 shares represented 32.28% of the 3,000 shares of Southwest Pump Company outstanding at that time.)

Southwest Pump Company was founded under a different name in 1929. It is a closely-held corporation which manufactures gasoline pumps and accessories. Evaluations of the company introduced at trial varied. The company has been a customer of InterFirst (or its predecessor, First National Bank) since at least 1940.

R. Eugene Risser, Jr., the original trustee, died in 1978, with little having been done with his brother's estate. InterFirst refused to accept the appointment as trustee unless a final accounting of the estate was presented to and approved by a court. On August 15, 1980, the 6th District Court of Fannin County entered judgment approving a final accounting of Dr. Risser's estate. The value of the Southwest Pump Company stock was listed in the accounting at $185 per share. InterFirst then assumed the trusteeships.

On December 19, 1980, InterFirst committed the act complained of in this suit. It sold the 968.5 shares of Southwest Pump Company stock which it held as trustee back to Southwest Pump Company for a total cash price of $500,000 ($512.26 per share).

On August 3, 1984, Preston State Bank, as guardian of the estate of a minority shareholder in Southwest Pump, filed a derivative suit under Tex.Bus.Corp. Act Ann. art. 5.14 (Vernon 1980) against Sally Estes, the controlling shareholder in Southwest Pump Company; William C. Estes, her husband and chief executive officer of Southwest Pump Company; J.J. French, Jr., the Esteses' attorney; and William E. Landrum and Joe D. Nelson, employees of InterFirst and Southwest Pump Company. The plaintiff alleged a conspiracy between the defendants to injure Southwest Pump Company through the sale of the 968.5 shares of stock from InterFirst as trustee to Southwest Pump Company, and its resale from Southwest Pump Company to Sally Estes. On November 19, 1984, the trial court granted a motion made by the defendants to have the trust beneficiaries joined as necessary parties.

InterFirst filed a plea in intervention on November 27, 1984. It asked that the court enter a declaratory judgment finding, declaring and ordering that the December 19, 1980, sale of Southwest Pump stock was fair, just, reasonable and proper; that InterFirst had not wronged the trust beneficiaries in any respect; that a full and correct accounting had been made of InterFirst's trusteeship; and that InterFirst be discharged of all liability to the trusts and be allowed to resign as trustee, and that a successor trustee be appointed. The trust beneficiaries filed an original petition in the suit on March 11, 1985, naming as defendants the same parties as those named defendants in the original suit, with the substitution of InterFirst for Southwest Pump Company. The beneficiaries alleged, among other things, breaches of InterFirst's fiduciary duties, negligence, conspiracy, fraud and bad faith. They also asked for an accounting and the removal of InterFirst as trustee.

On April 16, 1985, the trial court entered orders severing various claims from the suit, leaving only the claims of the trust beneficiaries against InterFirst and two of its employees. During the course of trial, the beneficiaries non suited their claims against the employees, leaving only their claim against InterFirst.

The beneficiaries' claim against InterFirst was for breach of a fiduciary duty, specifically for a violation of the duty of loyalty through self-dealing in the sale of the stock. The beneficiaries claimed that InterFirst was involved in a scheme with William and Sally Estes to help the Esteses get control of the block of stock that was eventually sold by InterFirst for the trusts. Southwest Pump Company resold the stock to Sally Estes. The beneficiaries claimed a loss to the trust because the stock was sold to Southwest Pump Company for less than the stock was worth. This claim was submitted to the jury. On May 24, 1985, the trial court entered judgment against InterFirst, finding that InterFirst had breached the fiduciary duties which it owed to the beneficiaries. The trial court awarded the beneficiaries $1,000,000 in actual damages for the benefit of the two trusts (the difference between the $1,500,000 value of the stock found by the jury and the $500,000 received by the trusts for the stock). The court also awarded damages in the amount of $265,479.46 based upon the amount of interest income which would have been earned by each trust on $500,000 from December 19, 1980, until judgment. In addition, InterFirst was removed as trustee, and the court further ordered that all trustee's fees be returned with interest from the date charged in the amount of $73,896.05. The trial court awarded the beneficiaries the $10,000,000 in punitive damages found by the jury.

InterFirst appeals contending that the trial court erred in that there was no evidence or insufficient evidence as to actual damages, exemplary damages, bad faith, and self-dealing; in that there was no evidence of attorney's fees or inconvenience which was included for the jury's consideration under exemplary damages; that the charge failed to submit causation or to include issues submitted by the defendant and contained improper definitions, submissions, and instructions; in that it incorrectly based the judgment on the answers to the special issues as submitted; in that it allowed excessive exemplary damages; and in that it admitted evidence which was not relevant to a breach of fiduciary duty.

In reviewing the no-evidence points hereafter discussed, we consider only the evidence tending to support the finding, viewing it in the light most favorable to the finding, giving effect to all reasonable inferences therefrom, and disregarding all contrary and conflicting evidence. Glover v. Texas General Indemnity Co., 619 S.W.2d 400 (Tex.1981). Insufficient evidence points require that we consider and weigh all the evidence. In re King's Estate, 150 Tex. 662, 244 S.W.2d 660 (1951).

THE FIDUCIARY DUTY

The fundamental duties of a trustee include the use of the skill and prudence which an ordinary capable and careful person will use in the conduct of his own affairs, Tucker v. Dougherty Roofing Company, 137 S.W.2d 884 (Tex.Civ.App.-Dallas 1940, writ dism'd judgmt cor.), and loyalty to the beneficiaries of the trust. Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377 (1945).

Provisions in an instrument creating the trust can relieve the trustee of certain duties, restrictions, responsibilities, and liabilities imposed on him by statute. Tex.Rev.Civ.Stat.Ann. art. 7425b-22 (Texas Trust Act). ¹ However, the language of a trust instrument cannot authorize self-dealing by a trustee, because that would be contrary to public policy. Langford v. Shamburger, 417 S.W.2d 438 (Tex.Civ.App.-Fort Worth 1967, writ ref'd n.r.e.). This limitation should include any situation in which a trustee used the position of trust to obtain an advantage by action inconsistent with the trustee's duties and detrimental to the trust. Neither can an exculpatory provision in the trust instrument be effective to relieve the trustee of liability for action taken in bad faith or for acting intentionally adverse or with reckless indifference to the interests of the beneficiary. Restatement (Second) of Trusts § 222 (1959).

The will of Joe A. Risser, Sr. which set up the testamentary trust, contains the following provision: "(f) The Trustee shall never be liable for any action or any failure to act hereunder in the absence of proof of bad faith."

Thus, liability of the trustee for breach of trust in the present case must be based upon self-dealing, bad faith, or intentionally adverse acts or reckless indifference toward the interest of the beneficiary.

FAIR MARKET VALUE

The first seven points of error urged by InterFirst involve the evidence of fair...