Wednesday, August 24, 2011

Can a family relationship or connection give rise to a fiduciary duty for purposes of breach of fiduciary duty?


When does a family relationship -- such as between cousins -- constitute a fiduciary relationship? 

Elements of fiduciary duty claimTo recover under a cause of action for breach of fiduciary duty, a plaintiff must show that the defendant owed her a fiduciary duty and breached that duty, and that the breach proximately caused her damages. See, e.g., Plotkin v. Joekel, 304 S.W.3d 455, 479 (Tex. App.—Houston [1st Dist.] 2009, pet. denied).

Muske and Menke do not have the kind of special relationship that gives rise to a fiduciary duty, such as an attorney-client or trustee-beneficiary relationship. See, e.g., Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 199 (Tex. 2002).

Did relationship between cousins have fiduciary character?

Absent a special relationship, co-tenants do not owe each other a fiduciary duty. Scott v Scruggs, 836 S.W.2d 278, 282 (Tex. App.—Texarkana 1992, writ denied).

Muske also alleged that she and Menke were partners, but absent other evidence of an agreement, their joint dealings in leasing their undivided interests in Live Oaks do not transform their co-tenancy into a partnership. See Tex. Bus. Orgs. Code Ann. § 152.052(b)(2) (West Supp. 2010).

Informal fiduciary relationship?

“An informal fiduciary duty may arise from a moral, social, domestic or purely personal relationship of trust and confidence, generally called a confidential relationship.” Assoc. Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 287 (Tex. 1998). This duty is not lightly created. Id. at 288. “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.” Id. “[M]ere subjective trust does not . . . transform arm’s-length dealing into fiduciary relationship.” Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997). “Although . . . the existence of a confidential relationship is ordinarily a question of fact, when the issue is one of no evidence, it becomes a question of law.” Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992).

SOURCE: Houston Court of Appeals - 01-10-00479-CV - 8/18/11

In her second and third issues, Muske contends that the trial court erred in granting summary judgment because the evidence raises a fact issue on whether Menke owed her a fiduciary duty.

[case law discussion]

Muske primarily relies on her lifelong family friendship with Menke as the source of his alleged fiduciary duty to her.

[case law discussion]

The evidence before the trial court shows that Muske and Menke, though cousins, did not have a close relationship during adulthood and that Muske managed her business affairs without input or guidance from Menke. She made independent decisions with respect to Live Oaks, often in conflict with Menke. These facts belie any suggestion that Muske has the kind of trust and confidence in Menke that demonstrates the existence of a fiduciary relationship. Further, despite Muske’s profession of continued familial affection, her willingness to extend generous credit terms, and Menke’s close relationship with her father, the evidence shows that their relationship is not the kind of “close family relationship” that gives rise to a fiduciary duty. See Consolidated Gas & Equip. Co. v. Thompson, 405 S.W. 2d 333, 336–37 (Tex. 1966) (“The usual cases of fiduciary relationship have been attorney-and-client, partners, close family relationships such as that of parent-and-child, and joint adventurers, particularly when there is an agreement . . . to share gains and losses.”). Muske’s expressed love for and trust in Menke, including her trust that he would repay an unsecured loan, “is not enough to transform arms-length dealing into a fiduciary relationship.” Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962). Therefore, the trial court correctly granted summary judgment on the breach of fiduciary duty claim. Muske’s second and third issues are overruled.

SOURCE: Houston Court of Appeals - 01-10-00479-CV - 8/18/11

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