United States District Court, E.D. Texas, Texarkana Division
MARK R. ADAMS, TRUSTEE OF THE ADAMS LIVING TRUST
WELLS FARGO BANK, N.A. d/b/a WELLS FARGO HOME MORTGAGE
MEMORANDUM ORDER ADOPTING REPORT AND
GILSTRAP, UNITED STATES DISTRICT JUDGE.
above-entitled and numbered civil action was heretofore
referred to United States Magistrate Judge Caroline M. Craven
pursuant to 28 U.S.C. § 636. The Report of the
Magistrate Judge which contains her proposed findings of fact
and recommendations for the disposition of such action has
been presented for consideration. Plaintiff filed objections
to the Report and Recommendation. The Court conducted a de
novo review of the Magistrate Judge's findings and
R. Adams (“Mr. Adams”) and Beatrice Olean Adams
(“Ms. Adams”) were the owners of the property
located at 603 Georgetown Road, Ovilla, Texas 75154 (the
“Property”) as tenants in common until Nugent R.
Adams' death in 1995. In 1989, Mr. Adams and Ms. Adams
jointly created by trust declaration, and funded, the Adams
Living Trust (the “Adams Trust”). Following his
death, Mr. Adams' undivided one-half interest in and to
the Property was transferred to the Adams Trust.
Adams obtained a reverse mortgage from Wells Fargo in 2005,
which was secured by the Property. When Ms. Adams died on
June 4, 2016, all sums secured by the reverse mortgage became
immediately due and owing. Mark R. Adams, as executor of Ms.
Adams' estate, notified Wells Fargo Bank, N.A. d/b/a
Wells Fargo Home Mortgage (“Defendant”) that he
intended to sell the Property in full satisfaction of the
outstanding amount due under the reverse mortgage. On October
14, 2016, the Property sold for $225, 000. Pursuant to the
signed closing disclosures approving of the disbursement of
the sale proceeds, Defendant was paid $174, 060.71 to pay off
and release its lien securing repayment of the reverse
February 23, 2017, Plaintiff Mark R. Adams, Trustee of the
Adams Trust (“Plaintiff”) filed his Original
Petition, in the 5th Judicial District Court of Bowie County,
Texas, seeking the partial return of money paid to Defendant
based on a conversion claim. Defendant removed the case to
this Court on March 29, 2017. Plaintiff contends Ms. Adams
and the Adams Trust each owned an undivided one-half interest
in the Property at the time Ms. Adams obtained a reverse
mortgage in 2005. Orig. Pet., ¶¶ 15-19. Upon Ms.
Adams' death in 2016, Plaintiff asserts the Property was
sold for $225, 525.15. Id. ¶¶ 20-22.
Plaintiff alleges that $174, 060.71 of the sale proceeds were
paid to Defendant to satisfy the reverse mortgage.
Id. ¶ 26. Plaintiff contends the Adams Trust
was entitled to receive half of the proceeds in the amount of
$102, 381.49 (after closing costs). Id. ¶ 28.
Plaintiff asserts a claim for conversion and seeks actual
damages in the amount of $87, 030.36 before adjustment,
exemplary damages, and attorney's fees. Id.
parties filed cross motions for summary judgment.
Report and Recommendation dated February 5, 2018, the
Magistrate Judge recommended Plaintiff's motion for
summary judgment be denied and Defendant's motion for
summary judgment be granted. The Magistrate Judge first noted
Plaintiff asserts a single claim for conversion, seeking
actual damages in the adjusted amount of $70, 892.53,
exemplary damages, and attorney's fees. Orig. Pet.,
¶¶ 32-38; see also Affidavit of Mark R.
Adams (“Adams Aff.”) at 5:1-3. As noted by the
Magistrate Judge, Plaintiff asserts “Wells Fargo has,
at all times since the sale of the Subject Property,
continued to maintain possession, and to exercise dominion
and control over the Adjusted Trust Funds belonging to the
Adams Trust without Plaintiff's consent and to the
exclusion of or inconsistent with Plaintiff's
rights.” Adams Aff. at 5:4-7.
Magistrate Judge set forth the elements of a conversion
claim, noting that Texas jurisprudence holds that money can
be the subject of conversion but only when it is in the form
of specific chattel or when the money is delivered to another
party for safe keeping. (Docket Entry # 29 at 11). The
Magistrate Judge held Plaintiff's claim fails because the
money received by Defendant was to pay off the reverse
mortgage and release the lien and was not in the form of a
specific chattel delivered to Defendant for safe keeping.
Id. at 12. According to the Magistrate Judge,
Plaintiff's conversion claim fails for the additional
reason that there is no conversion of property when the owner
has expressly or impliedly consented to the taking, and here
the summary judgment evidence conclusively establishes
Plaintiff consented to the delivery of the proceeds of the
sale of the Property to Defendant. Id.
Magistrate Judge then turned to Plaintiff's briefing and
noted he focuses on the validity of the lien itself.
Id. at 13. The Magistrate Judge noted, as urged by
Defendant, that the validity of the lien is irrelevant to the
Court's analysis as to the critical issue before the
Court - whether the summary judgment evidence conclusively
negates at least one element of Plaintiff's conversion
claim for money. Even so, for the sake of full discussion,
the Magistrate Judge considered, and rejected,
Plaintiff's challenges to the validity of the lien based
on cotenancy law and Texas homestead rights. Id. at
Plaintiff's arguments regarding the validity of the lien
irrelevant and/or without merit, and having previously found
Plaintiff's conversion claim against Defendant fails as a
matter of law, the Magistrate Judge considered whether
Plaintiff should be allowed to proceed on a claim for unjust
enrichment, which he alleged for the first time in his
response to Defendant's motion for summary judgment. The
Magistrate Judge noted no formal motion to amend had been
filed. Rather, in his December 31, 2017 response to
Defendant's motion, Plaintiff stated his pleadings
clearly gave notice to Defendant of Plaintiff's claim to
proceeds derived from the sale of the Adams Trust's
interest in the Property. However, to the extent necessary,
Plaintiff requested leave in his response to “amend his
pleadings to include a claim sounding in unjust enrichment as
such claim is supported by existing facts set forth in the
pleadings and documents of the parties, and otherwise will
not cause prejudice to Defendant.” Id. at 21.
Magistrate Judge held Plaintiff's pleadings do not give
notice to Defendant of an unjust enrichment claim and held
amendment to include such a claim would be required. The
Magistrate Judge noted the Docket Control Order required that
motions for leave to amend pleadings must be filed by
November 6, 2017. Because Plaintiff's request for leave
to amend was made in his December 31, 2017 response to
Defendant's motion for summary judgment, the Magistrate
Judge considered whether good cause existed to allow
Plaintiff to amend to allege an unjust enrichment claim
against Defendant outside the deadline. Id. at 20.
Magistrate Judge considered the four factors courts consider
in determining whether good cause exists to allow a deviation
from the scheduling order and concluded Plaintiff had not met
his burden of demonstrating good cause for extending the
deadline for amending pleadings. Id. at 21-23.
Specifically, the Magistrate Judge found Plaintiff had not
demonstrated he could not have met the deadline despite his
diligence. The Magistrate Judge further held an amendment
would be futile; there is potential ...