Jiles Daniels v. Empty Eye, Inc., Empty Eye & Associates, L.P. and Judith Daniels
368 S.W.3d 743
Tex. App.2012Background
- Jiles Daniels and Judith Daniels formed Empty Eye, Inc. (the Corporation) with each owning half and serving as officers; the Corporation owned 1% of Empty Eye & Associates, L.P. (the Limited Partnership), with the Corporation as general partner and the Daniels as limited partners.
- The Limited Partnership financed Cochran Project land acquisition and construction; Jiles and Judith each signed personal guaranties to the Bank, which could be rescinded if no funds were advanced.
- In fall 2006, marital strain arose; Jiles filed for divorce in January 2007, and February 2007 he rescinded his guaranty and asked the Bank not to fund Cochran Project, causing the loan to be rescinded.
- Jiles then told contractors not to perform work unless payment was certain, and later testified he did so to avoid personal liability.
- In January 2008, Judith, the Limited Partnership, and the Corporation sued Jiles for breach of fiduciary duty and breach of contract; the jury found in favor of plaintiffs on fiduciary duties and on the contract claim related to the Partnership Agreement, and damages were awarded.
- The trial court awarded damages for breach of fiduciary duty and for the contract claim, but the appellate court reversed the contract damages and related attorney’s fees, and modified prejudgment interest related to the total damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of fiduciary relationship with the Limited Partnership | Daniels breached a confidential relationship | No confidential relationship existed with the Limited Partnership | Yes, evidence supports a confidential relationship with the Limited Partnership |
| Breach of the Limited Partnership Agreement | Jiles breached the Partnership Agreement | No breach as per the Agreement's terms | No legally sufficient evidence of breach; contract damages reversed |
| Effect of divorce court orders on damages | Divorce orders bar damages | Divorce decree does not bar claims in this case | Error to rely on divorce orders to bar damages; damages analysis still open for fiduciary claim |
| Res judicata and post-trial motions | Claims barred by divorce res judicata | Not barred; grounds not conclusively established | Res judicata not a bar; appellate review allowed; some issues preserved for rendition |
Key Cases Cited
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal-sufficiency standard for reviewing evidence)
- Meyer v. Cathey, 167 S.W.3d 327 (Tex. 2005) (informal fiduciary duty requires pre-existing trust before contract dispute)
- Brazosport Bank of Texas v. Oak Park Townhouses, 889 S.W.2d 676 (Tex.App.-Houston [14th Dist.] 1994) (limits on relying on other parties’ fiduciary duties to impose duty by association)
- Dunnagan v. Watson, 204 S.W.3d 30 (Tex.App.-Fort Worth 2006) (sufficiency of evidence regarding fiduciary-duty breach between limited partners)
- Grierson v. Parker Energy Partners 1984-I, 737 S.W.2d 375 (Tex.App.-Houston [14th Dist.] 1987) (situations involving corporate officer liability for partnership breach)