Opinion filed July 14 , 2016



### In The 

# Eleventh Court of Appeals

__________ 

### No. 11

- 1 4

- 000 5 5

- C V

__________


### E & E SERVICE & SUPP LY, INC. , Appellant

V. CYNTHIA G. RUDDICK, DAVID R. RASCO AND ALIEN MANUFACTURING, INC. , Appellee s

On Appeal from the County Court at Law

Ector County, Texas Trial Court Cause No. CC

- 23,487

M E M O R A N D U M O P I N I O N
This is a dispute between an employer, E & E Service & Supply, Inc., and its former employees. The former employees, Cynthia G. Ruddick and David R. Rasco,
formed Alien Manufacturing, Inc . while still employed by E & E. Alien Manufacturing is a similar oilfield sales and service business that competes with
E & E. E & E filed suit against Ruddick, Rasco, and Alien Manufacturing alleging
various causes of action. E & E appeals the trial court’s order granting summary2

judgment in favor of Ruddick, R asco, and Alien Manufacturing. We affirm in part and reverse and remand in part. Background Facts
E & E is a well service and supply company that sells oilfield supplies and perf orms repairs on pulling units. E & E hired Ru ddick in 1992 as a bookkeeper. Her duties included making daily bank deposits, inv oicing customers, and payroll. In August 2008, Ruddick was elected as a director and secretary

- treasurer of E & E.
Rasco was hired by E & E in 1998 as a machinist. Prior to working at E & E, Rasco
had worked as a ma chinist for twenty

- four years. By 2010, Rasco served as the machine shop foreman for E & E. While still employed by E & E , Ruddick and Rasco made plans to form Alien Manufacturing. Ruddick and Rasco did not disclose these plans to E & E

. Ruddick and Rasco incorporated Alien Ma nufacturing in September 2010. Rasco and
Ruddick resigned as employees of E & E on November 24, 2010. Ruddick verbally

r esigned as an employee of E & E. However, Ruddick did not specifically state that
she was resigning as either a di rector or secretary

- treasurer. Rasco gave a written resignation

. At the time of his departure, Rasco had a personal laptop that contained
some of E & E’s programs on it, but he deleted the programs at the demand of E & E.
Alien Manufacturing began operations and contact ed vendors and customers in January and February of 2011. E & E did not replace Ruddick as secreta ry

- treasurer until April 2011. In April 2012, E & E sued Ruddick, Rasco, and Alien Manufacturing (Appellees) for br each of contract, breach of fiduciary duty, injunctive relief, and
tortious interference with a contractual relationship

. With respect to its brea ch of contract claim, E & E asserted that Ruddick and Rasco breached a non compete agreement by operating within sixty miles of Odessa, soliciting E & E’s customers,3

and manufacturing equipment similar to E & E. E & E attached a blank copy of a

non compete agreement to its original petition. E & E could not find a non compete agreement signed by either Ruddick or Rasco. However, E & E alleged that every employee was required to execute the agreement.
E & E also alleged that Ruddick breached her fiduciary duty as a corporate
officer for E & E by redirecting communications belonging to E & E, soliciting
E & E’s customers, misappropriating E & E’s confidential information, and using
that confidential information to defame and interfere with E & E’s business relationships. Finally, E & E asserted that Alien M anufacturing willfully and
intent ionally interfered with the non compete agreements betw een E & E and
Ruddick and Rasco. In October 2013, Appellees moved for summary judgment on no

- evidence and traditional grounds on all of E & E’s claims. In Appellees’ no

- evidence motion for summary judgment, they asserted that E & E presented no evidence that a fiduciary relationship existed between Ruddick and E & E. Appellees also a lleged eight traditional grounds for summary judgment. On November 25, 2013, E & E filed a response to Appellees’ summary judgment motion

. E & E also filed an amended petition on the same day

. The amended petition appears to have b een timely filed because it was filed seven days prior to the hearing on the motion for summary judgment

. See T EX

. R. C I V

. P. 63. In the amended petition, E & E added a claim for breach of fiduciary duty against
Rasco. E & E alleged that Ruddick and Rasco breach ed their fiduciary duty to E & E based upon the ir status as employees of E & E. E & E further alleged a claim for breach of fiduciary duty against Alien Manufacturing based upon the contention that
it was a corporate entity created to effectuate a wrong

. E & E also added a claim for4

“conspiracy to breach fiduciary duties” against Ruddick , Rasco, and Alien Manufacturing

. 1 Appellees filed a reply to E & E’s summary judgment response

. How ever, they did not amend their motion for summary judgment to address the new claims
added in E & E’s amended petition

. The trial court granted summary judgment against E & E on all claims without specifying the grounds upon which it relied

. Analysis
E & E raises six issues on appeal. We note at the outset that E & E only challenges the trial court’s rulings on its claims for breach of fiduciary duty and conspiracy to breach fiduciary duty

. Accordingly
, the trial court’s rulings on E & E’s
claims for breach of contract and tortious interference with a contract ual relationship
are not before this court. See J acobs v. Satterwhite , 65 S.W.3d 653, 655

– 56 (Tex. 2001)

. T he parties devoted a great deal of attention in the summary judgment proceedings to these unchallenged claims, particularly the breach of contract claim. As set forth below, we affirm the trial court’s rulings granting summary judgment to Appellees on E & E’s claims for breach of contract and tortious interference with a

contract.
E & E a lleges in its first issue that the trial court improperly granted
A ppellees’ motion for summary judgment on causes of action that were not
ad dressed in Appellees’ motion. As noted previously, E & E filed an amended petition at the same time that it filed its response to th e motion for summary judgment. Th e amended petit ion asserted n ew variations of E & E’s clai m of breach of fiduciary duty. In its original petition, E & E only asserted a claim of breach of fiduciary duty against Ruddick on the basis that she owed E & E a fiduciary duty as

1 In the amended petition, E & E repeated its claim for breach of contract against Ruddick and Rasco and its claim for interference with a contract ual relationshi p against Alien Manufacturing. However, it no longer asserted it s claim for injunctive relief.5

a director and officer. E & E’s amended petition included new claims of breach of fiduciary duty against Ruddick, Rasco, and Alien Manufacturing

. The new claims alleged that Ruddick and Rasco breached their fiduciary duty as emplo yees and that
Alien Manufacturing was an entity creat ed to effectuate the breach of fiduciary duty. Additionally, E & E alleged that Alien Manufacturing , Ruddick, and Rasco conspired to breach thei r respective fiduciary duties. Summary judgments may only be granted upon grounds expressly asserted in
the su mmary judgment motion. See G & H Towing Co. v. Magee , 347 S.W.3d 2 93, 297 (Tex. 2011) (citing T EX

. R. C IV

. P . 166a(c)). Thus, as a general rule, a trial court
commit s reversible error if it grant s summary judgment on claims not addressed in the summary judgment motion

. See id. The general rule is subject to the following

two limited exceptions: (1) when the movant has conclusively proved or disproved a matter (usually corresponding to a claim’s element or to an affirmative defense) that would also preclude the unaddressed claim as a matter of law or (2) when the unaddressed claim is derivative of the addressed claim, and the movant proved its entitlement to summary ju dgment on that addressed claim.
Id

. If either exception is met, the trial court’s error is harmless under T EX

. R. A PP

. P. 44.1( a). See id

. at 297

– 98. C ourts require “a very tight fit” between the grounds established or negated by summary judgment and the elements of unaddressed
claims be c ause “otherwise, the exception c ould swallow the rule.” Wilson v. Davis
, 305 S.W.3d 57, 73 (Tex. App.

— Houston [1 st Dist.] 2009, no pet.).
Th e foregoing rule applies when the summary judgment movant fails to
amend its motion after the nonmovant amends its petition

. See Coterill

– Jenkins v.
Tex. Med. Ass ’

n Health Care Liab. Claim Trust , 383 S.W.3d 581, 592 (Tex. App.

— Houston [14th Dist.] 2012, pet. denied). A summary judgment on the ent ire case
can still be affirmed if (1) the amended petition e ssentially reiterates previously6

pleaded causes of action, (2) a ground asserted in the motion for summary judgment conclusively negates a common element of the newly and previously pleaded claims, or (3) the original motion is broad enough to encompass th e newly asserted claims.
See id

. However, if the plaintiff asserts a new cause of action in its amended petition
b ased on facts not alleged in its original petition, a court cannot conclude that the
defendant’ s motion for summary judgment contemplated and embraced the additional claim in the amended petition. See Espeche v. Ritzell , 123 S.W.3d 657, 664 (Tex. App

. — Houston [14th Dist.] 2003, pet. denied). From an analytical standpoint, our first task is to determine if the trial court’s

summary judgment was correct on the grounds alleged in the motion for summary judgment pertaining to E & E’s claim of breach of fiduciary duty against Ruddick as alleged in E & E’s original petition. Accordingly, we will address E & E’s other appellate issues pri or to resolving its first issue. In its second issue, E & E contends that Appellees did not properly assert a

no

- evidence motion for summary judgment. E & E argues that Appellees ’ no

evidence motion for summary judgment was improper because it was conclusory and did not specifically challenge the specific element s of E & E’s breach of fiduciary duty claim. 2 In advancing this argument, E & E is asserting that Appellees’

no

- evidence motion for summary judgment was procedurally deficient. We disagree

. We review a summary judgment de novo. Travelers Ins. Co. v. Joachim , 315 S.W.3d 860, 862 (Tex. 2010). When a party moves for summary judgment on both

no

- evidence and traditional grounds, the appellate court should address the no

evidence grounds first. Merriman v. XTO Energy, Inc. , 407 S.W.3d 244, 248 (Tex.

2 We only address E & E’s seco nd issue as it pertains to its claim of breach of fiduciary duty against Ruddick based upon her alleged status as a director and officer because that was the only basis for this cause of action alleged in E & E’s original petition

.7

2013); s ee T EX

. R. C IV

. P . 166a(c), (i). After adequate time for discovery, a party may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. T EX

. R. C IV

. P

. 166 a(i). A no

- evidence summary judgment motion under Rule 166a(i) is essentially a motion for a pretrial directed verdict; it requires the nonmoving party to present evidence raising a genuine issue of material fact supporting each element contested in the m otion. Id. ; Timpte Indus.,
Inc. v. Gish , 286 S.W.3d 306, 310 (Tex. 2009); Mack Trucks, Inc. v. Tamez , 206 S.W.3d 572, 581

– 82 (Tex. 2006). When reviewing a no

- evidence summary judgment, we “review the evidence presented by the motion and response in the l ight most favorable to the party against whom the summary judgment was rendered, crediting evidence favorable to that party if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not.” Timpte Indus. , 286 S.W.3d
at 31 0; Mack Trucks , 206 S.W.3d at 582 (citing City of Keller v. Wilson , 168 S.W.3d 802, 827 (Tex. 2005); Johnson v. Brewer & Pritchard, P.C. , 73 S.W.3d 193, 208 (Tex. 2002)).
In Appellees’ no

- evidence motion for summary judgment, they asserted that
E & E had presented no evidence that Ruddick owed a duty to E & E for the b reach of fiduciary duty claim. Specifically, they alleged that E & E had presented no evidence that Ruddick served as a corporate officer during the years pr eceding her departure from E & E

. Rule 166a(i) requires that no

- evidence motions for summary judgment “state the elements as to which there is no evidence.” T EX

. R. C IV

. P

. 166a(i). The comments to Rule 166a(i) state that “[t]he motion must be specific in challenging the evidentiary support for an element of a claim or defense” and that “paragraph (i) does not authorize conclusory motions or general no

- evidence challenges to an opponent’s case.” Id. cmt.8

Appellees’ no

- evidence motion for summary judgment was sufficient to
attack the duty element for E & E’s breach of fiduciary duty claim against Ruddick as a corporate director or officer. For a breach of fiduciary duty claim, a plaintiff must show (1) a fiduciary relationship between the plaintiff and the defendant, (2) a breach by t he defendant of his fiduciary duty, and (3) an injury to the plaintiff or
benefit to the defenda nt as a result of the defendant’ s breach. Priddy v. Rawson , 282 S.W.3d 588, 599 (Tex. App.

— Houston [14th Dist.] 2009, pet. denied). Appellees’ motion specific ally asserted that E & E had no evidence that Ruddick owed a fiduciary duty to E & E in the factual context that E & E alleged in its original petition

. Accordingly, w e overrule E & E’s second issue

. In its third issue, E & E argues that the trial court e rred when it held that Appellees did not have a fiduciary relationship with E & E. E & E presents its third issue in three subparts. The first subpart deals with the assertion that Ruddick owed a fiduciary duty as corporate officer and director. This was the only basis that E & E alleged in its original petition to assert its breach of fiduciary duty claim against
Ruddick. 3 Appellees a sserted in their no

- evidence motion for summary judgment
that E & E had not produced any evidence that Ruddick served as a corporate officer during 2009 and 2010. Appellees also made this assertion as a tradit ional summary judgment ground. There are two types of fiduciary relationships in Texas: (1) a formal fiduciary relationship arising as a matter of law, such as betw een partners or an attorney and a client, and (2) an informal or confidential fiduciary relationship arising from a

3 The second subpart of E & E’s third issue concerns the claim that Ruddick and Rasco had fiduciary relationships based upon their status as employees of E & E. The third subpart of E & E’s third issue concerns the claim that Alien Manufacturing had direct liability for the alleged fiduciary obl igations of Ruddick and Rasco. These are new claims that were not addressed in the grounds set out in Appellee s ’ motion for summary judgment. Accordingly, we do not reach the second and third subparts of E & E’s third issue.9

moral, social, domestic, or merely personal relationship where one person trusts in and relies upon another. Crim Truck & Tractor Co. v. Navistar Int ’ l Transp. Corp.
, 823 S.W.2d 591, 594 (Tex. 1992)

. Corporate d irectors owe a fiduciary duty to the corporation in their directorial actions, and this duty “includes the dedication of [their] uncorrupted business judgment for the sole benefit o f the corporation.” Ritchie v. Rupe , 443 S.W.3d 856, 868 (Tex. 2014) (quoting Int’l Bankers Life Ins. Co. v. Holloway , 368 S.W.2d 567, 577 (Tex. 1963) )

. The summary judgment evidence indicates that Ruddick was elected as a director and secretary

- treasurer of E & E on August 15, 2008. Ruddick attended
E & E’s annual meeting in 2008. Ruddick was not elected again in either 2009 or
2010. There is a question as to whether E & E held its annual direct o rs’ meeting in
2009 and 2010. Curtis Travis, the president of E & E, recalled hav ing meetings in
2009 and 2010. He also remembered Ruddick b eing present at both meetings. However, Ruddick signed an affidavit that she “was not elected or reelected a

corp orate officer or director” in 2009 or 2010 and “w as specifically asked .

. . to not attend the majority of all corporate meetings.” Ruddick gave a verbal resignation in November 2010
, but she did not specifically resign as either a director or secretary

- t reasurer of E & E at that time

. Ruddick was subsequently replaced as secretary

- treasurer on April 25, 2011
, by Cody Travis, who was also the vice

- president of E & E. There is no evidence that Ruddick was ever replaced as a director.
E & E’s bylaws state that a director “shall serve for one year from the date of
their election and until their successors have been chosen” (emphasis added)

. The bylaws further provide that o fficers “shall serve until the next regular annual meeting, or until their successors have been appointed and qualified” (emphasis10

added)

. Conversely, the bylaws do not contain a cap or otherwise limit the number of terms a director may serve. Appellees argue on appeal that
, under E & E’s bylaws
, directors and officers only serve a yearly term and that the language “ or until their successors ” implies that an officer may be removed prior to the e xpiration of that annual term. Reading all
of E & E’s bylaws together, the language “shall serve until the next regular annual meeting” appears to only establish a minimum time of service that expires upon the
election of a successor. See Houston Aeronautical Her i t age Soc’y, Inc. v. Graves
, No. 01

- 12

- 00443

- CV
, 2013 WL 6506301 , at *9 (Tex. App.

— Houston [1st Dist.] Dec. 10, 2013, no pet.) (mem. op.) . At a minimum, the summary judgment evidence raises a fact question that Ruddick continued to serve as a director or as an officer until her successor was appointed in April 2011. Thus, t he trial court erred when it granted summ ary judgment with respect to whether or not Ruddick owed a fiduciary duty based upon her status as a director and officer of E & E. We sustain E & E’s
third issue.
E & E’s fourth issue concerns the question of whether or not Appellees
breached t heir alleged fiduciary duties. Appellees did not seek summary judgment on this basis. Thus, the trial court did not make a summary judgment ruling on the
“breach” question and this element of E & E’s claim for breach of fiduciary duty is
not before this court

. Accordingly, w e do not reach E & E’s fourth issue.
E & E’s fifth issue concerns the matter of damages arising from Appellees’
all eged breach of fiduciary duty. Appellees included two traditional summary judgment grounds that addressed damages. They asserted that ( 1) E & E cannot recover lost profits because E & E was not making profits “at the time any actionable
conduct occurred” and ( 2) E & E is precluded from recovering on any claim because
it is uncertain whet her any damages have o ccurred.11

Appellees only challenged E & E’s alleged damages under traditi onal summary judgment grounds. To properly obtain traditional summary judgment on
th ese ground s , Appellees were required to conclusively negate the existence of damages for the breach of fiduciary duty claims

. See T EX

. R

. C IV

. P . 166a(c). We conclude that Appellees have not done so . The damages available for a breach of fiduciary duty are qu ite broad. As recognized in ERI Consulting Engineers, Inc. v.
Swinnea , the damages recoverable for a breach of fiduciary duty are equitable in nature and are not restricted to a showing of damages actually incurred by the plaintiff. 31 8 S.W.3d 867, 872

– 73 (Tex. 2010). “ It is the law that in s uch instances if the fiduciary ‘ takes any gift, gratuity, or benefit in violation of his duty, or acquires any interest adverse to his principal, without a full disclosure, it is a betrayal of his trust and a breach of confidence, and he must account to his principal for all he has

rec eived. ’ ” Kinzbach Tool Co. v. Corbett

– Wallace Corp.
, 160 S.W.2d 509, 514 ( Tex. 1942) (quoting United States v. Carter , 217 U.S. 286, 306 (1910) )

. “ For instance, courts may disgorge all ill

- gotten profits from a fiduciary when a fiduciary agent usurps an opportunity properly belonging to a principal, or competes with a principal. ” Swinnea , 318 S.W.3d at 873. Appellees’ damage grounds do not negate all of the damages recoverable for a breach of fiduciary duty because they do not address any profits or gai ns received by Ruddick, Rasco, or Alien Manfacturing in competition with E & E . We sustain E & E’s fifth issue. In its sixth issue, E & E asserts that the trial court erred when it disposed of
the claim against Appellees for conspira cy to breach fiduciary duties. This is a new
claim that E & E asserted in its amended petition. E & E contends that the summary judgment grounds contained in Appellees’ motion for summary judgment do not
extend to E & E’s conspiracy claims. For the reas ons set forth below, we agree.12

In conclusion, E & E only appeals the trial court’s summary judgment rulings on its claims for breach of fiduciary duty and conspiracy to breach fiduciary duty. The only claim of this type that E & E alleged in its original p etition was the claim against Ruddick for breach of fiduciary duty based upon her status as a director and officer. We have reviewed the summary judgment grounds and rulings pertaining to this claim and determined that Appellees were not entitled to summa ry judgment on this claim. Furthermore, t hese new claims were based on factual contentions that were not alleged in the original petition. See Espeche , 123 S.W.3d at 664. Specifically, E & E’s amended petition alleged claims for breach of fiduciary duty against Rasco and Alien Manufacturing for the f i rst time . Additionally, the amended petition alleged for the first time that Ruddick owed a fiduciary duty to E & E based upon her status as an employee. Accordingly, the trial court erred to the extent th at it granted sum mary judgment on the new breach of fiduciary duty claims asserted in
E & E’s amended petition. 4 We sustain E & E ’s first and sixth issue s

. Sanctions Appellees request sanctions and damages against E & E under T EX

. R.
A PP

. P. 45 for “substantive and frivolous misstatement of the trial court’s record

. ” Rule 45 permits a court of appeals to award damages for a frivolous appeal

. Whether to grant sanctions for a frivolous appeal is a matter of discretion that this court
exercises with prudence and caution and only after careful deliberation in tr uly egregious circumstances. See Methodist Hosp. v. Shepherd

– Sherman , 296 S.W.3d 193, 200 (Tex. App.

— Houston [14th Dist.] 2009, no pet.). E & E’s appeal is not
frivolous because E & E has prevai led on the matters that it has raised on appeal. Accordingly, we deny Appellees’ request for sanctions and damages.

4 We e xpress no opinion as to the viability of the new breach of fiduciary duty claims contained in E & E’s amended petition. In this regard, we have concluded that t hese claims have not been presented to the trial court for consideration.13 This Court’s Ruling
We affirm the trial court’s order insofar as it granted summary judgment on
E & E’s claims of breach of contract and tortious interference with a contract ual relationship . We reverse the trial court’s order insofar as it granted summary judgment on E & E’s claims for breach of fiduciary duty and conspiracy to breach fiduciary duty
, and we remand these claims to the tri al court for further proceedings consistent with this opinion

.

JOHN M. BAILEY
JUSTICE

July 14, 2016
Panel consists of: W right , C.J., Willson, J. , and Bailey, J.