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Adams v. Wells Fargo Bank, N.A.

United States District Court, E.D. Texas, Texarkana Division

March 1, 2018




         The 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 conclusions.


         Nugent 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.

         Ms. 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 mortgage.

         On 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. ¶¶ 32-38.

         The parties filed cross motions for summary judgment.


         In her 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.

         The 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.

         The 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 13-20.

         Finding 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.

         The 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.

         The 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 ...

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