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Affirmed in Part,
Reversed and Remanded in Part, and Opinion filed
In
The
Fourteenth
Court of Appeals
_______________
_______________
MICHAEL T. WILLIS,
FRANCIE WILLIS, WILLIS HITE ENTERPRISES, INC.,
and URBAN RETREAT OF
HOUSTON, INC., Appellants
V.
DAN DONNELLY, Appellee and Cross-Appellant
V.
MICHAEL T. WILLIS,
Cross-Appellee
___________________________________________________
On Appeal from the 157th District Court
Trial Court Cause
No. 95-36693
___________________________________________________
O P I N I O
N
This is a double appeal involving shareholders’ ownership of two
closely held corporations, breach of fiduciary duty, breach of contract,
and attorney’s fees.
In the first appeal, consisting of 37 issues (some overlapping and
some containing numerous subparts), Michael T. Willis, Francie Willis, Urban Retreat of Houston, Inc., and
Willis Hite Enterprises, Inc. seek reversal of a judgment awarding Dan
Donnelly $1.7 million for breach of contract, $1.7 million for breach of
fiduciary duty, and a constructive trust on Urban Retreat stock and
realty. First, we reverse and
remand the breach of contract claim as more specifically delineated in
this opinion because the trial court submitted an improper measure of
damages. Because liability
was contested, we may not reverse solely for a new trial on damages. Second, we affirm the judgment for
breach of fiduciary duty.
However, because the constructive trust partially provides a double
recovery for breach of fiduciary duty and partially secures damages for
breach of contract, which we are reversing and remanding, we remand for an
election of remedies pertaining to breach of fiduciary duty and reverse
that portion of the constructive trust relating to breach of
contract.
In the second appeal, Dan Donnelly contends that the trial court
erroneously awarded $400,000 in attorney’s fees in connection with his
$26,982.58 default on a loan made to him by Mike Willis. We reverse and remand for a
determination of properly segregated and reasonable attorney’s fees
incurred in prosecuting the defaulted loan.
Background
A. Urban
Retreat
Urban Retreat, a
Having created the shell of Urban Retreat, Willis needed only to
find staff and clientele. To
this end, Hite approached Dan Donnelly, a popular hairstylist and
president of an established local salon. Willis and Hite suggested that
Donnelly could transfer his clientele and staff to the soon-to-open day
spa. Donnelly would manage
the spa, continue his hairstyling business, and strive to increase
business. In exchange, if
certain longevity or gross revenue goals were met, Donnelly would gain
ownership in URB and WHE, an increase in salary, and a seat on WHE’s board of directors. Willis personally assured Donnelly
that he would provide the financial backing for the
business.
Donnelly executed a Letter Agreement on July 10, 1989, which set
forth the levels of URB and WHE stock ownership and salary he would attain
over the years: (1) 25% URB stock and 10% of WHE stock after 12 months’
employment or when the spa’s gross revenues equaled those made in
Donnelly’s salon the prior year; (2) annual increases of URB stock, up to
50%, contingent on yearly half-million-dollar gains in gross revenues; (3)
$110,000 salary for two years; and (4) five percent of gross revenues as
salary in year three and beyond.
The Letter Agreement also provided each shareholder the right of
first refusal to purchase another shareholder’s stock. Further, it set forth the value of
Donnelly’s shares should his employment terminate: the greater of two times earnings
in the prior year or assets minus liabilities.
Donnelly transferred his profitable business to URB, bringing
several hairstylists, manicurists, and other salon personnel with
him. URB held its grand
opening in mid-December 1989.
The gross revenues soon surpassed those of Donnelly’s previous
salon.
However, Urban Retreat’s costs were great, and the construction
expense had exceeded projections.
Further, Willis and one other minimal shareholder had provided only
$1,000 as capital contribution.
The $800,000 construction loan was in URB’s name, although Willis provided a $600,000
certificate of deposit as collateral. Additionally, although Willis
personally transferred almost $297,000 to URB, he listed it as a loan
instead of capital contribution.[2] Thus, just six weeks after its
grand opening, URB was over $1,000,000 in debt.
Willis quickly recognized the need to “stop the bleeding.” There is evidence that he proposed
suspending Hite’s $7,000 a month salary even before the grand
opening. He also considered
transferring Hite’s employment to WHE instead of URB. In early 1990, Hite left Urban
Retreat.[3] On
Nonetheless, URB continued to lose money. Willis was thus faced with a
financial quandary: he had
personally guaranteed URB’s $14,000 a month
lease, pledged his $600,000 CD as collateral for the construction loan,
and invested $540,500 of cash by
In March 1991 (after Donnelly met revenue goals ensuring him 25%
URB stock and 10% WHE stock), Willis sought to change Donnelly’s
status. Willis was no longer
willing to provide 100% of the financing unless he was still “100%
owner.” He wanted Donnelly to
“step up” and “act like an owner.”
Legal documents were prepared, but never signed, capping Donnelly’s
ownership at 25% of URB stock and rescinding the Letter Agreement. Willis also wanted Donnelly to
assume some of the debt, but Donnelly declined to do
so.
Certainly, it made good business sense for Willis to minimize his
potential losses and work towards profitability. However, Willis then continued to
control Urban Retreat in disregard of Donnelly throughout the years. He rationalized that Donnelly had
relinquished ownership when he refused to “act like an owner.” When Donnelly asked about stock
issuance, Willis would assure him that he intended to live up to the
Letter Agreement, but asked to delay until the business “turned the
corner.” At the same time,
Willis continued to use URB as a wholly-owned, sub-chapter S-corporation
for tax benefits. Willis also
unilaterally cut Donnelly’s salary[5]
in March 1992, supposedly temporarily, and diminished his management
responsibilities. Willis
continued to make “loans” to URB although there is no evidence such loans
were approved by the board of directors.[6]
Additionally, Willis controlled Urban Retreat through his wife,
Francie.
He supposedly transferred all of his URB stock to her. A “unanimous consent of the board”
was prepared in March 1991, but never signed, reflecting URB’s permission for Francie
to convey to Willis a beneficial interest in URB’s option to buy its realty. Then, on
Over these years, Donnelly’s personal hairstyling revenues had
increased, as did the overall gross revenues of the spa. In fact, every revenue goal in the
Letter Agreement was met.
Each time he asked about his stock, Willis would assure Donnelly
that he would live up to the agreement. Finally, in late November 1994,
Francie learned that Donnelly was helping a
friend plan a new day spa.
When she learned of this, she asked Donnelly to leave Urban
Retreat.
B. Loans to
Donnelly
In January 1992, Donnelly asked Willis to borrow $18,000. He signed a promissory note for
that amount at eight percent annual interest, to be repaid $500 a month
from Donnelly’s paychecks. On
C. The
Lawsuit
When Donnelly ignored Francie’s demand
letter, Willis filed suit for the outstanding $26,982.58. Donnelly reciprocated by suing
Willis, Francie, URB, and WHE for breach of the
Letter Agreement and breach of fiduciary duty, among other claims. The jury ultimately found that URB
and WHE breached the Letter Agreement; Willis and Francie ratified it; Donnelly was entitled to 50% of
URB stock and 10% of WHE stock; and that contract damages were $1.7
million. The jury further
found that Willis had breached his fiduciary duty to Donnelly and that
those damages were $1.7 million.
The jury rejected limitations questions for both issues. As for the loans to Donnelly, the
jury found that he defaulted on the promissory note and owed $26,982.56 to
Willis. Finally, the jury
awarded both sides $400,000 in attorney’s fees.
Under the trial court’s judgment, Donnelly was awarded (1) $1.7
million for the fiduciary duty claim; (2) $1.7 million for the contract
claim; (3) a constructive trust on the Urban Retreat realty and on 50% of
all URB stock and 10% of all WHE stock possessed by the Willises or Urban Retreat; and (4) $400,000 in
attorney’s fees. The trial
court awarded Mike Willis (1) $26,982.56 for the promissory note and (2)
$400,000 in attorney’s fees.
Breach of Contract
In nine of the Willises’ issues and three
of Urban Retreat’s issues, they attack the judgment against them for
breach of contract.
A. Breach of Contract
Jury Findings
In their first, second, and third issues, the Willises argue that Donnelly waived breach of contract
because he failed to request jury findings that Willis and Francie breached the Letter Agreement. However, whether a party has
breached a contract is a question of law for the court, not a question of
fact for the jury. Meek v. Bishop, Peterson & Sharp,
P.C., 919 S.W.2d 805, 808 (Tex. App.—Houston [14th Dist.] 1996, writ
denied); Garza v. Southland
Corp., 836 S.W.2d 214, 219 (Tex. App.—Houston [14th Dist.] 1992, no
writ). “The court determines
what conduct is required by the parties, and, insofar as a dispute exists
concerning the failure of a party to perform the contract, the court
submits the disputed fact questions to the jury.” Meek, 919 S.W.2d at 808; see ITT Commercial Fin. Corp. v. Riehn, 796 S.W.2d 248, 253 n.3 (Tex. App.—Dallas
1990, no writ). When facts
are undisputed or conclusively established, there is no need to submit
those issues to the jury. Sullivan v. Barnett, 471 S.W.2d
39, 44 (
Here, the existence of the Letter Agreement was undisputed; it was
also undisputed that Donnelly never received the benefits promised in the
Letter Agreement. The issues
that were disputed, such as whether Donnelly waived enforcement of the
contract (Question 6) and whether the Willises
ratified it (Question 10), were submitted to the jury. It is uncontroverted that the Willises failed to abide by the Letter Agreement. Thus, it was not necessary to
submit the question about their breach to the jury, and Donnelly’s failure
to request such a question does not result in waiver. Accordingly, we overrule the Willises’ first three issues.
B. Signatories to the
Contract
In their fourth and fifth issues, the Willises argue they could not have breached the Letter
Agreement because they were not signatories to it. The parties listed in the Letter
Agreement were Willis, Hite, URB, WHE, and Donnelly. It was signed by Hite
(individually and as president of WHE) and Donnelly. Willis’s signature line was
crossed out.
The Willises contend their signatures or
an authorized agent’s signature was required under the statute of
frauds. The statute of frauds
provides:
(a) A promise or
agreement . . . is not enforceable unless the promise or agreement, or a
memorandum of it, is
(1) in writing; and
(2)
signed by the person to be charged with the promise or agreement or by
someone lawfully authorized to sign for him.
Tex.
Bus. & Com. Code Ann. §
26.01(a)(2) (Vernon 2002). The Willises argue that they did not sign the contract nor
is there evidence that Hite had authority to bind them.
In their argument, the Willises ignore
the jury’s finding that they ratified the contract. Ratification is the adoption or
confirmation by a person with knowledge of all material facts of a prior
act that did not then legally bind him and that he had the right to
repudiate. Avary v. Bank of Am., N.A., 72 S.W.3d
779, 788 (Tex. App.—Dallas 2002, pet. denied). Such approval can be given through
act, word, or conduct. K.B. v. N.B., 811 S.W.2d 634, 638
(Tex. App.—San Antonio 1991, writ denied); see Stable Energy, L.P. v.
Newberry, 999 S.W.2d 538, 547 (Tex. App.—Austin 1999, pet. denied)
(ratification can occur if one affirmatively acknowledges a
contract). Further, whether
Hite was the Willises’ authorized agent is of no
consequence. See Hays v. Marble, 213 S.W.2d
329, 333 (Tex. Civ. App.—Amarillo 1948, writ
dism’d).
“One may ratify the acts or contract of another . . . whether the
other was his agent and exceeded his authority as such or was not his
agent at all.”
C.
Ratification
In their sixth issue, the Willises
contend that their ratification of the contract is insufficient to support
recovery for breach of contract.
They again urge that a separate jury finding of breach is
necessary. We have already
overruled this contention in our disposition of issues one through
three.
Additionally, in a single sentence in issue six, the Willises argue the evidence is legally and factually
insufficient to show that they ratified or breached the Letter
Agreement. Bare assertions of
error, without citation to the record, present nothing for review. Tex. R. App. P. 38.1(h); Thedford v. Union Oil Co. of Ca., 3 S.W.3d
609, 615 (Tex. App.—Dallas 1999, pet. denied). When a party fails to include
citation of authority or discussion of relevant facts to support its
sufficiency contention, we will not perform an independent review of the
record and applicable law to determine whether the error complained of
occurred. Ryan v. Abdel-Salam, 39 S.W.3d 332, 336 (Tex.
App.—
D. Waiver through
Pre-Suit Conduct
In the Willises’ seventh issue and Urban
Retreat’s first and third issues, appellants contend that, as a matter of
law, Donnelly waived breach of contract by his pre-suit conduct. Waiver is an affirmative
defense. Tex. R. Civ.
P. 94; Rogers v. Cont’l Airlines, Inc., 41 S.W.3d 196, 198
(
When an appellant attacks the legal sufficiency of an adverse
answer to a finding on which it has the burden of proof, the appellant
must overcome two hurdles. Victoria Bank & Trust Co. v.
Brady, 811 S.W.2d 931, 940 (
There is evidence in the record supporting the jury’s finding that
Donnelly did not intentionally relinquish a known legal right. Donnelly testified, “Mr. Willis .
. . continually told me that . . . once we turned the corner, you know,
that he would at some point live up to the Letter Agreement. But until that time, I had to live
by whatever compensation changes were enacted by Mr. Willis.” According to Donnelly, Willis
would tell him that he could “not issue stock at this time.” Mike Willis’s testimony
corroborates Donnelly’s account.
He stated that he merely delayed issuing the stock and that had he
been asked, he would have complied with the Letter Agreement. Because there is evidence
supporting the jury’s finding, we do not review the record for evidence to
the contrary. Accordingly, we
overrule the Willises’ seventh issue and Urban
Retreat’s first and third issues.
E. Statute of
Limitations
In the Willises’ eighth issue and subpart
(a) of Urban Retreat’s second issue, they contend that Donnelly’s breach
of contract claim is barred by the statute of limitations. A breach of contract action is
subject to a four-year statute of limitations. Tex. Civ.
Prac. & Rem. Code
Ann. § 16.004 (Vernon 2002).
Donnelly filed his lawsuit in August 1995. The jury found there was no
failure to comply before
Limitations is an affirmative defense, which the asserting party
must prove. Woods v. William M. Mercer, Inc.,
769 S.W.2d 515, 517 (
In contrast, Donnelly argues that his suit was timely, citing two
cases with facts substantially similar to the facts in this case, Pickett v. Keene, 47 S.W.3d 67
(Tex. App.—Corpus Christi 2001, pet. dism’d),
and Intermedics, Inc. v. Grady, 683 S.W.2d 842
(Tex. App.—Houston [1st Dist.] 1984, writ ref’d
n.r.e.).
Both Pickett and Intermedics
involved contracts in which portions of ownership in businesses were to be
transferred to parties working for each business. In each case, deadlines for such
transfers were delayed by the parties. In each case, the business
ultimately tried to avoid transferring any portion of ownership and fired
the worker. And in each case,
the business claimed on appeal that because breach had occurred with the
first missed deadline many years before, the case was barred by the
statute of limitations. In
both cases, the appellate court held that the cause of action accrued at
the employee’s termination (when the employer clearly repudiated the
agreement to transfer ownership).
Pickett, 47 S.W.3d at
77; Intermedics, 683 S.W.2d at
847.
In asserting the statute of limitations, appellants disregard the
undisputed evidence that deadlines were postponed so the Willises could reap tax benefits and URB could “turn
the corner.” “Even when an
exact date of performance is specified in the contract, this provision can
be waived by the parties.”
Sieber & Calicutt, Inc. v. La Gloria Oil & Gas Co., 66
S.W.3d 340, 347 (Tex. App.—Tyler 2001, pet. denied); see Intermedics, 683 S.W.2d at
846; see, e.g., Pickett, 47 S.W.3d at 77. Further, an extension of time to
perform can be expressed or implied and does not affect the other
provisions of the contract.
Intermedics, 683 S.W.2d at
846. The evidence indicates
that appellants intended to honor the agreement “at some point.” Donnelly relied on Willis’s
assurances and accepted the delays.
There was no clear intent by appellants to repudiate the Letter
Agreement until Donnelly’s termination. See Pickett, 47 S.W.3d at 77; Intermedics, 683 S.W.2d at
847. Thus, the contract claim
did not accrue before
F. Response to Jury
Note
In the Willises’ ninth issue and Urban
Retreat’s issue two, subpart (b), appellants contend the trial court
improperly responded to the following jury note about the statute of
limitations:
Does
an answer of yes to question no. 7 [the statute of limitations question]
indicate that the failure to comply [with the Letter Agreement] happened
before that date and excludes the possibility that it happened on or after
that date?[9]
We
find that appellants’ complaint is waived because (1) the record fails to
sufficiently reflect (a) that a supplemental instruction was given to the
jury or (b) the contents of such an instruction; and (2) appellants
incorrectly and untimely presented their requested supplemental
instruction to the trial court.
To show error regarding a supplemental jury instruction, the record
must reflect the contents of the instruction and that the instruction was
given. Keene Corp. v. Gardner, 837 S.W.2d
224, 228–29 (Tex. App.—Dallas 1992, writ denied). In this case, neither the jury’s
note nor the trial court’s written response are included in the clerk’s
record.[10] Further, while the reporter’s
record repeats the jury’s question word-for-word, it does not contain the
trial court’s supplemental instruction verbatim. The trial court’s response was
apparently written, extensively discussed by the parties and the court,
and altered throughout the discussion. However, the final wording of the
response is not reflected in the reporter’s record. Additionally, at the end of
discussion about the jury’s note, the reporter’s record denotes only “jury
deliberating,” not whether an instruction was actually delivered to the
jury. See id. (holding court reporter’s
notation that “whereupon the jury continued to deliberate” was
insufficient to show court delivered additional charge). Thus, there is an insufficient
record showing either the contents of the supplemental instruction or that
the instruction was given to the jury.
Next, appellants argue the trial court should have provided the
supplemental question, “What is the earliest of any breach you have
found?” in response to the jury’s note. However, appellants have waived
error because they requested this supplemental question orally during jury
deliberations. “To complain
of the trial court’s omission of a requested instruction on appeal, a
party is obliged to make a written request to the trial court
for a substantially correct instruction.” Jarrin v. Sam White Oldsmobile Co., 929
S.W.2d 21, 25 (Tex. App.—Houston [1st Dist.] 1996, writ denied) (emphasis
added). Appellants’ oral
request is thus unsatisfactory.
Further, the appellants filed a written request for this question
too late, after the jury
returned its verdict. Waiting
until after verdict to file a request for a supplemental jury instruction
is untimely. See Scott Fetzer
Co. v. Read, 945 S.W.2d 854, 871 (Tex. App.—Austin 1997), aff’d, 990
S.W.2d 732 (
Additionally, appellants have not provided case law that their
proposed supplemental question was legally correct, while Question 7 was
not. The statute of
limitations was their
affirmative
defense, and they voiced no objection to Question 7 during the charge
conference. Lastly,
appellants’ argument about their proposed supplemental jury question
simply reiterates their previous points of error, which we have overruled,
about accrual of a contract claim.
For the above reasons, we overrule the Willises’ issue nine and Urban Retreat’s issue two,
subpart (b).
Breach of Fiduciary Duty
The Willises’ next ten issues address
Mike Willis’s breach of fiduciary duty.
A. Existence of
Majority Shareholder/Minority Shareholder
Relationship
In their tenth, eleventh, and twelfth issues, the Willises argue that there is no evidence of breach of
fiduciary duty because, after October 1990, there was never a
majority-minority shareholder relationship between Willis and
Donnelly. Specifically,
Willis argues that Francie became sole
shareholder of Urban Retreat in October 1990, and thus he had no majority
shareholder’s duty after that time.
Further, he argues that Donnelly was never a
shareholder.
When a party without the burden of proof challenges the legal
sufficiency of the evidence to support an adverse jury finding, we
construe the issue as a “no evidence” point. See Gooch v. Am. Sling Co., 902
S.W.2d 181, 183–84 (Tex. App.—Fort Worth 1995, no writ). In determining a “no evidence”
point, we are to consider only the evidence and inferences that tend to
support the finding and disregard all evidence and inferences to the
contrary. Catalina v. Blasdel, 881 S.W.2d 295, 297
(
The record includes evidence that Willis transferred stock to Francie as late as October or November 1991. Additionally, Francie testified that a magazine article in January
1991 identified her husband and Donnelly as the owners of Urban
Retreat. This article was
written approximately one month after the Letter Agreement contemplated
transfer of 25% of URB stock and 10% WHE stock to Donnelly. Further, shortly after March 1991,
she was privy to a meeting between her husband and Donnelly in which
Willis asked Donnelly to cap his ownership interest in URB at 25%. This is more than a scintilla of
evidence showing that both Donnelly and Willis were shareholders in Urban
Retreat after October 1990.
Accordingly, we overrule issues ten, eleven, and
twelve.
B. Claim Sounds in
Contract Only
In issue 13, the Willises contend that a
party cannot claim breach of fiduciary duty when the only alleged damages
are the subject of a contract.
The Willises argue that Donnelly’s only
alleged damages arise from breach of the Letter Agreement; thus, the claim
sounds only in contract. See
First, we look to the source of the duty to act.
Additionally, the contract between the parties may create both
contract and tort duties.
In this case, breach of contract arose from failure to transfer
shares to Donnelly and failure to compensate him at the rate set forth in
the Letter Agreement.
Donnelly alleged that breach of fiduciary duty arose from Willis’s
(1) purchase of the URB realty; (2) lease of the realty to URB for the
total debt on the property; (3) treatment of capital contributions as
loans; (4) representation that Urban Retreat was worthless; and (5)
personal use of Urban Retreat’s tax benefits. The damages for breach of
contract, more fully addressed below, were the unpaid compensation and
fair market value of the Urban Retreat stock. In contrast, the damages for
breach of fiduciary duty involved the value of the realty and the benefits
personally taken by Willis.
Thus, Donnelly’s injuries did not arise solely from breach of the
Letter Agreement.
Accordingly, we do not agree that the damages sought were solely
contract damages. We overrule
issue thirteen.
C. Existence of
Fiduciary Relationship
In their fourteenth issue, the Willises
contend the trial court erred in finding that a fiduciary relationship
existed between Willis and Donnelly and in instructing the jury that such
a relationship existed.[11] Whether a fiduciary relationship
exists is normally a question of fact for the jury. Procom Energy, L.L.A. v. Roach, 16
S.W.3d 377, 382 (Tex. App.—Tyler 2000, pet. denied); Hoggett v. Brown, 971 S.W.2d 472, 488
(Tex. App.—Houston [14th Dist.] 1997, pet. denied); Farah, 927 S.W.2d at
675. “When the issue is one
of no evidence or conclusive evidence, the issue is a question of
law.” Farah, 927 S.W.2d at
675. Here, the Willises contend that there was no evidence of a
fiduciary relationship or, conversely, the evidence conclusively shows no fiduciary relationship
exists.
“[A] co-shareholder in a closely held corporation does not as a
matter of law owe a fiduciary duty to his co-shareholder.” Hoggett, 971 S.W.2d at
488. Instead, the existence
of such a duty depends on the circumstances. Pabich v. Kellar, 71 S.W.3d 500, 504–05 (Tex. App.—Fort
Worth 2002, pet. denied). For
example, a fiduciary duty exists if a confidential or “informal”
relationship exists.
We disagree that there was no evidence of, or alternatively
evidence conclusively disproving, a fiduciary relationship. There is evidence tending to show
that Mike Willis engaged in oppressive conduct [12]
and dominated control over the business. See Hoggett, 971 S.W.2d at 488 n.13. For instance, Willis alone reaped
personal tax advantages by treating URB as a wholly-owned business. Willis, not Urban Retreat or the
board of directors, hired a new CEO and promised him ownership in URB if
Willis’s capital investment was repaid. Further, the evidence shows that
although Willis promised to provide cash capital contributions, he
continually treated all but $1,000 of such contributions over the years as
loans. There is evidence that
Willis’s promises to provide capital were inducements to Donnelly to join
the business. See Willis, 997 S.W.2d at 801
(defining oppressive conduct as that which defeats the minority
shareholder’s expectations that were reasonable and central to the
decision to join the venture).
The evidence shows that Willis kept Urban Retreat thinly
capitalized and thus limited its on-going ability to operate. And, if debts always surpassed
income and assets, Donnelly’s shares would be worth little to nothing
under the Termination provision of the Letter Agreement (defining share
value as the greater of two times prior year’s earnings or assets minus
liabilities).
Further, after Willis could not convince Donnelly to cap his
ownership interest, he found a way to purchase the spa realty for
himself. First, a corporate
document was prepared allowing Francie to assign
Willis an interest in the spa’s option. Later, he bought the realty,
having Francie waive URB’s option the day of closing. Although URB supposedly could not
afford to buy the realty, the Willises then
charged the total debt to URB through rent.[13] By purchasing the realty, Willis
also ensured that Donnelly’s stock value decreased under the Letter
Agreement.[14] These could be construed as
purposeful actions to dilute the value of shares while employing the
business and its assets solely for Willis’s own benefit. See generally Duncan v.
Lichtenberger, 671 S.W.2d 948, 953 (Tex. App.—Fort Worth 1984, writ
ref’d n.r.e.) (citing
Patton v. Nicholas, 279 S.W.2d
848 (
Additionally, the evidence shows that Willis transferred all the
URB stock to Francie as late as November
1991. By that time, Donnelly
was a minority owner in the business, and he had a right of first refusal
to purchase the shares per the Letter Agreement. Willis did not extend this
opportunity to Donnelly. See Thompson v. Hambrick, 508 S.W.2d 949, 951–54 (Tex. Civ. App.—Dallas 1974, writ ref’d n.r.e.) (fact issue
whether majority shareholder’s sale of shares without offering right of
first refusal to minority shareholder was a breach of fiduciary
duty). Further, Willis
unilaterally cut Donnelly’s salary and tried to cap his ownership
interest, after delaying issuance of his stock. Willis’s own discovery answers
reveal that he decided Donnelly was not acting like an owner, and he
justified treating him like a nonowner for that
reason. See Davis v. Sheerin, 754 S.W.2d 375, 382 (Tex. App.—Houston
[1st Dist.] 1988, writ denied) (conspiring to deprive one of ownership in
a corporation is oppressive conduct). Finally, case law indicates Willis
would owe a fiduciary duty to Donnelly in repurchasing his shares. See Fawcett, 55 S.W.3d at 219–20.
These examples defeat the Willises’
argument that only legal absolutes existed, i.e., no evidence supported the
existence of a fiduciary relationship or that they conclusively disproved
the existence of a fiduciary relationship.[15]
Lastly, the Willises contend because it
is a question of fact, the trial court erred in instructing the jury that
a fiduciary relationship existed.[16] However, the Willises failed to object to Question 22 in the charge
on this basis.[17] Instead, they objected as
follows: