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Reis v. Citibank N.A.

United States District Court, N.D. Texas, Dallas Division

March 29, 2019

JAMES R. REIS 1999 REVOCABLE LIVING TRUST and JAMES R. REIS, Trustee, Plaintiffs, Counterclaim Defendants,
v.
CITIBANK, N.A., Defendant, Counterclaim Plaintiff,
v.
JAMES R. REIS, in his individual capacity, and I. SAMUEL REYES, Third-Party Defendants.

          FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          DAVID L. HORAN UNITED STATES MAGISTRATE JUDGE

         Both third-party defendants filed motions to dismiss, which were referred to the undersigned United States Magistrate Judge for recommendation by United States Chief District Judge Barbara M. G. Lynn. See Dkt. No. 21-1 (under seal) & 23 (redacted). Third-Party Defendant I. Samuel Reyes (“Reyes”) filed a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), see Dkt. No. 36, and Third-Party Defendant James R. Reis, in his individual capacity (“Reis”), filed a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), see Dkt. No. 41.

         The undersigned now issues the following findings of fact, conclusions of law, and recommendation.

         Background

         This case is based on credit card payments received from a trust's checking account.

         Reis and Reyes were married in California in 2008 and thereafter lived in Texas and Arizona. See Dkt. Nos. 21-1 & 23 at 14. Prior to their marriage, Reis and Reyes were friends and in a personal relationship with each other. See id.

         Reis established the James R. Reis 1999 Revocable Living Trust (the “Reis Trust”) in 1999. See Dkt. No. 23 at 15. Reis is the sole Trustee of the Reis Trust and Reyes was a beneficiary. See id.

         Two Citibank credit card accounts were issued to Reyes (the “Citibank Accounts”). See Id. at 14, 28, 42. Reyes is the primary card member for the Citibank Accounts, and Reis was an authorized user until January 7, 2017. See id.

         In December 2005, Reis moved the Reis Trust's checking account to Frost Bank (the “Frost Account”). See Id. at 16. Frost Bank is located in San Antonio, Texas. See Dkt. No. 49-1 at 33. The Account Agreement includes a Texas choice of law provision and provides for arbitration in Texas. See Id. at 32-36.

         On January 9, 2009, Reis added Reyes as an authorized user of the Reis Trust's checking account at Frost Bank so that Reyes could pay their expenses out of the Frost Account. See Id. at 14, 28, 42; Dkt. No. 49-1 at 19.

         Starting in 2009, Reis and Reyes began paying the Citibank Accounts through both paper checks and Citibank's online bill payment service using funds from the Frost Account and Citibank's online bill payment service. See id.

         Reyes moved to Arizona in 2012 and he is currently an Arizona resident. He has not been domiciled in Texas since 2012, and he does not own any real or personal property in the state of Texas. See Dkt. No. 38 at 4.

         Payments on the Citibank Accounts originating from the Frost Account were made by Reyes and Reis from 2009 through 2017. See Dkt. No. 23 at 14, 28, 42; Dkt. No. 49-1 at 19.There is a dispute between Reis and Reyes as to whether Reyes had authority to use the funds in the Frost Account in 2016 when Reyes used the account to pay his Citibank credit card. See Dkt. No. 46 at 3. During periods of time when Reis claims that he and Reyes were broken-up and not co-habitating, Reyes continued to use the Citibank Accounts for expenses to maintain homes owned by the couple, pay his other living expenses and attorneys' fees. Reis also wrote checks from the Frost Account to pay the Citibank Accounts. See See Dkt. No. 23 at 16-17.

         Reis filed a petition for divorce against Reyes in Dallas County, Texas on February 25, 2016. See Dkt. No. 37 at 5, 11; Dkt. No. 38 at 4.

         On January 7, 2017, Reis contacted Citibank and advised that payments made on the Citibank Accounts from the Reis Trust checking account were not authorized and that Reyes (the primary card member on the Citibank Accounts) had stolen Reis' checking account number from settlement checks he had sent him. See Id. At that time, Reis did not disclose that he was married to Reyes. At no point prior to January 7, 2017, did the Reis Trust or Reis inform or otherwise notify Citibank that any payment made from the Frost Account for the Citibank Accounts was unauthorized or fraudulent or that it was not authorized to accept payments from the Frost Account. See Id. at 17.

         Citibank refunded $75, 085.67 to the Frost Account, which corresponds to the sum of payments from the Reis Trust checking account to C itibank on the Citibank Accounts from November 25, 2016 through January 5, 2017. See id.

         The Citibank Accounts then went into default. When the Third-Party Complaint was filed, one of the Citibank accounts had an outstanding balance due and owing of $61, 388.66 and the other had an outstanding balance due and owing of $69, 424.64. The combined amount due and owing on the two Citibank accounts is $130, 813.30. See id.

         On March 15, 2017, Reyes initiated a lawsuit against Reis, individually and as Trustee of the Reis Trust, and others in Dallas County state court, alleging claims related to a transaction involving GAINSCO stock. See Dkt. No. 37 at 5; Dkt. No. 38 at 6-16.

         Reis brought this lawsuit against Citibank in Dallas County state court on December 11, 2017. See Dkt. No. 1-5. Reis sought to recover $225, 546.61 from Citibank. That amount represents credit card payments received by Citibank from the Reis Trust's checking account at Frost Bank from February through November of 2016, which were credited to Reyes's Citibank credit cards. See Id. Reis claims that those payments were made by Reyes without his authority or consent and constituted theft or conversion of funds. See Id. Reis seeks to hold Citibank liable for Reyes' alleged wrongful use of the Frost Bank account funds because Reyes processed the withdrawals from the Frost Account using Citibank's online bill payment website. See Id. In his Original Petition, Reis did not disclose his relationship with Reyes. See id.

         On January 10, 2018, Reis filed a lawsuit against Reyes in Arizona state court alleging claims including conversion, fraudulent misrepresentation and unjust enrichment, based on Reyes' alleged unauthorized use of the Frost Account to pay Reyes' Citibank credit card accounts. See Dkt. No. 49-4 at 63-76.

         Citibank removed this case to this Court on January 12, 2018. See Dkt. No. 1.

         Reis and Reyes were divorced in Dallas County, Texas on January 24, 2018. See See Dkt. Nos. 21-1 & 23 at 18. They entered a confidential settlement agreement incident to divorce (“AID”) in which they agreed to release certain claims against each other, resolve the GAINSCO stock case, and dismiss with prejudice the Arizona action. The only reference in the AID to Citibank is a clarification that Reis was not releasing his ability to pursue claims against Citibank in this lawsuit. See See Dkt. Nos. 21-1 & 23 at 18; Dkt. No. 37 at 5, 11; Dkt. No. 38 at 4; Dkt. No. 48 at 4.

         On November 2, 2018, Citibank amended its answer, asserted counterclaims against the Reis Trust and Reis in his role as Trustee, and asserted third-party claims against Reis, individually, and Reyes. See Dkt. No. 23. Citibank asserts breach of contract and quantum meruit/unjust enrichment claims against the Reis Trust, Reis and Reyes. It asserts fraud and fraud by nondisclosure claims against Reyes. It also seeks recovery of attorneys' fees from the Reis Trust, Reis and Reyes. See id.

         Reyes filed a motion to dismiss for lack of personal jurisdiction, see Dkt. No. 36, and Citibank filed a response, see Dkt. No. 46.

         Reis filed a motion to dismiss for failure to state a claim, asserting that Citibank has failed to allege a claim against him individually. See Dkt. No. 41. Citibank filed a response, s ...


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