Andrew HAUT, Appellant, v. GREEN CAFÉ MANAGEMENT, INC. and Alabama Green, LLC, Appellees.
No. 14-10-01224-CV.
Court of Appeals of Texas, Houston (14th Dist.).
June 12, 2012.
171
Keith M. Remels, Houston, for Appellees.
Panel consists of Justices FROST, BROWN, and CHRISTOPHER.
OPINION
JEFFREY V. BROWN, Justice.
A jury found that appellant Andrew Haut breached a fiduciary duty to two companies in which he owned minority shares of stock and membership interests. The trial court found that Haut‘s breach of fiduciary duty was clear and serious, warranting the remedy of equitable forfeiture of Haut‘s stock and membership interests in the companies. We affirm.
I
Green Café Management, Inc. (GCM), is a corporation that franchises “Ruggles Green” restaurants. Alabama Green, LLC, operates a Ruggles Green restaurant at 2311 West Alabama in Houston. As franchisor, GCM sold the Ruggles Green franchise to Alabama Green. Haut owned 10% of the shares in GCM and 5% of the membership interests in Alabama Green. Haut is not an officer, director, or manager of either company.
In 2007, Federico Marques, along with Bruce Molzan and Robert Guillerman, developed the concept of the first green restaurant in Houston—one certified by the Green Restaurant Association‘s food-industry standards.1 Later that year, Marques discussed the business plan for the Ruggles Green restaurant with Haut. Marques
As the Ruggles Green concept took shape, Haut increasingly participated with Marques, Molzan, and Guillerman in discussions about the structure and operation of the nascent business. Eventually, Haut began to draft legal documents, including a GCM shareholders agreement, a franchise agreement between GCM and Alabama Green, and an operating agreement for Alabama Green. Haut testified that, in addition to drafting legal documents for the companies, he performed other services such as preparing financial projections for investors, budgeting, helping acquire a suitable restaurant location, and obtaining licenses and insurance.
Marques, Molzan, and Guillerman knew Haut was in law school at the time and was not a licensed attorney. Haut testified that, as a law student, he had agreed to take a “first cut” at drafting the legal documents, but it was always understood that the final versions would be forwarded to an attorney for review. According to Haut, he, Marques, Molzan, and Guillerman would meet regularly to review and discuss in detail the various provisions in the documents he prepared. Marques testified that Haut would explain any provisions they did not understand. Although Marques, Molzan, and Guillerman were experienced businessmen, none of them were lawyers. According to Marques, Haut was “very insistent” about what the law required and how things needed to be done, and so they accepted his advice.
Haut testified Marques told him that an attorney named Tom Coleman, an acquaintance of Molzan, would review the documents when they were finalized. Marques disputed this. According to Marques, although the group considered hiring Coleman at one time and met with him briefly, Coleman was never hired to represent GCM or Alabama Green. Marques also stated that Haut was critical of Coleman‘s competence, which influenced their decision to not hire him. Molzan testified that they could not afford to retain Coleman, and because Haut had criticized Coleman‘s legal skills, he agreed to have Haut do all the legal work for them in exchange for shares in the company.
Marques testified that he believed Haut could contribute to the business because he had a finance degree from the University of Pennsylvania‘s Wharton School, had previously run his own business, and was in law school. According to Marques, Haut said he was “very familiar” with the documents they would need to prepare, and he also had access to professors and other resources at law school to help with drafting the documents. Marques testified that he and the others trusted Haut to contribute his financial and legal knowledge to the enterprise and originally agreed to give Haut a 3% ownership interest in GCM in exchange for his efforts, including the drafting of legal documents. According to Marques, he asked Molzan and Guillerman to increase Haut‘s interest to 10% after Haut complained that he was doing a lot of work and needed a larger share.
Marques also testified that he, Molzan, and Guillerman were uncertain about structuring the business as a franchise, but Haut insisted that a franchise would be the legally proper way to proceed. Haut agreed that he advised the group that the business should be structured as a franchise even though Marques, Molzan, and Guillerman were against this initially. Haut described the advice he gave as “business” or “financial” advice rather than legal advice. Haut acknowledged, however, that he had no prior experience
Haut testified that Marques never discussed paying Haut for performing legal work on behalf of Ruggles Green. He also denied that he drafted the documents in exchange for stock in the companies. Instead, Haut testified, he contributed $300 for his shares in GCM and $100 for his interest in Alabama Green. He acknowledged, however, that his interests were increased from 3% in each company to 10% in GCM and 5% in Alabama Green because he “was working so hard” to provide financial and legal services to the companies. Haut also admitted that he had no previous experience in drafting corporate documents.
Ultimately, the GCM shareholders agreement was signed in May 2008 by Molzan, Marques, Guillerman, and Haut. Molzan, Marques, and Guillerman also signed the agreement on behalf of GCM. The shareholders agreement reflected that Molzan, Marques and Guillerman would be directors of GCM, but Haut would not. The next month, the Alabama Green operating agreement was signed by Molzan, Marques, Guillerman, and Haut, as well as Randy Bower, the sole investor in the restaurant, and Jennifer McGehee, a friend of Bower‘s who had introduced him to Molzan. Of these, only Molzan, Marques, and Guillerman were designated managers of the company. Molzan‘s title was “Chief Executive Manager.”
Haut acknowledged at trial that Molzan, Marques, and Guillerman wanted to make sure they had exclusive control over the operation and management of the business. To ease their concern that investors might interfere with their management, at one point Haut sent an email to them stating that there were “any number of legal maneuvers available to management to stifle investor interference” and “the law is on your side.” Haut denied that his statements could properly be described as legal advice. But Haut admitted that the final, signed documents did not give Marques, Molzan, and Guillerman, the directors of GCM, exclusive authority over the management of Alabama Green. Marques testified that, among other things, Haut drafted the GCM shareholders agreement and the Alabama Green operating agreement to give himself veto rights, effectively divesting GCM‘s directors and Alabama Green‘s managers of their ability to control the management of the respective companies.2
On December 20, Haut sent an email to the shareholders and members of GCM and Alabama Green informing them that he would no longer be involved in any aspect of the restaurant and also would consider selling his interests in the companies.
Bower testified that before Haut‘s departure, Haut would come in the restaurant and insult the employees if they were not doing things exactly as he preferred. Marques also testified that Haut was “volatile” and would yell at employees in front of customers. He described Haut as believing he was “smarter than everybody” and “very arrogant.” Bower also testified that since Haut‘s departure, Ruggles Green was doing very well financially and was extremely well run under the management of Molzan, Marques, and Guillerman. Marques expressed the opinion that if Molzan or Guillerman had been removed as Haut wanted, the company would have failed.
In August 2009, Haut sent Marques a spreadsheet reflecting Haut‘s estimated valuation of his interests in GCM and Alabama Green at $603,582.63. After the parties failed to reach an agreement to buy out Haut‘s interests in the companies, Haut filed a lawsuit against GCM and Alabama Green seeking access to the books and records of both companies and damages for breach of contract by Alabama Green. GCM and Alabama Green answered and filed counterclaims against Haut for breach of fiduciary duty, negligence, unjust enrichment, negligent misrepresentation, fraudulent inducement, and unauthorized practice of law.
At trial, the jury was asked to consider Haut‘s claims against GCM and Alabama Green, as well as GCM‘s and Alabama Green‘s counterclaims, which were now limited to breach of Haut‘s fiduciary duty. After hearing the evidence presented, the jury found against Haut on his claims and in favor of GCM and Alabama Green. The jury found that a relationship of trust and confidence existed between Haut and the companies, and that Haut breached his fiduciary duties to the companies. The jury was not asked to assess actual damages for the fiduciary-duty claims; instead, GCM and Alabama Green asked the trial judge to order the equitable forfeiture of Haut‘s stock and membership interests in the companies.
II
On appeal, Haut raises five issues: (1) because GCM and Alabama Green had no standing to assert breach-of-fiduciary-duty claims against Haut, the trial court lacked subject-matter jurisdiction; (2) Haut, a minority shareholder, owed no formal or informal fiduciary duty to the corporations as a matter of law; (3) the evidence is insufficient to support a finding that Haut breached any fiduciary duty owed to the companies; (4) the trial court‘s failure to file findings of fact and conclusions of law on the equitable-forfeiture issue is harmful error; and (5) the remedy of equitable forfeiture was inappropriate because Haut paid for his stock by check and forfeiture is appropriate only in exceptional circumstances. Haut does not challenge the jury‘s negative findings on his claims against GCM and Alabama Green.
A
In his first issue, Haut contends GCM and Alabama Green lack standing to assert breach-of-fiduciary-duty claims against him because the claims arising from the shareholders and operating agreements are between the shareholders and members respectively, not the companies, and the companies have suffered no injury.
Haut argues without citation to authority that corporations “are indifferent as to how the shareholders divide rights among themselves,” and therefore “any breach of fiduciary duty giving Haut more rights than co-shareholders harmed only co-shareholders,” not the companies. Therefore, Haut maintains, “[d]isputes arising from the GCM shareholder agreement and the Alabama Green operating agreement must be brought by the shareholders, not the [c]ompanies.”
The general rule in Texas is that a corporate shareholder has no individual cause of action for damages caused by a wrong done solely to the corporation. Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex. 1990). Causes of action for injury to the property of a corporation or for impairment or destruction of its business are vested in the corporation, as distinguished from its shareholders, even though the shareholders may be harmed indirectly by a loss of earnings. Id. It is the nature of the wrong, whether directed against the corporation only or against the shareholder personally, not the existence of injury, which determines who may sue. Redmon v. Griffith, 202 S.W.3d 225, 234 (Tex. App.—Tyler 2006, pet. denied).
GCM and Alabama Green allege that they relied on Haut to perform legal services on their behalf in exchange for equity in the companies because Haut represented that he was competent to do the work based on his legal education and research. Instead, however, Haut gave legal advice and drafted the companies’ documents in a manner contrary to their interests and
We conclude that these allegations are sufficient to assert claims belonging to GCM and Alabama Green because the companies allege that Haut‘s wrongful acts impaired GCM and its ability to manage the Alabama Green franchise and thus directly harmed both companies. There are no claims that Haut breached any duty owed to the shareholders or members of the companies individually. Further, GCM and Alabama Green were the parties to the franchise agreement, and GCM was a signatory to the shareholder agreement. The companies’ claims include allegations directed to Haut‘s advice concerning the structure of the business as well as the drafting of the agreements. Therefore, GCM and Alabama Green were entitled to assert their claims directly against Haut. See Wingate, 795 S.W.2d at 719; Redmon, 202 S.W.3d at 233-34; see also Corona v. Pilgrim‘s Pride Corp., 245 S.W.3d 75, 78-79 (Tex. App.—Texarkana 2008, pet. denied) (counterclaims for harm done to corporation belonged to corporation, not shareholder and guarantor of corporation and could not be asserted by shareholder and guarantor in creditor‘s suit on sworn account). We overrule Haut‘s first issue.
B
Before addressing Haut‘s remaining issues, we must address the state of the record before us.
As GCM and Alabama Green point out, Haut filed only a partial reporter‘s record in this court. The reporter‘s record consists of six volumes: one master index, three volumes of testimony, and two volumes of exhibits. The reporter‘s record does not include voir dire, the parties’ opening statements or closing arguments, or the charge conference.
In addition, the clerk‘s record and reporter‘s record in this appeal indicate that we do not have a complete record of the testimony and evidence presented at trial. At the end of each reporter‘s record volume for the first two trial days (June 14-15 of 2010), the trial court states that the court is recessing for the day. At the end of the third volume for June 16, 2010, there is no such statement from the trial court. Instead, the third volume ends with counsel for appellees stating that the defendants rest their case-in-chief. Significantly, the reporter‘s record does not contain a statement from Haut‘s counsel as to whether Haut offered any evidence in a rebuttal case, nor does the record contain any statement from the trial court that the evidence is closed. We cannot discern from this record, for example, whether Haut presented rebuttal evidence, whether the appellees presented surrebuttal evidence, or whether the trial court reopened the evidence to admit additional evidence on a party‘s motion. The volumes of trial testimony in the reporter‘s record are labeled “Jury Trial Excerpt,” and there is no statement in the reporter‘s record that it contains all of the evidence offered at trial. On the contrary, the clerk‘s record contains the trial court‘s docket sheet, which states that evidence was presented on June 17, 2010, after which the jury deliberated and rendered its verdict. But, the reporter‘s record on appeal contains no record of any evidence offered on June 17, 2010. Indeed, the reporter‘s record contains no record at all regarding the trial proceedings on June 17, 2010.
[4] Entries on docket sheets may not be used to contradict trial court orders and are not generally considered to be trial court orders or findings. See N-S-W Corp. v. Snell, 561 S.W.2d 798, 799 (Tex. 1977)
If an appellant requests a partial reporter‘s record, the appellant must include in the request a statement of the points or issues to be presented on appeal, and the appellant will then be limited to those points or issues on appeal.
Haut did not file a request for a partial reporter‘s record with a statement of the points or issues on appeal. See
Because Haut failed to follow the requirements for Rule 34.6, we must presume “that the omitted portions of the record are relevant and support the trial court‘s judgment” on issues in which evidentiary review is required. See Christiansen v. Prezelski, 782 S.W.2d 842, 843 (Tex. 1990); Mason, 154 S.W.3d at 819; Richards v. Schion, 969 S.W.2d 131, 133 (Tex. App.—Houston [1st Dist.] 1998, no pet.).6 Therefore, we analyze Haut‘s remaining issues in light of this presumption.
1
In his second issue, Haut contends that as a matter of law he does not owe either a formal or an informal fiduciary duty to either company. The only argument Haut makes regarding informal fiduciary duty is that there was no trial evidence that Haut had a special relationship of trust and confidence prior to and apart from the agreement made the basis of the suit. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997) (stating that, to impose an informal fiduciary duty in a business transaction, the special relationship of trust and confidence must exist prior to and apart from the agreement made the basis of the suit). To sustain this argument, this court would have to conclude that, considering all the trial evidence in the light most favorable to the challenged finding, indulging every reasonable inference that would support the finding, crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not, the evidence at trial would not enable reasonable and fair-minded people to find that Haut had a special relationship of trust and confidence prior to and apart from the agreement made the basis of the suit. See City of Keller v. Wilson, 168 S.W.3d 802, 823, 827 (Tex. 2005). But because Haut failed to comply with the requirements of
In addition, even if the partial record did not require us to presume that the evidence supports the jury‘s finding in this
Accordingly, we overrule Haut‘s second issue.
2
In his third issue, Haut asserts that the evidence is legally insufficient to sup-
In addition, even if the partial record did not require us to presume that the evidence supports the jury‘s finding in this regard, the issue would be whether—considering all the trial evidence in the light most favorable to the challenged finding, indulging every reasonable inference that would support the finding, crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not—the evidence at trial would not enable reasonable and fair-minded people to find that Haut did not show each of the following:
- The transactions in question were fair and equitable to [GCM or Alabama Green];
- [Haut] made reasonable use of the confidence that was placed in him by [GCM or Alabama Green];
- [Haut] acted in the utmost good faith and exercised the most scrupulous honesty toward [GCM and Alabama Green];
- [Haut] placed the interests of [GCM or Alabama Green] before his own, did not use the advantage of his position to gain any benefit for himself at the expense of [GCM or Alabama Green], and did not place himself in any position where his self-interest might conflict with his obligations as a fiduciary; and
- [Haut] fully and fairly disclosed all important information to [GCM or Alabama Green] concerning the transactions.
Even absent the presumption regarding the partial record, the trial evidence would be legally sufficient to support such a finding by the jury. See Keck, Mahin & Cate v. Nat‘l Union Fire Ins. Co. of Pittsburgh, Pa., 20 S.W.3d 692, 699 (Tex. 2000); Kormanik v. Seghers, 362 S.W.3d 679, 688-89 (Tex. App.—Houston [14th Dist.] 2011, pet. denied).
Accordingly, we overrule Haut‘s third issue.
3
In his fourth issue, Haut contends the trial court‘s failure to file findings of fact and conclusions of law on the issue of equitable remedy is harmful error. Haut contends the trial court “needed to explain its factual and legal basis for ordering the forfeiture of [his] stock” and its failure to do so is presumed harmful. In response, GCM and Alabama Green contend that, among other things, Haut‘s failure to timely file a notice of past due findings of fact and conclusions of law waives his right to complain about the trial court‘s failure to file findings of fact and conclusions of law.
Under
It is undisputed that Haut timely filed his request for findings of fact and conclusions of law. But he failed to file and serve his notice of past due findings of fact and conclusions of law within thirty days after filing his original request as required. See
4
In his fifth issue, Haut contends the equitable remedy of forfeiture of his interests in the two companies is inappropriate as a matter of law because Haut paid $100 for his interest in Alabama Green and $300 for his stock in GCM and because forfeiture is only applied in exceptional circumstances. Under this issue, Haut argues that (1) no legal standard has been established for determining whether fee forfeiture should be awarded against a fiduciary who is a minority shareholder a company; (2) Haut paid $100 for his interest in Alabama Green and $300 for his stock in GCM; and (3) the trial court erred to the extent it concluded that Haut‘s breach of fiduciary duty was clear and serious and that equitable forfeiture of his interests in Alabama Green and GCM was appropriate.
The Supreme Court of Texas has made it clear that the legal standard from Burrow v. Arce applies, even to situations in which the fiduciary is not an attorney. See ERI Consulting Eng‘rs, Inc. v. Swinnea, 318 S.W.3d 867, 873 (Tex. 2010) (citing Burrow for the proposition that “even if a fiduciary does not obtain a benefit from a third party by violating his duty, a fiduciary may be required to forfeit the right to compensation for the fiduciary‘s work“); Burrow v. Arce, 997 S.W.2d 229, 237 (Tex. 1999) (stating that “a person who renders service to another in a relationship of trust may be denied compensation for his service if he breaches that trust“).
Evidence of Haut‘s payment of $100 in connection with receipt of his interests in Alabama Green and $300 in connection with receipt of his stock in GCM does not preclude the trial court, as a matter of law, from determining under the Burrow legal standard that Haut‘s conduct was a clear and serious breach of duty and that Haut‘s interests in these companies should be forfeited. See Burrow, 997 S.W.2d at 237-46.
On this partial record, we must presume the omitted portions of the record support the trial court‘s determination that Haut‘s breaches of fiduciary duty to GCM and Alabama Green were clear and serious based on the relevant factors and that the remedy of equitable forfeiture was warranted on the facts presented. See, e.g., Bennett, 96 S.W.3d at 229-30; Mason, 154 S.W.3d at 819; Burrow, 997 S.W.2d at 237-46. Even absent the presumption regarding the partial record, we would still conclude that the trial court did not err in making these determinations. See Burrow, 997 S.W.2d at 237-46; Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 22-23 (Tex. App.—Tyler 2000, pet. denied). Accordingly, we overrule Haut‘s fifth issue.
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CHRISTOPHER, J., dissenting.
TRACY CHRISTOPHER, Justice, dissenting.
I respectfully dissent, in part,1 because the majority invokes a presumption of an incomplete record against Haut when (1) there is nothing to suggest that the evidentiary record is incomplete; (2) appellees have not urged this court, by their brief or in a motion, to make such a presumption; and (3) because we have an incomplete clerk‘s record, we do not know what portions of the trial record were requested. In addition, I would hold that Haut has no fiduciary duty as a matter of law.
1. The evidentiary record appears complete.
In Part II. B. of its opinion, the majority states, “As GCM and Alabama Green point out, Haut filed only a partial reporter‘s record in this court.” While this is true, GCM and Alabama Green only note that the record did not include the charge conference. GMC and Alabama Green go on to state that “when the appellant files a partial reporter‘s record, the appellate court must presume the partial record is the entire record for purposes of reviewing the appellant‘s designated issues.” GCM and Alabama Green never complained that they did not receive a statement of points or issues under
Our court has not required a statement of points under rule 34.6(c)(1) when the only part of the record that is missing is non-evidentiary. See W & F Transp., Inc. v. Wilhelm, 208 S.W.3d 32, 40-41 (Tex. App.—Houston [14th Dist.] 2006, no pet.) (omission of closing argument). What is missing in this case—voir dire, opening statement, objections to the charge, and closing arguments—are all part of the non-evidentiary record in the case. Under our own precedent, we should not apply rule 34.6(c)(1).
The majority strains to find the evidentiary record incomplete. The majority first relies on the court reporter‘s certification that she provided “a true and correct transcription of all portions of evidence and other proceedings requested in writing by counsel for the parties”2 (emphasis added). Next the majority notes that the record ends when the defense rested, and then proceeds to wonder whether there might have been rebuttal or surrebuttal3 evidence. This is a complete guess bolstered by a computer generated docket-sheet entry, which constitutes no evidence at all. See Rush v. Barrios, 56 S.W.3d 88, 95 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) (an appellate court may not consider docket entries since they are only made for the clerk‘s convenience and are usually unreliable). What we do have is a reporter‘s record that starts with the judge requesting that Haut call his first witness and ends with “the defense rests.” GCM and Alabama Green never state that any evidence is missing. While it is true that we do not have opening statements, objections to the charge, or closing arguments, we have a complete evidentiary record. In the absence of a complaint by GCM and Alabama Green as to the evi-
The cases on which the majority relies do not support its holding. In Bennett v. Cochran, 96 S.W.3d 227, 229-30 (Tex. 2002) (per curiam), the Texas Supreme Court reversed our own court for applying
In Mason v. Our Lady Star of the Sea Catholic Church, 154 S.W.3d 816, 819 (Tex. App.—Houston [14th Dist.] 2005, no pet.), the appellant only requested that the court reporter transcribe objections to the charge and closing arguments. She did not request any evidence at all. The court held that in order to evaluate appellant‘s claims for charge error and improper jury argument that it needed to review the evidentiary record. This is a proper application of the presumption—without any evidence, it was impossible for the court to review the issues before it.
2. GMC and Alabama Green have not argued that any evidence is missing.
GMC and Alabama Green have not argued that any evidence is missing. GCM and Alabama Green never complained that they did not receive a statement of points or issues under
3. The clerk‘s record is incomplete.
Unless the parties are proceeding on an agreed record, it is mandatory that the clerk of the trial court include “any request for a reporter‘s record, including any statement of points or issues under Rule 34.6(c),” even if the appellant did not ask that it be included in the record. See
Haut contends that as a matter of law he does not owe either a formal or an informal fiduciary duty to either company and there is no evidence to support the imposition of any fiduciary duty. Haut points out that it is undisputed that he was not a director, officer, or manager of either GCM or Alabama Green. Nor was he an accountant or attorney for either company. Haut contends he was merely a co-founder and minority-interest holder in both companies and therefore owed no formal fiduciary duty to the companies. He also argues that no informal fiduciary duty was created because there was no preexisting relationship of trust and confidence between himself and the companies.
Fiduciary duties arise either from certain formal relationships or from the existence of an informal or confidential relationship between the parties. See Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex. 2005); Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998). Fiduciary duties arise as a matter of law in certain formal relationships such as that of attorney and client. Meyer, 167 S.W.3d at 330. In contrast, an informal fiduciary duty may arise from a moral, social, domestic, or purely personal relationship of trust and confidence. Id.; Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 287 (Tex. 1998). But courts “do not create such a relationship lightly.” Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997).
It is well settled that “not every relationship involving a high degree of trust and confidence rises to the stature of a fiduciary relationship.” Meyer, 167 S.W.3d at 330. Mere subjective trust does not, as a matter of law, transform arm‘s-length dealing into a fiduciary relationship. Schlumberger Tech. Corp., 959 S.W.2d at 177. Further, to impose an informal fiduciary duty in a business transaction, the special relationship of trust and confidence must exist before and apart from the agreement made the basis of the suit. Willis v. Donnelly, 199 S.W.3d 262, 277 (Tex. 2006); Meyer, 167 S.W.3d at 331; Associated Indem. Corp., 964 S.W.2d at 288.
When the evidence is disputed, the existence of an informal confidential relationship is a question of fact. Lee v. Hasson, 286 S.W.3d 1, 14 (Tex. App.—Houston [14th Dist.] 2007, pet. denied). But when the underlying facts are undisputed, determination of the existence, and breach, of fiduciary duties are questions of law, exclusively within the province of the court. Meyer, 167 S.W.3d at 330.
(a) Haut preserved this point of error.
As an initial matter, GCM and Alabama Green suggest that Haut has waived his issue because there is no evidence he objected to the jury charge on fiduciary duty and he did not include the charge conference as part of the reporter‘s record on appeal.
Concerning the existence of a fiduciary duty, the jury was asked the following:
Did a relationship of trust and confidence exist between Andrew Haut and either of the parties below?
A relationship of trust and confidence existed if Alabama Green, LLC or Green Café Management, Inc. justifiably placed trust and confidence in Andrew Haut to act in their best interest. Alabama Green, LLC and Green Café Management, Inc.‘s subjective trust and feelings alone do not justify transforming arm‘s length dealings into a relationship of trust and confidence.
The jury answered affirmatively as to both GCM and Alabama Green.
Significantly, the trial court did not instruct the jury that a preexisting relation-
Generally, the sufficiency of the evidence must be measured by the jury charge when there has been no objection to it. Romero v. KPH Consol., Inc., 166 S.W.3d 212, 221 (Tex. 2005); Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). GCM and Alabama Green are correct that Haut did not include the charge conference in the appellate record. The clerk‘s record, however, contains a proposed instruction on fiduciary duty that includes an instruction concerning the requirement of a pre-existing special relationship of trust and confidence.4 The record reflects that the trial court rejected the proposed instruction. Even rejecting that record, as the majority does because we do not know when the trial court signed that rejection, Haut still preserved error.
Haut moved for a judgment notwithstanding the verdict arguing that GCM and Alabama Green had presented no evidence that Haut owed them either a formal or an informal fiduciary duty. As part of this complaint, Haut cited authority for the proposition that a preexisting relationship of trust and confidence is required when the claims arise from a business transaction, and he argued that he “owed no informal fiduciary duty to Defendants because there was no prior special relationship of trust and confidence.”
Haut‘s proposed instruction and motion for JNOV were sufficient to make the trial court aware of his complaint that as a matter of law he owed no fiduciary duty to GCM and Alabama Green. This court has previously held that a party may preserve a no-duty challenge by one or more of the following methods: (1) a motion for directed verdict, (2) a motion for judgment notwithstanding the verdict, (3) an objection to the submission of the question to the jury, (4) a motion to disregard the jury‘s answer to a vital fact question, or (5) a motion for new trial. Battaglia v. Alexander, 93 S.W.3d 132, 140 (Tex. App.—Houston [14th Dist.] 2002), rev‘d on other grounds, 177 S.W.3d 893 (Tex. 2005); see also Cecil v. Smith, 804 S.W.2d 509, 510-11 (Tex. 1991) (listing methods for preserving “no evidence” challenge). Accordingly, I would hold that Haut has adequately preserved his argument that there is no evidence to support the imposition of an informal fiduciary duty on him.
(b) He has no duty as a matter of law.
As noted above, Haut contends there was no evidence that he had any special relationship of trust and confidence with GCM and Alabama Green before, and apart from, the agreements made the basis of the suit. See Willis, 199 S.W.3d at 277; Meyer, 167 S.W.3d at 331. GCM and Alabama Green argue that Haut, a law student, represented that he was competent and qualified to draft operative legal documents and give legal advice for and on behalf of the companies. The companies point to evidence that Haut advised them and drafted legal documents for them in exchange for compensation in the form of equity—despite his lack of experience and despite the fact that he was not licensed to practice law at the time the companies were formed. They also point to evidence that GCM was set up as a franchisor and Alabama Green was set up as a franchisee based on Haut‘s “unlicensed advice” even though the original three founders—Molzan, Marques, and Guillerman—only want-
To reinforce this contention on appeal, GCM and Alabama Green assert that Haut‘s alleged actions constitute the unauthorized practice of law. See
The jury, however, was not instructed that Haut engaged in the unauthorized practice of law, and no evidence was presented showing that Haut‘s allegedly wrongful conduct had been determined to constitute the unauthorized practice of law in an earlier civil or criminal proceeding. The subject was touched on only briefly during Marques‘s testimony, and he admitted that he was not qualified to opine on what constitutes the unauthorized practice of law. In any event, the allegation does not dispense with the requirement that the companies demonstrate Haut owed them a duty based on the existence of a relationship prior to, and apart from, the agreements made the basis of the suit.
Although there was testimony that Marques and Haut had been friends and business acquaintances for several years and that Marques had shared other business plans with Haut in the past, there was no evidence suggesting that a relationship of trust and confidence existed before Marques approached Haut about the green-restaurant concept. And Haut did not even know Molzan and Guillerman before he became involved in the business plan for the restaurant. Further, Marques and Molzan acknowledged that they knew Haut was not a lawyer and he did not claim to be a lawyer at the time he participated in the formation of the companies. Testimony regarding the subjective beliefs of Marques and Molzan is not sufficient to impose a duty on Haut on these facts. See Meyer, 167 S.W.3d at 331 (refusing to impose fiduciary duty when parties to business project had been friends and frequent dining partners for four years as well as participants in earlier projects); Schlumberger, 959 S.W.2d at 177 (“Again, the fact that the parties to a transaction trust one another will not, in and of itself, establish a finding of a confidential relationship.“).
I would hold that on this record there is no evidence Haut owed GCM and Alabama Green an informal fiduciary duty based on a relationship of trust and confidence.
Accordingly, I dissent.
Larry Joseph TILLMAN, Jr., Appellant v. The STATE of Texas, Appellee.
No. 14-08-00846-CR.
Court of Appeals of Texas, Houston (14th Dist.).
July 24, 2012.