In Rainier Income Fund I v. Gans, two limited partnerships sued an individual, who was the president of the general partner of the partnerships and co-owner of the only other limited partner, for breaching fiduciary duties allegedly owed to the limited partnerships. No. 05-15-00460-CV, 2016 Tex. App. LEXIS 6042 (Tex. App.—Dallas June 7, 2016, no pet. history). The plaintiffs claimed that he breached fiduciary duties to them by not declaring the partnerships dissolved and liquidated. The trial court held that the defendant did not owe any fiduciary duties.
The court of appeals held that there are two types of fiduciary relationships—formal and informal. “Formal fiduciary relationships arise as a matter of law and include the relationships between partners, among others.” The court noted that informal relationships arise from “a moral, social, domestic or purely personal relationship of trust and confidence, generally called a confidential relationship.” The court held that to impose such a relationship in a business transaction, the relationship must exist prior to, and apart from, the agreement made the basis of the suit. The court held that there was no evidence of a formal fiduciary relationship:
Gans is not a partner in the partnership; he is an officer of the general partner. Although appellants cite several cases involving partners who owe duties, appellants do not cite any case for the proposition that an officer of the general partner of a partnership owes a fiduciary duty to the partnership. Instead, they argue Gans “cannot be distinguished from the entities he controls.” Appellants did not, however, allege that the corporate identity of Star Creek, the general partner, should be disregarded. Appellants have not shown a formal fiduciary relationship.
Id. The court also held that the plaintiffs did not prove that the individual defendant had an informal fiduciary relationship because they did not direct the court to any evidence to show a prior relationship between the parties existed.
Interesting Note: Recently, a federal district court held that employees of fiduciaries may have individual liability for their actions. Medve v. JPMorgan Chase Bank, N.A., No. H-15-2277, 2016 U.S. Dist. LEXIS 11961 (S.D. Tex. February 2, 2016). That court noted that there are three separate legal bases under Texas law for imposing liability on an employee who carries out the fiduciary functions of an entity: “(1) first, the employee owes a fiduciary duty directly as a subagent carrying out the employer’s fiduciary functions, (2) second, the employee is liable if he ‘participates’ in the employer’s breach of fiduciary duty, which the employee necessarily does if he is the one carrying out the breaches, and (3) third, the employee is personally liable for any tort he commits in the course of his employment, and breach of fiduciary duty is of course a tort.” Id. (citing In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185 (Tex. 2007); Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 369, 375 (Tex. 1984); Searle-Taylor Mach. Co. v. Brown Oil Tools,Inc., 512 S.W.2d 335, 338 (Tex. Civ. App.—Houston [1st Dist.] 1974, writ ref’d n.r.e.)).These issues were not raised in the Gans case, and the court in that case did not address these other potential arguments.