Millan v. Dean Witter Reynolds, Inc.

90 S.W.3d 760, 2002 WL 1559632

• Court: Court of Appeals of Texas
• Decided: September 4, 2002
• Docket: 04-00-00608-CV
• Status: Published

Opinions

OPINION ON APPELLEE’S MOTION FOR REHEARING EN BANC

Opinion by

KAREN ANGELINI, Justice.

We grant Dean Witter Reynolds, Inc.’s motion for rehearing en banc, withdraw our opinion and judgment issued November 30, 2001, and issue this revised opinion and judgment.

Factual & Procedural Background

Maria Millan opened two brokerage accounts at Dean Witter — one for herself and the other as trustee for her son, James — using her other son Miguel as her broker. Her investment practice was to purchase municipal bonds, hold them until they matured, then reinvest the proceeds. Over the next three years, Miguel systematically looted his mother’s account, ultimately stealing from her more than $287,000. He managed to do this by opening an additional account in his mother’s name and forging her signature on the application. This account had check-writing privileges and a credit card attached to it that Miguel used liberally. He took his mother’s periodic deposits, usually consisting of several thousand dollars, deposited the money into this fictitious account, and wrote himself cheeks from the account, usually made out to “cash.” Miguel covered his tracks by opening a post office box, fifing a false change of address form on which he forged his mother’s signature, and creating false account statements purporting to be from Dean Witter.

Millan sued her son and Dean Witter for conversion, fraud, breach of fiduciary duty, unauthorized transactions, negligence, and gross negligence. In its amended response, Dean Witter asserted limitations and invoked the proportionate responsibility section of the Civil Practices and Remedies Code. See Tex. Civ. Prac. & Rem.Code Ann. § 33.001 (Vernon 1997). The trial court directed a verdict for Dean Witter on the issues of vicarious liability, breach of fiduciary duty, and exemplary damages and refused various liability and damages issues requested by Millan. The jury was asked to determine the relative direct negligence of Millan and Dean Witter. It found Millan 85% negligent and Dean Witter 15% negligent and determined Millan’s damages to be $11,433.39. The jury further found Millan should have discovered the fraud in July 1994.

The trial court denied Millan’s motion for judgment notwithstanding the verdict (JNOV) and to disregard the jury findings, rendered a take-nothing judgment, and denied the motion for new trial. In twelve issues on appeal, Millan contends the trial court erred in rendering the directed verdict, refusing her jury questions, denying her motion for JNOV, and denying her motion for new trial. She also challenges the legal and factual sufficiency of the evidence supporting the jury’s findings on negligence and concerning when she should have discovered the fraud.

Limitations

Limitations is the threshold issue. In issue seven, Millan challenges the sufficiency of the evidence to support the jury’s finding that she should have discovered irregularities in her Dean Witter account by “July 1994.” Similarly, in issue nine, Millan claims the trial court improperly reduced the limitations period from four to two years when it rendered a directed verdict on her breach of fiduciary duty and fraud claims. Dean Witter contends all of Millan’s claims are time barred.

Negligence, gross negligence, and conversion are governed by a two-year statute of limitations. See Tex. Civ. Rem. & PRAc.Code Ann. § 16.003(a) (Vernon Supp. 2002). A cause of action for conversion accrues at the time facts come into existence that authorize a claimant to seek a judicial remedy. See Risinger v. Wilson County, 961 S.W.2d 525, 527 (Tex.App.San Antonio 1997, pet. denied). Although Millan cites Perez v. Gulley, 829 S.W.2d 388, 390 (Tex.App.-Corpus Christi 1992, writ denied) to argue breach of fiduciary duty has a four-year limitations period, this court previously held it has a two-year limitations period. See Farias v. Laredo Nat’l Bank, 955 S.W.2d 328, 334 (Tex.App.-San Antonio 1997, pet. denied).¹ Finally, fraud is governed by a four-year statute of limitations. See Tex. Civ. Rem. & Prac.Code Ann. § 16.004 (Vernon Supp. 2002).

The discovery rule doctrine provides that an action does not accrue until a plaintiff knew or in the exercise of reasonable diligence should have known of a wrongful act and resulting injury. Farias, 955 S.W.2d at 334. In response to jury question three, the jury found Millan should have discovered the irregularities in her Dean Witter accounts in July 1994. Millan filed suit June 3, 1998. Assuming the evidence was sufficient to support the jury’s answer to question three, limitations bars recovery for Millan’s claims of negligence, gross negligence, conversion, and breach of fiduciary duty.² It does not, however, bar recovery for fraud, because Millan filed suit before limitations had run on this cause of action.

Sufficiency of the Evidence

Millan contends in issue seven that the evidence was not legally or factually sufficient to support the jury’s finding that she should have discovered something was amiss with her account by July 1994, thus the trial court erred in overruling her motion for JNOV. In issue five, she contends the evidence was legally and factually insufficient to sustain the jury’s finding that she was 85% negligent. We address these sufficiency points, together.

In assessing whether the evidence supporting a jury finding is legally sufficient, we only consider evidence favorable to the jury’s decision and disregard all evidence and inferences to the contrary.¹ See Davis v. City of San Antonio, 752 S.W.2d 518, 522 (Tex.1988); Thrift v. Hubbard, 974 S.W.2d 70, 77 (Tex.App.-San Antonio 1998, pet. denied). If there is more than a scintilla of evidence to support the finding, the no evidence challenge fails. Thrift, 974 S.W.2d at 77. In considering a challenge to the evidence’s factual sufficiency, we review all of the evidence and reverse for a new trial only if the challenged finding shocks the conscience, clearly demonstrates bias, or is so against the great weight and preponderance of the evidence that it is manifestly unjust. See Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986); Thrift, 974 S.W.2d at 77.

The evidence and testimony in the record reflects the following acts, omissions, and chronology of events:

July 7,1993 Millan and her sister opened brokerage accounts at Dean Witter; Millan selected her son as her broker, despite knowing Miguel was in debt and had difficulty managing his own finances; Millan had her statements mailed to her sister’s home. Over time, her sister noticed irregularities in Millan’s account and brought that to Millan’s attention, but Millan did not act on this information. Over the next three years, Dean Witter violated its own policy of reviewing employee-related accounts on a monthly basis.

January 1994 Miguel forged his mother’s signature and opened a different type of account for her in both their names, an “Active Assets Account” with check-writing privileges. Dean Witter did not verify Millan’s signature, as its policy required, when the bogus account was opened. Millan began receiving statements at her home address, which Miguel apparently stole from her mailbox. Miguel gave Millan a checkbook for her use, with checks that began with number 502. It is not clear from the record whether he mailed the checkbook or brought it to her personally. Millan accepted her son’s word that her account suddenly had check-writing privileges and did not call Dean Witter to verify this. Some of the cheeks Millan wrote over the next three years to deposit money into her account showed a different account number on the back where each was endorsed payable to Dean Witter. Millan did not notice this. Miguel deposited the money into the joint account he had opened by forging his mother’s signature.

June 11,1994 Miguel forged check 506 that he pilfered from Millan’s checkbook; it is made payable to “cash” in the amount of $35,000. It is unclear from the record whether he stole the check before giving the checkbook to Millan, or stole it from her home. Disregarding written policy, a Dean Witter supervisor did not verify the check, despite the high amount, the payment to “cash,” and the concerns of the employee who first handled the check.

July 1994 Millan did not receive a statement for the month of June 1994. Millan’s receipt of Dean Witter statements after July 1994 became spotty. She did not question this, despite her expectation that she would receive monthly or quarterly statements and her sister’s uninterrupted receipt of monthly statements.

August 1994 Millan received the first of the bogus statements Miguel generated and sent to her until the account is closed. The statements she received beginning in August 1994 did not have the Dean Witter logo on them, were not printed on colored paper, did not have the lines and boxes separating various types of information, and were missing certain financial information. Miguel filed a false change of address form, forging his mother’s signature yet again and diverting the actual statements to a post office box. Dean Witter failed to verify the change-of-address information, violating its own policy.

October 5-18,1994 Millan wrote checks 502 through 505.

October 1994³ Millan discovered check 506 was missing. She thumbed through the checkbook and discovered other checks were also missing. She called Dean Witter and was referred to her broker/son. He told her, falsely, that none of the missing checks had been processed. Millan did not speak with any other Dean Witter employee about the missing checks.

October 25,1994 Millan wrote checks 507 and 508.

November 23, 1994 Millan wrote checks 510 and 511.⁴

December 3,1994 Millan wrote check 512.

April 11,1995 Millan wrote check 513.

June 14,1995 Miguel forged check 514.

[[Image here]]

There is more than a scintilla of evidence, reviewed in the light most favorable to the jury’s findings, to support the jury’s findings that Millan should have known by July 1994 that something was amiss with her accounts and that she bore 85% of the responsibility. Moreover, these findings are not so against the great weight and preponderance of the evidence as to shock the conscience or render the findings manifestly unjust.

We overrule issues five and seven.

Negligence Damages

In issue eleven, Millan contends that, as a matter of law, she is entitled to damages in the amount of $247,440.00, and thus the trial court erred in refusing to disregard the jury’s damages award of $11,433.47. However, because Millan’s negligence claims are time barred and because there is sufficient evidence to support the jury’s finding that Millan was 85% responsible for her losses, Millan is not entitled to recover any damages. Tex. Civ. PRAC. & Rem.Code Ann. § 16.003(a) (Vernon Supp. 2002), § 33.001 (Vernon 1997). Accordingly, we decline to reach the merits of Mil-lan’s issue.

Refused Jury Questions

In issue one, Millan argues the trial court erred in not submitting her requested issue on breach of fiduciary duty; in issue eight, she argues conversion should have been submitted; and in issue twelve, she argues gross negligence should have been submitted. Because we have held there was sufficient evidence to sustain the jury’s finding that Millan should have discovered by July 1994 that something was amiss, Millan’s claims for breach of fiduciary duty, conversion, and gross negligence are barred by the two-year statute of limitations. See Tex. Civ. Rem. & PRAC.Code Ann. § 16.003(a) (Vernon Supp.2002).

In issue two, Millan contends the trial court should have submitted a question on whether Miguel was acting with apparent authority. We disagree. Apparent authority is not itself a cause of action; rather, it can be used to establish a principal’s liability when there is no actual authority. See Baptist Mem’l Hosp. Sys. v. Sampson, 969 S.W.2d 945, 949 (Tex.1998). Because Miguel was a registered agent for Dean Witter, there was no need to show apparent authority because Miguel had actual authority.

In issue three, Millan contends the trial court erred by not submitting an issue on unauthorized trading. As Dean Witter notes, none of the authority Millan cites supports the argument that there is an independent cause of action for unauthorized trading.

In issue four, Millan contends the trial court erred in not submitting a question regarding violations of NASD rules. As in unauthorized trading, there is no independent cause of action for NASD violations. See Porter v. Shearson Lehman Bros., Inc., 802 F.Supp. 41, 63 (S.D.Tex.1992).

We overrule issues one, two, three, four, eight, and twelve.

Vicarious Liability

At trial, Millan alleged that Dean Witter is vicariously liable for Miguel’s fraudulent acts under the doctrine of respondeat superior because he was acting in the course and scope of his employment. At the close of Millan’s case-in-chief, Dean Witter moved for directed verdict on the issue of its vicarious liability. The trial court instructed a verdict on the issue, finding that Dean Witter was not vicariously liable for Miguel’s actions. In her sixth issue, Mil-lan maintains the trial court erred in granting Dean Witter’s motion and should have, instead, submitted the issue of Dean Witter’s vicarious liability for fraud to the jury.

In reviewing a challenge to a directed verdict, we must determine whether there is any evidence to raise a fact issue. Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex.1994); Porterfield v. Brinegar, 719 S.W.2d 558, 559 (Tex.1986). We consider all of the evidence in the light most favorable to the party against whom the verdict was directed, disregarding all contrary evidence and inferences. S.V. v. R.V., 933 S.W.2d 1, 8 (Tex.1996). If the record contains any probative and conflicting evidence on a material issue, then the jury should have resolved the issue. White v. Southwestern Bell Tel. Co., 651 S.W.2d 260, 262 (Tex.1983).

“Under the doctrine of respon-deat superior, an employer is vicariously liable for the negligence of an agent or employee acting within the scope of his or her agency or employment....” Baptist Mem’l Hosp. Sys. v. Sampson, 969 S.W.2d 945, 947 (Tex.1998). To determine whether an employee’s acts are within the scope of his or her employment, we ask whether the employee’s actions fall within the scope of the employee’s general authority, are in furtherance of the employer’s business, and are for the accomplishment of the object for which the employee was hired. Leadon v. Kimbrough Bros. Lumber Co., 484 S.W.2d 567, 569 (Tex.1972); Robertson Tank Lines, Inc. v. Van Cleave, 468 S.W.2d 354, 357 (Tex.1971); Darensburg v. Tobey, 887 S.W.2d 84, 89 (Tex.App.-Dallas 1994, writ denied). In cases involving serious criminal activity, an employer is not liable for intentional and malicious acts that are unforeseeable considering the employee’s duties. Adami v. Dobie, 440 S.W.2d 330, 334 (Tex.Civ.App.-San Antonio 1969, writ dism’d). Our inquiry, therefore, must first focus on the scope of Miguel’s general authority.

Miguel, in the course and scope of his employment for Dean Witter opened a brokerage account for his mother. It was within Miguel’s general authority to open such accounts for clients, receive deposits to these accounts, and purchase and sell securities as directed by clients. Miguel’s activities, however, went far beyond these general brokerage duties. Miguel greatly exceeded the scope of his authority when, through a litany of deceitful acts, he stole money from his mother. Those acts include stealing checks from his mother’s bathroom drawer, writing checks on his mother’s account, depositing his mother’s checks into his own account, forging his mother’s signature on numerous occasions, stealing statements from his mother’s mailbox, creating and sending bogus statements to his mother, and opening a post office box so he could receive his mother’s actual statements. These acts were not related to Miguel’s duties and were not within his general scope of authority as a broker for Dean Witter.

We hold there was no evidence that Miguel acted within the scope of his authority as a broker at Dean Witter. Accordingly, there is no evidence to support the submission of the issue of Dean Witter’s vicarious liability for fraud to the jury. Issue six is overruled.

In issue ten, Millan contends the trial court erred in not submitting a question on exemplary damages based on fraud and breach of fiduciary duty. Millan’s breach of fiduciary duty claim is barred by limitations. Because we hold there was no evidence presented to support the submission of Dean Witter’s vicarious liability for fraud, Millan was not entitled to have a question regarding exemplary damages submitted with a jury question on fraud. Issue ten is overruled.

Conclusion

Having overruled issues one, two, three, four, five, seven, eight, eleven and twelve, we affirm the jury’s findings and those portions of the directed verdict dealing with apparent authority, unauthorized trading, NASD violations, breach of fiduciary duty, conversion, negligence, and gross negligence. We also overrule that part of issue nine addressing breach of fiduciary duty, because we have held this claim has a two year statute of limitations. Even though Millan’s fraud claim against Dean Witter is not limitations barred, there was no evidence to support submission of the issue to the jury. Accordingly, the trial court’s judgment is affirmed.

Dissenting opinion by: CATHERINE STONE, Justice, joined by PHIL HARDBERGER, Chief Justice, and ALMA L. LÓPEZ, Justice.

Concurring and dissenting opinion by: SARAH B. DUNCAN, Justice.

1 . In 1999, the Legislature specified a four-' year limitations period for breach of fiduciary duty, largely because of the split among the courts of appeal in determining whether limitations was two or four years. However, the statute is inapplicable here because the cause of action accrued before passage of the provision.

2 . Although the issues of conversion and breach of fiduciary duty were not submitted to the jury, its answer to question three would still apply to bar these claims. See Houston Terminal Land Co. v. Westergreen, 119 Tex. 204, 27 S.W.2d 526, 527 (1930) (determination of fact issue creates estoppel by judgment on same issue).

3 . The precise date is not reflected in the record, but discovery likely occurred between the 18th & 25th of October, based on the dates checks 505 and 507 were written.

4 . Check 509 was never used at all.