Florida Estate Planning Lawyer Blog
In St. Louis County, a jury awarded Barbara Morriss $77 million for mismanaging her family’s trust. The court agreed the bank breached its fiduciary duty, the duty to act in the beneficiary’s best interest, by failing to fully disclose significant financial transactions that allowed the trusts to lose millions of dollars
Barbara Morriss first learned of her trust’s lost assets when her credit card was declined at a local department store in 2011. Her son is a venture capitalist named B. Douglas Morriss, and was recently sentenced to five years in prison for tax evasion in 2013. Through his companies and others, B. Douglas Morriss and partners raised millions before the companies filed for bankruptcy with more than $35 million in debt.
Barbara was a beneficiary and co-trustee on two family trusts with her son Douglass. Her lawsuit alleged funds of the trusts were wrongfully pledged as collateral in risky business ventures, of which she only became aware after learning of the accusations against her son for defrauding investors. Her complaint alleged Wells Fargo and Doug Morriss acted together in a scheme to defraud the trusts. The complaint alleged Wells Fargo received more than $12 million in interest, loan fees, trust fees, and custody fees for its participation in the trust. Further, the complaint also alleged Wells Fargo and her son acted to conceal their conduct from Barbara until after the trust assets were depleted.
Wells Fargo argued it should not be held liable for any losses in the Morriss trust as the previous predecessor banks never acted as trustees, but merely held a portion of the trust assets as custodians. The predecessor banks, Offitbank and Wachovia merged in 1999, and Wells Fargo bought Wachovia in 2008. Mrs. Morriss’s attorney, Jim Bennett, believes the jury awarded his client damages because, “the bank failed to live up to the most basic obligation to take care and safe-keep the assets of the trust that were placed with the bank.”
A trustee owes many duties to the beneficiary that includes the duty of acting with reasonable care. This means banks and other corporate trustees owe a duty to keep the trust assets with reasonable care, and the trustee must act with a degree of caution. Wells Fargo allegedly allowed the trust’s assets to become depleted without even notifying the beneficiary Mrs. Morriss. If the allegations are true, the lack of notice to Barbara was most likely a breach of this duty
A trustee also owes a trust a duty of loyalty, and the trustee is not allowed to self-deal. A good example of self-dealing is when a trustee takes a loan from the trust’s assets. A trustee is also not allowed to significantly profit by acting as a trustee. For instance a trustee is not allowed to take a cut of the profits from a good investment. However a corporate trustee, such as a bank, is allowed to charge trustee fees and custodial fees. These fees are often in the thousands and are needed to maintain large trusts with millions of assets. In this case it is alleged that Wells Fargo received $12 million in fees to hold the trust. This is a significantly larger amount than most banks charge to hold trust assets.
In this case, the issue of whether Wells Fargo owed the Morriss trusts the same duties as a trustee was not determined. Instead, the jury found that Wells Fargo, at least, breached its custodial duties by continuing to allow the trust to be drained without notice to Barbara and charging the trust 12 million dollars to hold the assets.
Trustees and banks owe a trust certain duties as custodians and managers of the trust’s assets. If you believe a trustee or bank has violated a duty to your trust, misappropriated funds, or have invested the trust principal poorly contact the Law Office of David Goldman PLLC today to learn how these assets might be recoverable.