We are scratching our head over this case. A 10-2 verdict? Double Dipping? Defendants who drop out of the story?
"In Baker Botts, et al. v. Kenneth F. Cailloux, as Next Friend of Kathleen C. Cailloux, the 4th Court of Appeals in San Antonio reversed a 2005 trial court judgment ordering Baker Botts and Wells Fargo Bank Texas N.A. to pay $71 million in damages to their former estate-planning client Kathleen C. Cailloux, a wealthy widow in Kerrville.
In an opinion written by Justice Catherine Stone, the three-justice panel reversed the judgment against Baker Botts and Wells Fargo on the ground that nothing in the record proved that Baker Botts or Wells Fargo breached a fiduciary duty that caused Cailloux to disclaim her right to the estate of her late husband, Floyd Cailloux. The appeals court rendered a take-nothing judgment in favor of the firm and the bank.
In 1995, a jury in 198th District Judge Emil Karl Prohl’s court in Kerrville had found that Kathleen Cailloux would have received $65.5 million in trust if she had not disclaimed her right to Floyd’s estate. However, the jury also found the woman had no lost-income damages or economic-loss damages as a result of executing the disclaimer. Prohl ordered Baker Botts and Wells Fargo, the executor of Floyd’s estate, to pay $71 million in damages to fund a trust for Kathleen Cailloux.
However, in its opinion, the 4th Court found Prohl abused his discretion by creating an "equitable trust" to hold the millions of dollars he ordered Baker Botts and Wells Fargo to pay.
"We are further troubled by the "equitable trust’ fashioned by the trial court because it essentially places Kathleen in a better position than she previously occupied," Stone wrote in the 11-page opinion, in which Chief Justice Alma Lopez and Justice Karen Angelini joined.
The litigation stems from estate planning Baker Botts did for Cailloux and her husband, a founder of Keystone International. According to a lawyer for Kathleen and for her son Kenneth Cailloux, Austin’s Richard Harrison, Kathleen and Floyd were worth about $130 million. Kenneth is his mother’s legal guardian, because Kathleen is incapacitated by Alzheimer’s disease.
The plaintiffs alleged in the sixth amended petition that the defendants conspired to convince her, right after Floyd Cailloux’s death in 1997, to disclaim her rights to her husband’s estate and to transfer more than $60 million to the Cailloux Foundation — ostensibly to save more than $30 million in taxes — without informing her of other estate-planning options.
According to the 4th Court’s opinion, more than six years after Kathleen disclaimed her husband’s estate, her son Kenneth, as her next friend, sued Baker Botts and Wells Fargo for, among other things, breach of fiduciary duty relative to Kathleen’s execution of the disclaimer.
The defendants denied all of the allegations.
In February 2005, a jury in Prohl’s court, by a 10-2 vote, found Baker Botts breached its fiduciary duty to Kathleen Cailloux by failing to disclose "all important information" when doing estate-planning work for Cailloux following the death of her husband in January 1997. The jury, however, found Baker Botts did not breach its fiduciary duty in three other areas: by failing to act with the utmost loyalty toward Cailloux, by participating in transactions that were not fair and equitable to Cailloux, or by failing to act in the utmost good faith and to exercise the most scrupulous honesty toward the widow.
The jury also found Wells Fargo breached its fiduciary duty to Kathleen Cailloux and found that former bank official William Goertz, who also served on the board of the Floyd A. Cailloux and Kathleen C. Cailloux Foundation, individually participated in that breach. Goertz settled before trial.
The jury assessed 25 percent of the responsibility for the injury to Cailloux, another 25 percent against Baker Botts and 25 percent each against Wells Fargo and Goertz.
For the breaches of fiduciary duty, the jury found Kathleen Cailloux should be compensated with $65.5 million — the value she would have received in trust had she not agreed to disclaim her rights to the money.
Prohl signed a judgment in April 2005 ordering Baker Botts and Wells Fargo to pay $71 million into a new trust, the Kathleen C. Cailloux Equitable Trust. He ruled Kathleen Cailloux can use the interest from the trust and can withdraw up to 5 percent of the principal yearly.
While the jury returned a $65.5 million verdict, Prohl added $5.6 million in prejudgment interest, plus court costs and postjudgment interest.
Baker Botts and Wells Fargo appealed the judgment, claiming, among other things, that there was insufficient evidence to support the jury’s findings that their alleged breaches of fiduciary duty proximately caused Kathleen Cailloux damage, and the trial court had no power to create an equitable trust.
Ken Cailloux, Kathleen Cailloux’s son, also appealed the judgment, alleging there was insufficient evidence to support the jury’s finding that his mother is entitled to nothing for lost income.
The 4th Court panel reversed the trial court’s judgment to the extent that it imposes a $65.5 million equitable trust on Baker Botts and Wells Fargo, and rendered a take-nothing judgment in their favor, but it affirmed the trial court’s judgment in connection with Kathleen Cailloux’s claim for lost income.