In Markl v. Leake, a husband started a long-time extramarital relationship with his girlfriend in 2004. No. 05-15-00455-CV, 2015 Tex. App. LEXIS 11261 (Tex. App.—Dallas November 2, 2015, no pet. history). The husband gave her money, placed her on the payroll of his business, provided her a credit card, and maintained her vehicle and real property. The husband invested approximately $35,000 in his girlfriend’s real properties. The relationship ended when the girlfriend caused the husband to be indicted for four felony charges related to an “altercation” and obtained a protective order prohibiting his entry upon her real property. The husband and wife then sued the girlfriend for breach of fiduciary duty and other tort claims arising from the benefits bestowed upon her during the relationship. They sought a temporary injunction to prevent the girlfriend from disposing of the two parcels of real property in which they purportedly invested money. The trial court denied the injunction, and the husband and wife appealed.
The court of appeals held that there are two types of fiduciary relationships: formal fiduciary relationships that arise as a matter of law, such as partnerships and principal-agent relationships, and informal fiduciary relationships or “confidential relationships” that may arise from moral, social, domestic, or personal relationships. The court also held that a fiduciary relationship is an extraordinary one and will not be created lightly. The test for an informal fiduciary relationship is: “A person is justified in placing confidence in the belief that another will act in his or her best interest only where he or she is accustomed to being guided by the judgment or advice of the other party, and there exists a long association in a business relationship, as well as a personal friendship.”
The court first addressed whether the girlfriend owed an informal fiduciary duty to the wife. The court noted that it had located no authority recognizing a fiduciary relationship between the wife of a husband involved in an extramarital affair and the woman with whom the husband was carrying on that affair. The court affirmed the trial court’s finding that the girlfriend did not owe any such duty to the wife.
The court then addressed whether the girlfriend owed an informal fiduciary duty to the husband. The court held that while a marital relationship is a fiduciary one, that the relationship of girlfriend and boyfriend, without more, is generally not a fiduciary relationship. Once again, the court could not find any authority declaring the existence of a fiduciary relationship based on an extramarital affair. The husband argued that the following evidenced a fiduciary relationship between them: his longstanding romantic and sexual relationship with the girlfriend and the sums he expended on her behalf, coupled with her executing a will declaring him as the beneficiary and their mutual life insurance policies naming the other as a beneficiary. The court held that the trial court had discretion to find that no fiduciary relationship existed via the girlfriend’s testimony that they were simply girlfriend and boyfriend, a dating relationship substantively different from a marital union. The court held that the husband’s expenditures merely demonstrated donative gifting of labor and sums of money to a girlfriend and did not create any fiduciary duties on her part. The court affirmed the trial court’s denial of the requested injunction because the evidence supported the trial court’s finding of no fiduciary duty.
Interesting Note: Informal fiduciary relationships are difficult to sustain in Texas. There generally has to be evidence that the plaintiff relied upon the defendant’s advice and counsel regarding business or financial matters. There needs to be evidence to justify a plaintiff subjectively believing that the defendant will place the plaintiff’s interests above the defendant’s own interests. However, depending on the facts of the case, there are instances where Texas courts have sustained an informal fiduciary duty with less evidence. This case makes clear that sexual relationships do not, in and of themselves, create fiduciary relationships.