## COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH NO. 02-14-00273-CV BETHLYN KRAKAUER, ANDREW B. BARON, DAVID C. BARSKI, DAVID K. BENNETT, MARK A. BROWN, WALTER BURGESS, LEIGH A. CHURA, WILLIAM L. FORTUNE, III, AMERICAN DIRECT MERCHANT SYSTEMS, INC., GARY AND JANE HOLCOMBE, INDIVIDUALLY AND AS TRUSTEES OF BROADHURSTTRUST AND GERALD AND GRACE GORDON TRUST, PATHWAY BUILDERS, L.P., BROADHURST TRUST, GERALD AND GRACE GORDON TRUST, ROGER MOURLAM, MARK NAUGLE, MANOHA R K. SARAF,KAMLESH SISODIYA, OM-SHUBHLABH, F.L.P., GLENN SKEHAN, KENNETH J. STRASSER, KEITH L. STRASSER, JERRY D. WAKEFIELD, MYLES WALSH, DIANE WALSH, DR. DAVID ZEHR, TRENDA BETH BROWN, AND MDW CAPITAL INVESTMENTS, LLC APPELLANTS

V. WELLS FARGO BANK, N.A., WELLS FARGO BANK SOUTH CENTRAL, N.A., WELLS FARGO FINANCIAL BANK, AND WELLS FARGO FINANCIAL TEXAS, INC. APPELLEES2 ---------- FROM THE 153RD DI STRICT COURT OF TARRANT COUNTY TRIAL COURT NO. 153-272645-14

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### MEMORANDUM OPINION 1

---------- In five issues, Appellants (the Inve stors) appeal from the trial court’s summary judgment in favor of Appellee We lls Fargo Bank, N.A. (the Bank) on all of the Investors’ claims. 2 We affirm. Procedural Background The Investors sued the Bank and Teisha D. Boles—the vice president, as well as a manager and member—of Metr o Buys Homes, LLC and the wife of David C. Boles, Metro’s pres ident. The Investors allege d that Metro, David, and Teisha conspired to fraudule ntly induce them to investmoney in Metro, promising quick, high returns on their investment s. The investments were secured by “allegedly valid” deeds of trust and firs t mortgage liens on properties. The Investors alleged that “[t]he entire op eration was a fraud and a sham” because

1 See Tex. R. App. P. 47.4.

2 The Investors also sued Appellees Wells Fargo Financial Bank South Central, N.A., Wells Fargo Financial Ba nk, and Wells Fargo Financial Texas, Inc., and the trial court also granted su mmary judgment in favo r of these banking entities on all of the Investors’ claims. On appeal, the Invest ors do not challenge the summary judgment on their clai ms against these three Appellees.3 on many occasions, Metro di d not own the properties securing the investments and because David would, from time to time, issue checks to the Investors representing that the checks were for retu rns on the investments when they were really a return of the Invest ors’ initial principal investm ent or money re ceived from other investors. The Investors alleged that their invest ment funds were fi duciary funds and that those funds were deposited primarily in to one of Metro’s f our accounts at the Bank. The Investors claimed that their investment funds were funneled through accounts at the Bank and were used for David’s and Teisha’s personal use. According to the Investors, the Bank had a business relationsh ip with Metro and David that spanne d a number of ye ars. The Investors clai med that th e Bank had knowledge of Metro’s busines s, knew that the Investors were investing money in Metro through wire transfers and checks , and knew that th e funds from the Investors were fiduc iary in nature. The Investors further claimed that many of the checks Metro issued to them as purported returns or earnings on their investments were denied due to insufficient funds when the Inve stors tried to deposit or cash them. The Investors contended that the Bank knew about Me tro’s Ponzi scheme and profited from it by collecting overdraft fees, loan paymen ts, and “bank originated debits” out of the same account into wh ich Metro was depositing the Investors’ funds. The Investors asserted cl aims against the Bank fo r negligence, conspiracy to commit fraud, common law and statutory fraud, breach of contract, breach of4 fiduciary duty, knowing participation in brea ch of fiduciary duty , and violations of the Texas Securities Act. In addition to actual and exem plary damages, the Investors prayed for attorn ey’s fees and disgorgeme nt. The Bank moved for traditional and no-evidence summary judgm ent on all of the Investors’ claims. The Investors timely filed a summary ju dgment response and timely amended their pleadings to add causes of action for wrongful offset, unjust enrichment, money had and received, ai ding and abetting common law fraud, and aiding and abetting negligence. The Investors also added a request for an accounting. In their summary judgme nt response, the Invest ors argued, among other things, that the Bank’s summary judgment motion di d not address their newlypled claims for wrongful offset, unjust enrichment, and money had and received nor did it address their re quest for an accoun ting. The day be fore the summary judgment hearing, t he Bank filed a reply brief argu ing, among other things, that the Investors’ relationship with David and Metro was not a fiduciary relationship because the investment s were in the form of secure d loans and that, therefore, the relationship between the Invest ors and David and Metro was a debtorcreditor relationship and th e funds were not “trust fund s” or “fiduciary funds.” The trial court grant ed the Bank’s summary ju dgment motion without specifying the grounds upon which it re lied and severed the Investors’ claims against Teisha. The Investors filed a moti on for new trial, again complaining that the Bank had not sought summ ary judgment on the Investors’ claims for wrongful offset, unjust enrichment, and money had and receiv ed and the Investors’5 request for an accounting. The Investors also comp lained that the Bank’s argument in its summary judgment repl y—that David and Metro did not owe a fiduciary duty to the Inve stors—was a new summary ju dgment ground and asked the trial court to strike that portion of t he Bank’s reply. The trial court denied the Investors’ motion for new trial and denied the Invest ors’ motion to strike. The Investors have appealed. They challe nge the summary judgment against them only on their claims for wr ongful offset, unjust enrichment, money had and received, an accounti ng, knowing participation in breach of fiduciary duty, and statutory real estate fraud. Th ey argue on appeal that the trial court erred by granting summary ju dgment in favor of the B ank because (1) the Bank knew or should have known that the funds in David’s an d Metro’s accounts at the Bank belonged to the Invest ors, (2) the Bank did no t address the Investors’ newly-pled claims, (3) the Bank assert ed a new ground in it s summary judgment reply, (4) there was evidence that the Ba nk knowingly participated in David’s breach of fiduciary duty, and (5) there wa s evidence of statutory real estate fraud. Standards of Review After an adequate time for discovery, the party without the burden of proof may, without presenting evidence, move for summary judgment on the ground that there is no evidence to support an essential element of the nonmovant’s claim or defense. Tex. R. Civ. P. 166a(i). The motion must specifically state the elements for which there is no evidence. Id. ; Timpte Indus., Inc. v. Gish , 286 S.W.3d 306, 310 (Tex. 2009). The trial court mu st grant the motion unless6 the nonmovant produces summary judgme nt evidence that raises a genuine issue of material fact. See Tex. R. Civ. P. 166a(i) & cmt.; Hamilton v. Wilson , 249 S.W.3d 425, 426 (Tex. 2008). When reviewing a no-evidence summaryjudgment, we examine the entire record in the light most favorable to the nonmovant, indulging every reasonable inference and resolving any do ubts against the motion. Sudan v. Sudan , 199 S.W.3d 291, 292 (Tex. 2006). We re view a no-evidence summary judgment for evidence that would enable reasonable and fa ir-minded jurors to differ in their conclusions. Hamilton , 249 S.W.3d at 426 (citing City of Keller v. Wilson , 168 S.W.3d 802, 822 (Tex. 2005)). We credit evidence favorable to the nonmovant if reasonable jurors could, and we disregard evidence contrary to the nonmovant unless reasonable jurors could not. Timpte Indus. , 286 S.W.3d at 310 (quoting Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006)). If the nonmovant brings forward more than a scintilla of probat ive evidence that raises a genuine issue of materi al fact, then a no-evidenc e summary judgment is not
proper. Smith v. O’Donnell , 288 S.W.3d 417, 424 (Tex. 2009); King Ranch, Inc. v. Chapman , 118 S.W.3d 742, 751 (Tex. 2003), cert. denied , 541 U.S. 1030 (2004). We review a summary judgment de novo. Travelers Ins. Co. v. Joachim , 315 S.W.3d 860, 862 (Tex. 20 10). We consider the evidence presented in the light most favorable to the nonmovant, crediting ev idence favorable to the nonmovant if reasonable jurors could, an d disregarding evidence contrary to the7 nonmovant unless reasonab le jurors could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding , 289 S.W.3d 844, 848 (Tex. 2009). We indulge every reasonable inference and resolve any doubts in the nonm ovant’s favor. 20801, Inc. v. Parker , 249 S.W.3d 392, 399 (Tex. 2008). A defendant who conclusively negates at least one essent ial element of a cause of action is entitled to summary judgment on that claim. Frost Nat’l Bank v. Fernandez, 315 S.W.3d 494, 508 (Tex. 2010), cert. denied , 562 U.S. 1180 (2011); see Tex. R. Civ. P. 166a(b), (c). When, as here, a trial c ourt’s order granting summa ry judgment does not specify the ground or grounds relied on for its ru ling, summary judgment will be affirmed on appeal if any of the theories presented to the trial court and preserved for appellate re view are meritorious. Provident Life & Accident Ins. Co. v. Knott , 128 S.W.3d 211, 216 (Tex. 2003); Star-Telegram, Inc. v. Doe , 915 S.W.2d 471, 473 (Tex. 1995) . When the trial court’s judgment rests upon more than one independent ground or defense, the aggrieved party must assign error to each ground, or the ju dgment will be affirmed on the ground to which no complaint is made. Scott v. Galusha , 890 S.W.2d 945, 94 8 (Tex. App.—Fort Worth 1994, writ denied). The “Trust Fund Doctrine” Claims Because the Investors’ first three iss ues hinge on the ap plication of what they call the “trust fund doctri ne,” we review them together.8 Generally, when a deposi tor deposits funds into a bank account, the funds are unrestricted. Mauriceville Nat’l Bank v. Zernial, 892 S.W.2d 858, 860 (Tex. 1995). The bank is obligated to pay th ose funds back pursuant to the depositor’s instruction, but the funds are subject to the bank’s common la w right of setoff. Id. However, a bank with knowledge of the trust character of money deposited into an account cannot use the trust fund to offset a depositor’s debt. See, e.g. , S. Cent. Livestock Dealers, Inc. v. Sec. State Bank of Hedley, Tex. , 551 F.2d 1346, 1349 (5th Cir. 1977) (“Texas has lo ng held that if a bank knows that deposits by a debtor in hi s own name are in fact he ld by him in a fiduciary capacity, then the bank may not apply su ch funds to the individual indebtedness of the debtor.”); Steere v. Stockyards Nat’l Bank , 256 S.W. 586, 588 (Tex. 1923) (holding that where bank knew that deposited funds belo nged not to the depositor but to the depositor’s customers, bank co mmitted conversion by using those proceeds to pay depositor’s overdraft); Cont’l Nat’l Bank v. Great Am. Mgmt. & Inv., Inc. , 606 S.W.2d 346, 347 (Tex. Civ. App.—Fort Worth 1980, writ ref’d n.r.e.) (concluding that bank committe d conversion when it had pre-deposit knowledge that all funds deposited were advanced for a particular purpose); see also Mauriceville Nat’l Bank , 892 S.W.2d at 859–60 (collecting additional cases). The Investors refer to this legal pr inciple as the trust fund doctrine, 3and they

3 The “trust fund doctrine” also refers to “a method through which creditors are able to reach the assets of a dissolve d corporation in order to pay corporate debts.” Christian Otteson, Current Application of the Trust Fund Doctrine in Texas , 55 Baylor L. Rev. 313, 313 (2003).9 base their claims for wrongful offse t, unjust enrichment, and money had and received and their request fo r an accounting on it. Because they refer to the claims based on this principle as their tr ust fund doctrine claims, we will do the

same. In their first two issues, the Investors argue that the tr ial court erred in granting the Bank summary judgment on thei r trust fund doctri ne claims because the funds in Metro’s and Da vid’s accounts belonged to the Investors. Metro’s and David’s accounts were regular deposit accounts, an d the Investors conceded in their summary judgment response that the accounts were not designated as trust, fiduciary, or any othe r type of special accounts. Nevertheless, they argue that because the bank knew or should have known that fu nds deposited into David’s and Metro’s accounts belonged to the Inve stors, the Bank wrongfully took funds from those accounts to pay Da vid’s lines of credit and personal loans, overdraft fees, and “bank originated debits.” As pointed out by the supreme court in Mauriceville Nati onal Bank v. Zernial, the line of cases relied up on by the Investors is “inapposite” because “[i]n those cases, the banks had a pre-depos it arrangement with the depositor, creating a trust or allowing the deposit of a third-party’ s funds.” 892 S.W.2d at 860. Here, there is no evidence of a pre-deposit arran gement between Metro and the Bank or David and th e Bank that the funds woul d be held in trust for a third-party. See id. at 860. The Investors point to extensive deposition testimony from Bank employees who st ated that they knew thatthe funds deposited into10 the accounts came from investors, but th is is no evidence th at the Bank knew prior to the deposit that the funds would be held in trust for a third party. Simply knowing that David and Metro were depo siting money from investors is not enough to raise a fact issue as to whethe r the Bank knew that the funds were to be held “in trust.” See Mary E. Bivins Found. v. Highland Capital Mgmt. , 451 S.W.3d 104, 114 (Tex. App.—Dallas 2014, no pet.) (holding that hedge fund investment manager, manager’s presid ent, and manager’s chief investment officer did not owe fiduciary duty to he dge fund investor). Accordingly, we conclude that the trust fund doctrine (as that phrase has been used by the Investors in this case) does not apply to the fact s of this case. As part of their first and second issu es, the Investors al so argue that the trial court erred by granting summary judg ment for the Bank on their trust fund claims because the Bank di d not seek summary judgmenton them. A trial court cannot grant summary judg ment on grounds not pres ented in the motion. See Tex. R. Civ. P. 166a(c); G & H Towing Co. v. Magee , 347 S.W.3d 293, 297 (Tex. 2011) (“Granting a summary judgment on a claim not addressed in the summary judgment motion therefore is, as a genera l rule, reversible e rror.”). However, “[a]lthough a trial court errs in granting a summary judgment on a cause of action not expressly presented by written motion . . . the error is harmless when the omitted cause of action is precluded as a matter of law by other grounds raised in the case.” G & H Towing , 347 S.W.3d at 297–98.11 The Investors amen ded their petition to add their trust fund doctrine claims after the Bank filed its summ ary judgment motion. Broa dly read, the Bank’s reply does not fairly address the newly-pled claims, and the Bank disavowed raising anything new in the reply atthe summary judgment hearing. Thus, the Bank did not move for summary judgment on the tr ust fund doctrine claims. However, the Bank moved for traditional summary judgment on the Investors’ breach of fiduciary duty claim on the ground that the funds were held in ordinary deposit accounts at the Bank , thereby challenging the nature of the funds on deposit. Thus, even though the trial court grante d summary judgment on the trust fund doctrine claims—which were not specific ally addressed in the Bank’s summary judgment motion—the error was harmle ss because the Bank moved for summary judgment on an element comm on to these claims—the nature of the funds on deposit—on which the trial court found in favor of the Bank. We therefore overrule the Investors’ first and second issues. And because we have deter mined that the trial co urt could have granted summary judgment for the Ba nk on the grounds that the funds were held in ordinary deposit accounts and that the trust fund doct rine does not apply, we need not address the In vestors’ third issue complainin g that the Bank’s reply brief addressed a different issue than the trus t fund doctrine issue and thereby raised12 a new summary judgment ground. 4 See Knott , 128 S.W.3d at 216; StarTelegram, Inc. , 915 S.W.2d at 473; see also Tex. R. App. P. 47.1. Knowing Participation in Br each of Fiduciary Duty In their fourth issue, the Investors as sert the trial court erred by granting summary judgmenton their claim against the Bank for knowing participation in breach of fiduciary duty. The Investors alleged that David owed them a fiduciary duty and that the Bank, knowing that the funds on deposit were fiduciary funds and funds held in trust for their benefit byMetro and David, assisted in David’s misappropriation of funds and knowingl y participated by misappropriating the Investors’ investments. The Bank moved for summary judgment on this claim on both traditional and no-evidence grounds. On appeal, the Investors argue that the Bank failed to conclusively establish that it did not “k nowingly participate” in David’s breach of fiduciary duty, and they do not challenge the granting of summary judgment on no-evidence grounds. Because the Investors have failed to ra ise a challenge to the granting of the summary judgment on no-evidence gr ounds, we must affirm the summary judgment against the In vestors on their claim for knowing

4 Specifically, the Investors argue that in addressing their trust fund doctrine claims in its reply, t he Bank asserted a new summ ary judgment ground—the funds David and Metr o deposited at Wells Fargo we re not “trust funds” or “fiduciary funds”; in other words, the fu nds in the account did not belong to the Investors.13 participation in breach of fidu ciary duty on those grounds. See Scott , 890 S.W.2d at 948. We therefore ov errule the Investors’ fourth issue. Statutory Fraud In their fifth issue, the In vestors argue that the tria l court erred by granting summary judgment on their claim for statutory real estate fraud under section 27.01(d) of the busines s and commerce code. 5Tex. Bus. & Com. Code Ann. § 27.01(d) (West 2015). The investors alleged that the Bank had actual awareness of the falsity of Metro’s a nd David’s representa tions or promises, failed to disclose the falsity of the re presentations or promises made to the Investors, and benefited from the false representations to the Investors’ detriment. The Bank moved for summary judgment on both traditional and noevidence grounds, alleging th at it was not involved in any real estate transaction related to the lawsuit. A claim for statutory fraud unde r section 27.01(d) requires: [a] person who (1) has actual awareness of the falsity of a representation or promise made by another person and (2) fails to disclose the falsity of the represen tation or promise to the person defrauded, and (3) benefits from th e false representation or promise commits the fraud described in Subsec tion (a) of this section and is liable to the person defrauded fo r exemplary damages. Actual awareness may be inferred where ob jective manifestations indicate that a person acted with actual awareness.

5 The Investors do not challenge the summary judgment against them on their statutory fraud claims under bu siness and commerce code section 27.01(a)(1) or (a)(2). Tex. Bus. & Co m. Code Ann. § 27.01(a)(1), (2) (West 2015).14 Id. The Investors also sued the Bank for common law fraud, aiding and abetting the commission of common law fraud, and conspiracy to commit fraud. In support of each of these claims, the In vestors alleged that the Bank failed to disclose the falsity of Metro’s and Davi d’s representations. On appeal, the Investors do not challenge the summary judgment against them on these claims. Even though the Bank did not expressly move for summary judgment on the Investors’ claim for statutory real estate fraud under section 27.01(d), any error was harmless because of the trial court’s unchallenged ruling that there was no fraud by nondisclosure committed by the Bank. See G & H Towing , 347 S.W.3d at 297–98. Accordingly, we ove rrule the Investors’ fifth issue. Conclusion Having overruled each of the Investors’ five issues, we affirm the trial court’s judgment.

/s/ Anne Gardner ANNE GARDNER JUSTICE PANEL: GARDNER, ME IER, and SUDDERTH, JJ. DELIVERED: October 6, 2016