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Hubbard v. Jackson National Life Insurance Co.

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

February 23, 2017

JOHN HUBBARD, Appellant,

         On appeal from the 105th District Court of Nueces County, Texas.

          Before Justices Rodriguez, Contreras, and Longoria.


          DORI CONTRERAS Justice.

         In this case concerning the alleged fraudulent sale of a life insurance annuity, appellant John Hubbard challenges the trial court's summary judgment dismissing claims he made against appellees Jackson National Life Insurance Company ("JNL") and Jackson National Life Distributors LLC ("JNL Distributors").[1] We affirm.

         I. Background

         On March 31, 2009, Hubbard purchased a $1 million JNL variable annuity contract[2]from William Erik Byrne. According to Hubbard's live petition, Byrne held himself out to be a licensed insurance and securities broker. Hubbard contends that Byrne represented to him that JNL's variable annuity contracts did not provide guaranteed returns, but that Byrne himself "would make and manage the investments held by any variable annuity contract purchased by Hubbard, which would produce a much greater annual return than 5% on the principal."

         Hubbard later discovered that the contract was not earning a greater than 5% return on his investment. Instead, his June 2010 statement from JNL stated that the annuity had decreased in value to $911, 081.68. Further, the statement listed CUE Financial Group ("CUE") as the broker and Patrick Douglas Way as Hubbard's representative, though Hubbard had no knowledge of CUE or Way. Hubbard also allegedly learned that Byrne's representations that he was a licensed broker, and that JNL's annuity contracts do not provide guaranteed returns, were false.

         Subsequently, on various occasions, Byrne directed trades under the annuity contract by calling JNL's trading desk and falsely identifying himself as Hubbard.

         Hubbard filed suit against Byrne, JNL, CUE, and Foothill Securities, Inc. ("Foothill"), [3] alleging various causes of action. Specifically as to JNL, Hubbard asserted that, under the doctrines of respondeat superior and vicarious liability, JNL is jointly and severally liable for fraud and violations of securities and insurance statutes committed by Byrne and Way. See Tex. Ins. Code Ann. §§ 541.051, 541.057 (West, Westlaw through 2015 R.S.); Tex. Rev. Civ. Stat. Ann. art. 581-33-1 (West, Westlaw through 2015 R.S.). Hubbard further asserted that JNL was negligent and committed breach of contract. Specifically, he alleged that JNL had a duty under a negligence theory and under the contract "to implement and execute security procedures that were reasonably designed and calculated to avert or reduce the risk of trading in the accounts of its customers by unauthorized persons" but that, "[i]n failing and neglecting to design and/or implement and/or execute adequate security procedures, Hubbard was unreasonably exposed to the risk that an unauthorized person, such as Byrne, could and would direct [JNL] to execute trades on Hubbard's behalf that were not authorized by Hubbard." Hubbard sought actual damages of over $300, 000 representing "trading losses" as well as exemplary damages and attorney's fees.

         JNL moved for summary judgment on November 21, 2013, arguing in part that it is not vicariously liable for Byrne's conduct because Byrne lacked actual or apparent authority to act on its behalf. The motion alleged that, though all of Hubbard's claims are based on oral representations by Byrne, "Byrne was not authorized to sell JNL products, did not have any agreement with JNL, was not an agent of JNL, and was not affiliated with JNL in any manner." The motion also alleged that JNL is not vicariously liable for Way's conduct because his acts were "outside the course and scope of his agency authority." Evidence attached to JNL's motion included excerpts of sworn deposition testimony from Hubbard, Byrne, and Way. The testimony showed that, after meeting with Hubbard, Byrne completed the annuity application and gave it to Hubbard to sign. Hubbard signed it, and Byrne then sent the completed application to Way, who signed it and submitted it to JNL. Way testified that he never met Hubbard, never spoke to Hubbard, and never personally reviewed Hubbard's financials prior to submitting the application.

         Hubbard filed a response arguing in part that "[w]hen Way was selling JNL's annuity insurance policies for [CUE], he was acting on behalf of his principal, [CUE], and on behalf of JNL, whether those sales were made directly by Way or by Byrne acting on Way's behalf" and that "[CUE] and JNL are both liable for the consequences of those sales, irrespective of whether [CUE] or JNL knew of the fraud or benefited from it."

         After a hearing on the motions, Hubbard filed an amended petition adding a claim under the federal Securities Act of 1933. See 15 U.S.C.A. § 77q (West, Westlaw through P.L. 114-254). JNL then filed a second summary judgment motion addressing the newly-raised claim.

         The trial court granted both summary judgment motions filed by JNL as well as a summary judgment motion separately filed by CUE and Foothill.[4] Hubbard then filed the instant appeal. In September 2015, after he filed his appellate brief, Hubbard reached a settlement agreement with CUE and Foothill. Therefore, at Hubbard's request, we severed and dismissed his appeal against those parties. Hubbard v. CUE Fin. Group, Inc., No. 13-15-00406-CV, 2015 WL 5626231, at *1 (Tex. App.-Corpus Christi Sept. 17, 2015, no pet.) (mem. op.); see Tex. R. App. P. 42.1(a).

         II. Discussion

         Hubbard raises five issues on appeal, the first three of which concern only Foothill and are now moot. See Hubbard, 2015 WL 5626231, at *1. By his remaining two issues, Hubbard argues that the trial court erred by rendering summary judgment in favor of JNL.

         A. Standard of Review

         We review summary judgments de novo. Neely v. Wilson, 418 S.W.3d 52, 59 (Tex. 2013). In doing so, we view the evidence "in the light most favorable to the party against whom the summary judgment was rendered, crediting evidence favorable to that party if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not." Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009); City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).

         A party moving for traditional[5] summary judgment has the burden to show that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. Tex.R.App.P. 166a(c); Neely, 418 S.W.3d at 59. The movant meets that standard if, in light of all of the evidence presented, reasonable and fair-minded jurors could not differ in their conclusions. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007).

         B. Vicarious Claims

         In its summary judgment motion, JNL argued in part that it is entitled to judgment as a matter of law because neither Byrne nor Way were acting as its agents. By his first issue, Hubbard claims that the trial ...

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