David F. Johnson presented his paper “Litigating Self-Interested Transactions Involving Fiduciaries” to the State Bar of Texas’s Fiduciary Litigation Course on December 2-3, 2021, in San Antonio, Texas. This presentation discussed a fiduciary’s duty of loyalty, the right to compensation and other benefits, the concept of self-interested transactions, the presumption of unfairness that attaches to
Parties often add limitation-of-liability clauses to their agreements. These types of clauses can purport to limit a party’s claims or damages or both. Damage-limitation clauses can take many different forms. For example, such a clause may forbid the recovery of consequential or loss profits damages. Cont’l Holdings, Ltd. v. Leahy, 132 S.W.3d 471, 475-76 (Tex. App.—Eastland 2003, no pet.). Further, a contractual provision setting an upper limit on the amount recoverable is a limitation of liability provision. Arthur’s Garage, Inc. v. Racal-Chubb Sec. Sys., 997 S.W.2d 803, 810 (Tex. App.—Dallas 1999, no pet.); Fox Elec. Co. v. Tone Guard Sec., Inc., 861 S.W.2d 79, 83 (Tex. App.—Fort Worth 1993, no writ). If a plaintiff brings suit, the terms of the contract determine the relative positions of the parties and control the level of liability of either party. Federated Dept. Stores, Inc. v. Houston Lighting & Power Co., 646 S.W.2d 509, 511 (Tex. App.—Houston [1st Dist.] 1982, no writ).
Continue Reading A Limitation-Of-Liability Clause May Or May Not Be Enforceable For Breach Of Fiduciary Duty Claims
In Trinh v. Cent. River Healthcare Group, a brother sued his sister over the management of a PLLC. No. 03-19-00393-CV, 2021 Tex. App. LEXIS 4542 (Tex. App.—Austin June 9, 2021, no pet. history). The brother claimed that the sister promised to pay him a salary, and she did not. The court of appeals affirmed…
In Neal v. Neal, the decedent died leaving three sons. No. 01-19-00427-CV, 2021 Tex. App. LEXIS 2051 (Tex. App.—Houston [1st Dist.] March 18, 2021, no pet. history). She had several wills in the last five years of her life, but her final will left all of her estate to one son. The other sons alleged that the last will was invalid due to mental incompetence and due to undue influence. The trial court found against the contestants and admitted the will to probate, and the contestants appealed.
Continue Reading Court Properly Admitted A Will To Probate Where The Evidence Did Not Establish Mental Incompetence Or Undue Influence As A Matter Of Law
In Pense v. Bennett, the ward in a guardianship proceeding sued to invalidate the sale of real property from a trust created for his benefit to an affiliate of the trustee. No. 06-20-00030-CV, 2020 Tex. App. LEXIS 8002 (Tex. App.—Texarkana October 8, 2020, no pet.). The trial court granted summary judgment for the trustee, held that the sale was effective, but expressly refused to rule on a breach of fiduciary duty claim based on the transaction as it was pending in another proceeding. The ward appealed.
The court of appeals explained how the guardian had sought and obtained court approval for the creation of a management trust and the transfer of real property from the guardianship estate to the new trust. The trustee of that trust had the express authority to sell trust property:
Article VIII of the Trust Instrument lists the powers of the trustee. And, “[w]here the language of the trust instrument is unambiguous and expresses the intentions of the maker, the trustee’s powers are conferred by the instrument and neither the court nor the trustee can add or take away such power.” As pertinent here, the Trust Instrument authorized the trustee to: “[P]artition, exchange, release, convey or assign any right, title or interest of the trust in any real estate or personal property owned by the trust”; “[S]ell, exchange, alter, mortgage, pledge or otherwise dispose of trust property”; “[E]xecute and deliver any deeds, conveyances, assignments, leases, contracts, stock or security transfer powers, or any other written instrument of any character appropriate to any of the powers or duties herein conferred on the Trustee”; and “[H]old title to investments in the name of the Trustee or a nominee.”
In addition to these powers specified in the Trust Instrument, the Texas Trust Code authorizes “a trustee [to] exercise any powers . . . that are necessary or appropriate to carry out the purpose of the trust.” Those powers include the power to “contract to sell, sell and convey, or grant an option to sell real or personal property at public auction or private sale for cash or for credit or for part cash and part credit, with or without security.”
In Roels v. Valkenaar, a shareholder filed a shareholder derivative suit against former and current officers and directors of the company based on multiple claims of breach of fiduciary duty. No. 03-19-00502-CV, 2020 Tex. App. LEXIS 6684 (Tex. App.—Austin August 20, 2020, no pet. history). The defendants filed a motion to dismiss, and the trial court denied it. The defendants appealed, and the court of appeals reversed in part and affirmed in part.
The plaintiffs’ first claim dealt with certain interested-direction transactions that were loans from the company. The court dismissed these claims because the evidence showed that regarding one transaction that there was director consent to the loan and regarding the other loans that there was not sufficient evidence of damages. The court stated:
Self-dealing (i.e., an “interested transaction”) may constitute breach of an officer’s or director’s fiduciary duty to the corporation. However, we need not determine whether the shareholders met their prima facie burden as to the element of breach because we conclude that they have not met the burden as to the element of damages. To prove the damage-to-plaintiff or benefit-to defendant element of a claim for breach of fiduciary duty based on self-dealing, a plaintiff must demonstrate that the fiduciary obtained a benefit for itself either at the expense of its principal or without equally sharing the benefit with the principal. While the shareholders have alleged in conclusory fashion that the loans contained “non-market terms” and have “disproportionately benefitted” Roels and Barshop, they have not identified any specific harm to the Company or benefit to the defendants as a direct result of the loans.
In In re Estate of Klutts, a son held his mother’s power of attorney when he assisted in securing a new 2008 will, which enhanced his share of the estate. No. 02-18-00356-CV, 2019 Tex. App. LEXIS 11063 (Tex. App.—Fort Worth December 19, 2019, no pet. history). Siblings attempted to probate an earlier will and…
In In re Estate of Poe, the son of a car dealership owner who was frozen out of control of the business by the dying father’s decision to issue new stock sued his father’s estate, trust, and officers of the business. No. 08-18-00015-CV, 2019 Tex. App. LEXIS 7842 (Tex. App.—El Paso August 28, 2019,…