Jones v. Wells Fargo Bank, N.A.

• Decision Date: 01 June 2017
• Docket Number: No. 16-10042,16-10042
• Citation: 858 F.3d 927
• Parties: Richard Donald JONES, Jr., Plaintiff–Appellee Cross-Appellant, v. WELLS FARGO BANK, N.A., Defendant–Appellant Cross-Appellee, JPMorgan Chase Bank, N.A., Formerly Known as Chase Bank of Texas National Association, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

858 F.3d 927

Richard Donald JONES, Jr., Plaintiff–Appellee Cross-Appellant,

v.WELLS FARGO BANK, N.A., Defendant–Appellant Cross-Appellee,JPMorgan Chase Bank, N.A., Formerly Known as Chase Bank of Texas National Association, Defendant–Appellee.

No. 16-10042

United States Court of Appeals, Fifth Circuit.

June 1, 2017

Don Bradley Kizzia, Anthony Thomas Ricciardelli, Kizzia Johnson, P.L.L.C., Dallas, TX, for Richard Donald Jones, Jr., Plaintiff–Appellee Cross-Appellant.

Shayne D. Moses, David A. Palmer, Esq., Moses, Palmer & Howell, L.L.P., Fort Worth, TX, for Wells Fargo Bank, N.A., Defendant–Appellant Cross-Appellee.

David Wayne Lauritzen, Stephanie Diane Lee, Cotton, Bledsoe, Tighe & Dawson, P.C., Midland, TX, for JP Morgan Chase Bank, N.A., Defendant–Appellee.

Before SMITH and HAYNES, Circuit Judges, and JUNELL, District Judge.^*

JERRY E. SMITH, Circuit Judge:

Wells Fargo Bank, N.A. ("Wells Fargo"), and JPMorgan Chase Bank, N.A. ("JPMorgan"), served as trustees of trusts of which Richard Jones, Jr., was a beneficiary. Jones sued both banks for breach of fiduciary duty. The district court dismissed all but one of Jones's claims, as to which a jury, finding a breach, awarded actual and exemplary damages. Wells Fargo seeks to set aside the verdict. On cross-appeal, Jones hopes to revive some of the claims that were dismissed. We find in favor of the banks on all issues.

I.

Jones is the grandson of Sweetie Boyle, who died in 1996. Until 2010, Jones had beneficial interests in four trusts that were funded with assets from Boyle's estate. JPMorgan and its predecessors in interest¹ served as trustee of three of the trusts from their creation until 2001, when Wells Fargo became the trustee after acquiring JPMorgan's trust department. Wells Fargo remained the trustee until the trusts were terminated on December 31, 2010. A fourth trust was created in 2003, with Wells Fargo serving as trustee until the trust's termination on December 31, 2010.

The litigation surrounding these trusts dates back to 1999, when JPMorgan filed two actions in state court. In the first, it sought a final accounting of Boyle's estate and a discharge from any further duties to the beneficiaries, including Jones. In the second, it sought to resign as trustee of the Boyle trusts. Jones filed counterclaims in both cases, alleging that JPMorgan had mismanaged the trusts in various ways. Both matters were ultimately dismissed.

Meanwhile, another case, brought in a different state court, concerned the Richard Donald Jones, Jr. 1994 Family Trust (the "House Trust"). In 1995, Jones asked the then-trustee, JPMorgan, to purchase a specific house in Bastrop County, Texas, and hold it in the House Trust for his benefit. The trustee purchased the house, and for a time Jones lived there. According to Jones, however, the house had so many flaws—including broken appliances, electrical issues, and water leaks that eventually caused a mold problem—that it was uninhabitable, and he had to move out. In 1999, JPMorgan sued the inspector it had hired to perform a pre-purchase house inspection (hereinafter the "House Suit").²

By the mid-2000s, it was clear that the House Trust did not have enough cash to pay for all of the necessary repairs. Wells Fargo concluded that Jones would be better off if the House Trust were dissolved. In 2007, Wells Fargo sued in state court to terminate the House Trust (hereinafter the "Termination Suit"). The state court ruled against Wells Fargo, keeping the trust alive.

At some point, Wells Fargo also concluded that it would lose the House Suit if it took the case to trial. Settlement negotiations fell apart. Wells Fargo tried to assign the claim to Jones, who refused to accept the assignment. In 2009, Wells Fargo nonsuited the House Suit.

The present case is four years old. In March 2013, Jones sued JPMorgan and Wells Fargo in state court on a number of claims. Wells Fargo and JPMorgan removed to federal court and moved for summary judgment. The district court dismissed all of the claims except for the claim that, by nonsuiting the House Suit instead of proceeding to trial, Wells Fargo had breached its fiduciary duty to Jones, had breached the trust contract, and had violated the Texas Property Code.

The nonsuit claim went to trial. During his closing argument, Jones's lawyer introduced a new theory: that Wells Fargo had breached its fiduciary duty to Jones not by nonsuiting the case in April 2009, but by not nonsuiting it earlier, when it became clear that Wells Fargo would not prevail. Although Jones had not pleaded that theory, Wells Fargo did not object during trial.³ Wells Fargo instead raised its objection repeatedly in its post-trial briefing, including in its renewed motion for judgment JML, and its responses to Jones's motions to enter judgment and for leave to amend the complaint. The district court, however, ruled that, because Wells Fargo was on notice of this potential theory of liability, it had waived any objection to the adequacy of the pleadings by not objecting in its first motion for JML.

The jury seems to have relied on this new theory. It concluded that Wells Fargo had breached its fiduciary duty by nonsuiting and that the harm to Jones was the result of "gross negligence or malice." At the same time, the jury pegged Jones's likely recovery from the lawsuit, had it not been nonsuited, at "$0.00." The jury awarded Jones $171,780.57 in exemplary damages, $33,658.66 in attorneys' fees, and $4,440.94 in disgorged trustee fees. The court denied Wells Fargo's renewed motion for JML and granted Jones's motion for entry of final judgment.

Wells Fargo appeals. It claims that (1) the evidence was not sufficient to support a finding of breach of fiduciary duty, (2) the evidence was not sufficient to support a finding of actual damages, (3) the evidence was not sufficient to support a finding of exemplary damages, (4) the court erroneously shifted the burden of proof, (5) Wells Fargo did not waive its objection to Jones's introduction of his frivolous-litigation theory, (6) Jones should have presented expert testimony, and (7) Jones's claim is time-barred.

Jones cross-appeals. He asserts that the district court improperly dismissed several claims against Wells Fargo as well as his claim that JPMorgan failed to convey mineral interests.

II.

Wells Fargo asks this court to set aside a jury verdict. "Although we review denial of a motion for [JML] de novo, we note that ‘our standard of review with respect to a jury verdict is especially deferential.’ "⁴ "[W]hen evaluating the sufficiency of the evidence, we view all evidence and draw all reasonable inferences in the light most favorable to the verdict."⁵ Nevertheless, we will not sustain a jury verdict based on a "mere scintilla" of evidence.⁶

In Texas, "[t]he elements of a claim for breach of fiduciary duty are (1) a fiduciary relationship between the plaintiff and the defendant, (2) a breach by the defendant of his fiduciary duty to the plaintiff, and (3) an injury to the plaintiff or a benefit to the defendant as a result of the breach."⁷ Both sides agree that a fiduciary relationship existed. Jones claims that Wells Fargo breached its fiduciary duty when it nonsuited the case instead of taking it to trial. In doing so, Jones says, Wells Fargo deprived him of a potential recovery and rendered any trust resources spent on attorneys' fees to have been wasted. Alternatively, Jones claims that Wells Fargo breached its duty by wasting trust resources litigating a meritless suit.

With respect to the claim actually tried—that nonsuiting the suit was a breach of fiduciary duty—Jones failed to persuade the jury of that theory, as evidenced by its conclusion that the lawsuit had a value of zero at the time of nonsuit. Tellingly, Jones refused to accept an assignment of the House Suit claim. Thus, the only theory on which the jury could have found a breach is the one not pleaded—that the failure to nonsuit sooner was the breach.

As for the new theory of liability presented to the jury in passing in the rebuttal closing argument, Wells Fargo was never on notice that that issue was being litigated, so it could not construct an appropriate defense. Indeed, at trial, after the close of Jones's case-in-chief, Jones asked the court to conform the pleadings to purported new evidence that Wells Fargo had filed a frivolous lawsuit, but the court rejected the request. In the presence of both parties, the court instructed Jones that it had "diligently tried to make sure that we try only ... the nonsuit claim, and that's all that's going to the jury."⁸ Nevertheless, the subsequent entry of judgment on this unpleaded claim effectively amended the complaint.

Post-trial amendments conforming the pleadings to the evidence are appropriate under Federal Rule of Civil Procedure 15(b) only if the defendant gives express or implied consent.⁹ " Rule 15(b) recognizes that basic fairness entitles a defendant to notice, before trial, of who sued it and the nature of the claims being asserted against it."¹⁰ Wells Fargo could not have recognized, during trial, that the new unpleaded claim had entered the case because—after Jones had rested his case—the court expressly said the unpleaded claim was not part of the case and would not go to the jury. Thus, Wells Fargo could not have consented to the unpleaded claim.¹¹ Because Jones neither pleaded nor tried his case on the frivolous-lawsuit theory, and because Wells Fargo did not consent to a post-trial amendment, it was improper for the court to award damages against Wells Fargo on that theory.¹²

We do not reach the other issues Wells Fargo raises on appeal. Instead, we proceed to examine the cross-appeal.

III.

Jones claims that the district court erred by granting summary judgment to Wells Fargo on his claims that the bank misapplied insurance proceeds, double-billed trusts, improperly used trust funds to pay his adversaries' legal fees, and failed to advise him of the possibility of...