REVERSE and RENDER; and Opinion Filed December 17, 2018.




                                                                    In The
                                            Court of Appeals
                                     Fifth District of Texas at Dallas
                                                         No. 05-17-01184-CV

                                           PLAINSCAPITAL BANK, Appellant
                                                       V.
                                           SALLY JOANN REAVES, Appellee

                                  On Appeal from the 68th Judicial District Court
                                              Dallas County, Texas
                                       Trial Court Cause No. DC-16-04118

                                           MEMORANDUM OPINION
                                      Before Justices Evans, Boatright, and O'Neill1
                                              Opinion by Justice Boatright
            Following a bench trial, the district court rendered judgment against PlainsCapital Bank

for breaching a fiduciary duty owed to its customer, Sally Reaves, and for fraudulently failing to

disclose to Reaves material information that the Bank had a duty to disclose. PlainsCapital appeals

the judgment, claiming, among other grounds, that no evidence supports the court’s findings. We

reverse and render.

                                                           BACKGROUND

           Reaves and her business partner, Faith Glover, are the founders of Sagebrush Solutions,

L.L.C, a company whose business was to identify overpaid healthcare claims and to collect the

overpayments for a contingent fee. The events that allegedly gave rise to a fiduciary relationship


   1
       The Hon. Michael J. O'Neill, Justice, Court of Appeals, Fifth District of Texas at Dallas, Retired, sitting by assignment
date back to late 2000, when Reaves and Glover contacted Martin Talley, at that time a banker at

Texas Bank, to discuss a possible Small Business Administration loan to Sagebrush. In the ensuing

five years, Sagebrush obtained two loans from Texas Bank with Talley’s assistance.

       In April 2006, Compass Bank acquired Texas Bank, and Talley left Compass to join

PlainsCapital (the Bank). Approximately four months later, Reaves’s husband died from cancer,

and she notified Talley of her husband’s passing. Less than a week later, and before Reaves had

yet returned to work, Talley arranged a meeting to discuss a new SBA loan that he was arranging

for Sagebrush. At this meeting, Talley stated that the company needed additional collateral to

secure the loan. Reaves and Glover responded that they had no other assets to offer, at which point

Talley asked Reaves if she would be receiving any life insurance proceeds. Raves responded yes,

and Talley asked if she would pledge these proceeds as additional collateral. Reaves agreed to do

so, and she deposited $88,521 of the proceeds into her personal investment account to purchase

mutual fund securities.

       In late November 2006, approximately three months after Talley’s request, Plains Capital

made two loans to Sagebrush, the first of which was an SBA line of credit up to $1 million, and

the second of which was a conventional loan for $525,000. Each of these loans had three

guarantors—Reaves, Glover, and an entity owned by them, RG Consolidated Ventures, LP.

Reaves pledged her investment account containing the life insurance proceeds to secure the $1

million SBA loan, and Glover also pledged her own personal investment accounts as collateral for

the loan.

       In the spring of 2012, PlainsCapital made two additional loans to Sagebrush, the first in

the amount of $171,126.68, and the second in the amount of $250,000. As with the 2006 loans,

Reaves, Glover, and RG Consolidated Ventures guaranteed the 2012 loans. Moreover, Reaves and

Glover again pledged their investment accounts as collateral to secure the loans.

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       PlainsCapital contends that Sagebrush began to struggle in 2012, and additional financing

became difficult to obtain. In November of that year, the Bank, Sagebrush, and the guarantors

executed a forbearance agreement as to the 2006 SBA line of credit and the 2012 loans. Nearly

three years later, in July 2015, the $250,000 loan matured, and PlainsCapital demanded payment.

This debt remained unsatisfied as of September 2015. The Bank at that time accelerated the

remaining loans and demanded that they be paid in full. Sagebrush did not make payment. The

Bank then sold the securities in the accounts pledged by Reaves and Glover and applied the

proceeds from these sales to reduce Sagebrush’s outstanding debt. The offset of Reaves’s account

totaled $194,514.97.

       Reaves sued Plains Capital on April 8, 2016, alleging claims for breach of fiduciary duty,

breach of the duty of good faith and fair dealing, and fraud. Her claims are based on Talley’s

requests that she pledge as collateral the proceeds from her husband’s life insurance policy. She

complains that Talley did not tell her that these proceeds were exempt from creditors unless

pledged, TEX. INS. CODE ANN. §§ 1108.051, .053(2), and she asserts that she would not have

pledged them had she known of this exemption. She also alleges that Talley did not suggest that

she seek independent advice before signing her pledge. The Bank responds that the foregoing

statutory exemption did not take effect until 2003, three years prior to the 2006 loans at issue here.

It also contends that Talley was not yet aware of the exemption when the loans were made and that

Reaves was instructed in the loan documents to seek legal advice.

       PlainsCapital filed a no-evidence motion for summary judgment, which the court granted

as to Reaves’s good faith and fair dealing claim. The case proceeded to trial on the remaining

claims. Following the trial, the court rendered judgment for Reaves in the amount of

$277,450.34—consistent with Reaves’s calculations regarding the value of her pledged securities

at the time of trial had they not been sold—plus court costs and post-judgment interest. The court

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made findings of fact and conclusions of law in support of its judgment, and PlainsCapital filed

this appeal.

                                            ANALYSIS

       PlainsCapital raises four issues, the first two of which urge that Reaves’s breach of

fiduciary duty and fraud claims are “untenable and cannot be sustained.” As the plaintiff in the

court below, Reaves had the burden to establish the existence of a fiduciary duty, Clark v.

Dillard’s, Inc., 460 S.W.3d 714, 728 (Tex. App.—Dallas 2015, no pet.), and to prove the elements

of her fraud claim, Citizens Standard Life Ins. Co. v. Gilley, 521 S.W.2d 354, 356 (Tex. App.—

Dallas 1975, no writ). The Bank urges that no evidence supports the court’s findings that (i) the

Bank had a fiduciary relationship with Reaves, (ii) it breached its fiduciary duty, or (iii) it

committed fraud by nondisclosure. In evaluating these contentions, we must consider evidence

favorable to the court’s findings if a reasonable factfinder could and must disregard evidence

contrary to the finding unless a reasonable factfinder could not. Crosstex N. Tex. Pipeline, L.P. v.

Gardiner, 505 S.W.3d 580, 613 (Tex. 2016). Evidence is legally insufficient to support a finding

if: (1) the record discloses a complete absence of evidence of a vital fact; (2) the court is barred by

rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact;

(3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence

establishes conclusively the opposite of a vital fact. Id. Through the lens of these standards, we

will look at whether the evidence is legally sufficient to support the court’s findings.

Fiduciary Duty Claim

       A breach of fiduciary duty claim includes, among other elements, a fiduciary relationship

between the plaintiff and the defendant. Jones v. Blume, 196 S.W.3d 440, 447 (Tex. App.—Dallas

2006, pet. denied). Although such a relationship may be formal or informal, id., it is undisputed

that this case does not involve a formal fiduciary relationship. “An informal fiduciary duty may

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arise from a moral, social, domestic or purely personal relationship of trust and confidence,

generally called a confidential relationship.” Associated Indem. Corp. v. CAT Contracting, Inc.,

964 S.W.2d 276, 287 (Tex. 1998). However, “a fiduciary duty is an extraordinary duty.” Areda v.

S-W Transp., Inc., 365 S.W.3d 838, 841 (Tex. App.—Dallas 2012, no pet.). “[T]o give full force

to contracts, we do not create such a relationship lightly.” Meyer v. Cathey, 167 S.W.3d 327, 331

(Tex. 2005) (per curiam) (citation and internal quotation marks omitted).

       The relationship between a borrower and its lender is usually neither a fiduciary nor a

special relationship. Patrusky v. Bloomberg, No. 05-14-00175-CV, 2015 WL 3896097, at *7 (Tex.

App.—Dallas June 24, 2015, no pet.) (mem. op.). A fiduciary relationship in this context, when

found, “has rested on extraneous facts and conduct, such as excessive lender control over, or

influence in, the borrower’s business activities.” Id. In its first issue, the Bank urges that there is

no such evidence in this case. The existence of a confidential relationship is usually a question of

fact, though it becomes a question of law when the issue is one of no evidence. Crim Truck &

Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992), superseded by

statute on other grounds as noted in Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d

212, 225–26 (Tex. 2002).

       Scope of review

       It is undisputed, and the court found, that the relationship in question began in late 2000,

when Reaves and Glover sought out Talley to discuss a possible SBA loan to Sagebrush.

PlainsCapital argues that this relationship cannot qualify as a fiduciary one because Reaves and

Talley had no relationship prior to their business dealings. Among other authorities, the Bank relies

upon this Court’s recognition that an informal fiduciary relationship in a business transaction

depends on the existence of a special relationship of trust and confidence prior to, and separate

from, “the parties’ agreement,” Jones, 196 S.W.3d at 449 (citing Schlumberger Tech. Corp. v.

                                                 –5–
Swanson, 959 S.W.2d 171, 177 (Tex. 1997)), and upon our affirmance of a summary judgment for

the defendant with respect to a breach of fiduciary duty claim in which the plaintiff provided no

evidence of a preexisting relationship beyond the parties’ “business relationship,” Patrusky, 2015

WL 3896097, at *8. These opinions do not require that the “special relationship” predate any

business relationship between the parties. As the Texas Supreme Court has held, such a

relationship must instead exist prior to, and apart from, “‘the agreement made the basis of the

suit.’” Willis v. Donnelly, 199 S.W.3d 262, 277 (Tex. 2006) (emphasis added) (quoting

Schlumberger, 959 S.W.2d at 177). However, the court has also recognized that any prior

agreements, to the extent they were arms-length transactions entered into for the parties’ mutual

benefit, cannot establish a basis for a fiduciary relationship. Meyer, 167 S.W.3d at 331.With this

guidance in mind, we will examine whether the record contains evidence of a fiduciary relationship

that began prior to, and apart from, the execution of the loans at issue, which occurred in November

2006 and in March and April 2012.

        PlainsCapital also contends that, assuming a fiduciary relationship existed during Talley’s

employment at Texas Bank, this relationship did not transfer to PlainsCapital when Talley began

working there. PlainsCapital urges that to hold otherwise would “place an impossible burden on

lenders and employers” by requiring them to “research and determine if any informal fiduciary

relationship existed prior to employing any individual.” We need not decide this issue. As set forth

below, we conclude that the record contains no evidence of an informal fiduciary relationship,

even if we consider the portion of the relationship that dates back to Talley’s employment at Texas

Bank.

        Confidential relationship

        Reaves notes that “[a] party is justified in placing confidence in the belief that another party

will act in his or her best interest . . . where he or she is accustomed to being guided by the judgment

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or advice of the other party, and there exists a long association in a business relationship as well

as personal friendship.” In re Estate of Abernethy, 390 S.W.3d 431, 438 (Tex. App.—El Paso

2012, no pet.). Based upon her social and business relationship with Talley, Reaves urges that she

was accustomed to being guided by his business advice.

       At trial, Reaves testified that she and Glover had lunch with Talley a few times each year,

and Talley and his wife attended Reaves’s wedding in 2003 and gave her a gift. They also

discussed that Talley attended school with Reaves’s sister from elementary school through high

school. In addition, Reaves confided in Talley in 2005 that her husband had fallen ill, and she

included Talley on the e-mail a year later that notified her friends her husband had died. Talley

sent Reaves a condolence plant following this news. She likewise sent Talley a plant when his

mother died in 2010. None of these facts, in and of themselves, are sufficient to establish a

fiduciary relationship. “[S]olely because the relationship between the parties has been lengthy and

cordial does not necessarily mean a confidential relationship exists.” Id. By way of comparison,

the Texas Supreme Court could not justify such a relationship notwithstanding that, for four years,

the parities in question were friends and frequent dining partners. Meyer, 167 S.W.3d at 331.

       The record also reveals several instances in which Talley gave Reaves and Glover business

advice regarding Sagebrush. For example, while employed at Texas Bank, Talley recommended

that Sagebrush change from the cash method to the accrual method of accounting, thereby

rendering its financial statements more accurate and “more bankable.” Talley also suggested that

Sagebrush capitalize its software development costs as an asset, that it register on the SBA website

using “NAIC and SIC codes,” and that Reaves sell some of her personal securities holdings to

infuse additional capital into the business.

       After moving to PlainsCapital, Talley continued to advise Reaves regarding the available

options for financing Sagebrush’s business. He recommended that Sagebrush layer its loans by

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obtaining an SBA revolving line of credit for short-term expenses and a term note for long-term

expenses. According to Reaves, Talley himself completed a portion of the lengthy application for

the revolving line of credit, though she acknowledged on cross examination that Talley did not

prepare Sagebrush’s financial documents. Talley also reviewed, and suggested revisions to, the

complex “borrowing base” documents that Sagebrush’s line of credit required it to prepare and

submit twice monthly. Moreover, Talley recommended a “lock box”—a repository that the

revolving line of credit required for holding and tracking the overpayments that Sagebrush

obtained for its clients—and he assisted in implementing the lock box.

       Reaves also notes that Talley asked her, within a week after her husband’s death, if she

would pledge the proceeds from her husband’s life insurance policy as collateral for the Sagebrush

SBA loan. She was “pretty out of it” at the time, and she agreed to pledge these proceeds

notwithstanding that, unbeknownst to her, they would have been exempt from creditors if not

pledged. TEX. INS. CODE ANN. §§ 1108.051, .053(2). In 2012, Talley again recommended that

Reaves pledge the insurance proceeds to secure the Sagebrush loans originated that year, and she

did so. Reaves urges that the foregoing evidence establishes an informal fiduciary relationship,

based on case authority that such a relationship (i) arises in cases “in which influence has been

acquired and abused, in which confidence has been reposed and betrayed,” Crim Truck & Tractor,

823 S.W.2d at 594 (citation and internal quotation marks omitted), and (ii) is characterized by the

dominance of one party or the weakness or dependency by the other, Associated Indem. Corp. v.

CAT Contracting, Inc., 918 S.W.2d 580, 596 (Tex. App.—Corpus Christi 1996), aff’d in part,

rev’d in part on other grounds, 964 S.W.2d 276 (Tex. 1998). In addition, she argues for the

existence of a fiduciary relationship based on PlainsCapital’s purported exercise of excessive

control over, or influence in, Sagebrush’s business activities.




                                                –8–
       Reaves cites several case involving lenders and borrowers, but none of the circumstances

in those cases justified the imposition of a fiduciary relationship. On the other hand, for purposes

of comparison, PlainsCapital cites State National Bank of El Paso v. Farah Manufacturing Co., in

which our sister court held that the evidence supported a finding that lenders interfered with the

borrower corporation’s business by forcing out the corporation’s CEO, appointing their own CEO,

and packing the board with their own hand-picked nominees. 678 S.W.2d 661, 688–90 (Tex.

App.—El Paso 1984, writ dism’d by agr.). The Bank urges that this case does not involve such

facts and is instead analogous to decisions holding that lenders did not owe a fiduciary duty. For

example, a lender’s supervision of the borrower’s improvements to real property that secured the

loan did not constitute the exercise of dominion or control. Falcon Int’l Bank v. Cantu, No. 3-13-

00577-CV, 2015 WL 1743396, at *12 (Tex. App.—Corpus Christi–Edinburg Apr. 15, 2015, no

pet.) (mem. op.). Rather, the lender’s conduct “was merely consistent with protecting [its] interest”

in the collateral. Id. In another case, the fact that a bank’s customers had made substantial deposits

in the bank, were shareholders of the bank, and had often sought its advice on various matters, did

not establish extensive control or influence by the bank over the customers’ business activities.

Wil-Roye Inv. Co. II v. Washington Mut. Bank, FA, 142 S.W.3d 393, 410 (Tex. App.—El Paso

2004, no pet.).

       In sum, the record in this case reveals a long-standing and cordial business relationship in

which Reaves considered Talley “a trusted advisor and friend.” However, the “mere fact that one

party to a relationship subjectively trusts the other does not indicate the existence of a fiduciary

relationship.” McAfee, Inc. v. Agilysys, Inc., 316 S.W.3d 820, 829 (Tex. App.—Dallas 2010, no

pet.). Upon considering the evidence favorable to the court’s findings, we conclude that such

evidence is legally insufficient to support the court’s determination that Talley and Reaves shared

a fiduciary relationship.

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       Contractual disclaimer

       PlainsCapital also relies upon the November 2012 forbearance agreement signed by

Reaves, in which she expressly acknowledged that the relationship in question “is solely that of

debtor and creditor.” The agreement also states that PlainsCapital “has no fiduciary or other special

relationship” with Sagebrush or Reaves, nor shall any term or condition “be construed so as to

deem the relationship . . . to be other than that of debtor and creditor.” In addition, the agreement

notes that it was “negotiated at arms-length and in good faith” and that, before signing it, Reaves

“had the opportunity to be advised of [her] legal rights by an attorney of [her] choice and

selection.”

       In an analogous circumstance, the Supreme Court held that the lower court erred in relying

on the parties’ work on prior projects as evidence of a fiduciary relationship between them, given

that “the agreements” governing such projects “expressly disavowed the creation of any fiduciary

duties or other special relationships.” Meyer, 167 S.W.3d at 331. Similarly, the disclaimer signed

by Reaves supports our conclusion that the record contains no evidence of a fiduciary relationship.

Absent such a relationship, we need not decide whether the evidence supports the court’s finding

that PlainsCapital breached a fiduciary duty. We sustain the Bank’s first issue.

Fraud Claim

       Our holding regarding PlainsCapital’s first issue bears on our analysis of its second, which

urges that the record contains no evidence the Bank committed fraud by nondisclosure. This claim

is premised on the allegation that the Bank, through Talley, fraudulently concealed that Reaves’s

life insurance proceeds were exempt unless they were pledged. Absent a fiduciary relationship

between Talley and Reaves, and given that the statutory provisions exempting such proceeds were

publicly available, TEX. INS. CODE ANN. §§ 1108.051, .053(2), the record contains no basis to

impose a duty to disclose here, which is a necessary element of a fraud by nondisclosure claim.

                                               –10–
Myre v. Meletio, 307 S.W.3d 839, 843–44 (Tex. App.—Dallas 2010, pet. denied). Moreover, a

party cannot be guilty of fraudulently or intentionally concealing facts of which he is not aware.

Dewayne Rogers Logging, Inc. v. Propac Indus., Ltd., 299 S.W.3d 374, 391 (Tex. App.—Tyler

2009, pet. denied). Talley testified that he knew that homesteads, 401k accounts, and retirement

assets were exempt from creditors, but he was not aware until after the lawsuit was filed that life

insurance proceeds were also exempt. The record contains no evidence to the contrary. While

Talley at the time of trial possessed thirty-seven years of experience in the banking industry, the

foregoing statutory provisions were not enacted until 2003, three years prior to Reaves’s first

pledge of her insurance proceeds. Accordingly, there is not more than a scintilla of evidence of

proof of Talley’s knowledge of the facts that he purportedly concealed from Reaves. In sum, we

conclude that the record lacks legally sufficient evidence to support Reaves’s claim of fraud by

nondisclosure. Crosstex, 505 S.W.3d at 613. For each of the foregoing reasons, we sustain

PlainsCapital’s second issue.

                                        CONCLUSION

       Our resolution of the Bank’s first two issues is dispositive of this appeal. We need not

consider its remaining issues, which complain of purported evidentiary errors and also contend

that Reaves’s claims were barred by the statute of limitations. We reverse the court’s judgment

and render judgment that Reaves taking nothing with respect to her claims against the Bank.




                                                  /Jason Boatright/
                                                  JASON BOATRIGHT
                                                  JUSTICE


171184F.P05



                                               –11–
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                        JUDGMENT

 PLAINSCAPITAL BANK, Appellant                        On Appeal from the 68th Judicial District
                                                      Court, Dallas County, Texas
 No. 05-17-01184-CV          V.                       Trial Court Cause No. DC-16-04118.
                                                      Opinion delivered by Justice Boatright.
 SALLY JOANN REAVES, Appellee                         Justices Evans and O'Neill participating.

       In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and judgment is RENDERED that appellee take nothing with respect to her
claims against appellant.

       It is ORDERED that appellant PLAINSCAPITAL BANK recover its costs of this appeal
from appellee SALLY JOANN REAVES.


Judgment entered this 17th day of December, 2018.




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