Court Opinion

ID: 9351660
Source: CourtListenerOpinion
Date Created: 2023-01-03 12:08:32.099167+00
Date Added: 2024-06-11T17:01:33.137915
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                              BEFORE THE COURT EN BANC

                                     NO. 03-20-00058-CV

  Appellant, Christopher F. Bertucci, as Executor of The Estate of Anthony R. Bertucci,
 Deceased, and derivatively on behalf of American Affordable Homes & Properties, Inc.;
 American Affordable Homes, LP; Town Vista Development, LLC; Town Vista Terrace,
   Inc.; and MidCrowne Senior SLP, LLC // Cross-Appellant, Eugene L. Watkins, Jr.

                                               v.

Appellee, Eugene L. Watkins, Jr. // Cross-Appellee, Christopher F. Bertucci, as Executor of
  The Estate of Anthony R. Bertucci, Deceased, and derivatively on behalf of American
  Affordable Homes & Properties, Inc.; American Affordable Homes, LP; Town Vista
    Development, LLC; Town Vista Terrace, Inc.; and MidCrowne Senior SLP, LLC

                FROM THE PROBATE COURT NO. 1 OF TRAVIS COUNTY
      NO. C-1-PB-17-000937, THE HONORABLE GUY S. HERMAN, JUDGE PRESIDING

                           MEMORANDUM OPINION

              Appellant Christopher Bertucci, as Executor of The Estate of Anthony R.

Bertucci, Deceased, and derivatively on behalf of American Affordable Homes & Properties,

Inc.; American Affordable Homes, LP; Town Vista Development, LLC; Town Vista Terrace,

Inc.; and MidCrowne Senior SLP, LLC, filed a notice of appeal from the trial court’s summary

judgment favoring appellee Eugene L. Watkins. We will affirm the judgment in part, reverse the

judgment in part, and remand this cause for further proceedings.
                                       BACKGROUND 1

               This cause arises from a dispute between two parties—Anthony Bertucci

(Anthony 2) and Eugene Watkins (Watkins), who formed, funded, and ran business entities

created to develop low-income housing projects. These businesses— “the B-W Companies”—

were American Affordable Homes & Properties, Inc. (AAH); American Affordable Homes, LP

(AAHLP); MidCrowne Senior SLP, LLC (SLP); Town Vista Development (TVD); Town Vista

Terrace, Inc. (TVT); and Town Vista, LP (TVLP). AAH was the general partner of AAHLP and

co-developed the MidCrowne project. TVT is the general partner of TVLP, the owner of the

Towne Vista project, which TVD developed. No formal business entity encompasses all of the

B-W Companies. In forming the B-W Companies, Anthony and Watkins generally accorded

Anthony a sixty-percent interest and Watkins a forty-percent interest with Anthony generally

supplying the money and Watkins providing expertise concerning low-income housing tax

credits and managing the financial aspects of the individual businesses for “sweat equity.”

               Apart from the B-W Companies, Watkins and his wife were limited partners in

Texas Community Builders, LP (TCB). Allegedly with Anthony’s knowledge and agreement,

Watkins used a bank account controlled by TCB to deposit income and pay expenses of the B-W

Companies.    Watkins also used the bank account for personal transactions, which he said

Anthony knew. Watkins testified that he and Anthony regularly went over the B-W Companies’

transactions as discussed further below.

       1  This Background section is drawn from the pleadings and evidence in the record before
this Court. Except as final judgment is rendered on any particular claim, the descriptions herein
are not binding fact findings but provide general context for the discussions that follow.
       2  We refer to Anthony Bertucci as “Anthony” to distinguish references to him from
references to appellant Christopher Bertucci.

                                                2
               When Anthony’s health declined his children began familiarizing themselves with

Anthony’s interests; in 2014, Anthony’s son Christopher Bertucci (Christopher or Executor)

accessed a storage unit that contained records for the B-W Companies and requested

documentation from Watkins to explain this aspect of Anthony’s finances. When real estate

owned by one of the B-W Companies in 2015 was sold, Christopher, through his attorney,

requested information and an accounting for the finances of all of the B-W Companies that

would include information about the TCB account used for transactions involving the B-W

Companies. Christopher’s attorney proposed that the proceeds of the property sale be held in

escrow pending the sharing of financial information. In 2016, the escrow holder interpleaded

and deposited the proceeds from the property sale with the court; Watkins then filed a claim for

distribution of the funds and Anthony, through Christopher exercising his power of attorney,

filed a counterclaim. The parties also filed derivative claims on behalf of other parties and

amended their claims to involve other parties. When Anthony died in March 2017, Christopher

took his place in the lawsuit as Executor of Anthony’s estate, and this lawsuit was transferred to

the probate court.

               In his Sixth Amended Counterclaim, Christopher filed claims as Executor on

behalf of the Estate and derivatively on behalf of the B-W Companies. The claims include theft

liability by Watkins regarding money belonging to Anthony and to the B-W Companies, breach

of Watkins’s fiduciary duty to Anthony and the B-W Companies, breach of the duty to account

to the Estate regarding funds furnished to him by Anthony, and breach of alleged contractual

commitments to administer and account for the B-W Companies’ financial affairs.

               The parties filed motions for summary judgment. Executor filed motions for

partial summary judgment on his claims that Watkins owed a fiduciary duty and a duty to

                                                3
account and that he breached those duties. Watkins filed both a no-evidence and a traditional

motion for summary judgment.          In the no-evidence motion, Watkins sought judgment on

Executor’s counterclaims, alleging that Executor had no evidence to support the claims. In his

traditional motion, Watkins sought judgment on his defenses, including his theories that (1) the

Executor’s claims were barred by statutes of limitations that were not tolled by the discovery rule

or fraudulent concealment, (2) that Watkins’s counterclaims were not related to the pre-existing

claims in the suit and so any limitations bar was not temporarily lifted under section 16.069 of

the Texas Civil Practice and Remedies Code, and (3) that Anthony waived or ratified the

disputed transactions.

               The trial court overruled Executor’s motion to exclude a report by Gary

McIntosh, an auditor appointed by the trial court to determine “whether the funds invested by the

parties have been substantially accounted for by the parties.” McIntosh filed a report, then

sought to withdraw that report and substitute an amended one because of purported errors and

incomplete underlying documentation.         The probate court rejected the amended report and

declared the original report “conclusive as to the accounts stated therein.”

               In December 2019, the trial court granted Watkins’s motions for summary

judgment and denied Executor’s motions for summary judgment and overruled his objections

under the Dead Man’s Rule (Texas Rule of Evidence 601(b)) to the admission of evidence

regarding Anthony’s oral statements. The trial court severed the claims for attorney’s fees on the

Texas Theft Liability Act (TTLA) and breach-of-contract claims along with Watkins’s claims

against the B-W Companies for breach of contract, equitable restitution or unjust enrichment,

declaratory relief, and attorney’s fees, and transferred those claims to the district court.

                                                  4
               Christopher filed a notice of appeal as executor of the estate of Anthony R.

Bertucci, deceased, and derivatively on behalf of the B-W Companies. Watkins filed a cross-

appeal challenging the severance and transfer of the attorney’s fees claims.

                                     ISSUES ON APPEAL 3

               On appeal, Executor challenges the trial court’s admission of McIntosh’s report as

an auditor’s report, decisions to deem it conclusive, and consideration of it as an expert opinion.

He contests the overruling of his objections to Watkins’s summary-judgment evidence made

under the Dead Man’s Rule, see Tex. R. Evid. 601(b). He also challenges the trial court’s denial

of his motions for summary judgment and its grant of Watkins’s motions for summary judgment.

               In response, Watkins contends that the judgment on Executor’s derivative claims

on behalf of the B-W Companies must be affirmed because Executor did not file a brief in that

capacity or address the derivative claims. Watkins further argues that the trial court properly

overruled Executor’s objections to McIntosh’s auditor’s report and contends that any error in its

admission would have been harmless because Watkins’s motions for summary judgment did not

rely on the report. Watkins further contends that the trial court properly granted his no-evidence

motion for summary judgment; that Executor complains of TCB’s acts or omissions, not his; and

that no evidence indicated that Watkins unlawfully appropriated any property to which Anthony

had a possessory right. Watkins also argues that the trial court properly granted his traditional

       3    Watkins also originally raised a cross-appeal about attorney’s fees. By opinion and
order dated August 13, 2022, this Court abated and remanded the attorney’s fees issues for
resolution in the trial court consistent with the parties’ agreement. See generally Bertucci v.
Watkins, No. 03-20-00058-CV, 2022 WL 3328986 (Tex. App.—Austin, Aug. 12, 2022, order)
(en banc). After the trial court entered an order regarding the resolution of the attorney’s fees
issue, this Court reinstated this appeal. No attorney’s fees issue remains for this Court to resolve.

                                                 5
motion for summary judgment because limitations had run on Executor’s claim. He alternatively

contends that Anthony and Watkins executed ratifications and that Executor did not specially

except to Watkins’s defense of waiver and ratification. Watkins also contends that the trial court

properly overruled Executor’s objection under the Dead Man’s Rule.

                                         DISCUSSION

               Before addressing the substantive issues raised by this appeal concerning the

parties’ motions for summary judgment, we must consider which parties in what capacities and

which arguments are properly before this Court.

I.     Judgment concerning Executor’s derivative claims on behalf of the B-W Companies

               Watkins contends Executor waived his challenges to the trial court’s disposition

of his derivative claims by failing to brief this Court on those challenges in accordance with

Texas Rule of Appellate Procedure 38.1. We agree. Failure to provide argument and analysis in

support of an appeal can result in waiver. RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 126

(Tex. 2018). Here, the trial court pleadings and notice of appeal show that Anthony was not

identical to the B-W Companies, but the brief on appeal does not make this distinction and does

not include argument concerning the derivative claims.

               Executor’s Sixth Amended Counterclaim lists him as the executor of Anthony’s

Estate who brought claims on behalf of the Estate and derivatively on behalf of the companies:

       Defendant/Counterclaimant/Third-Party Plaintiff Christopher F. Bertucci
       (“Executor”), as executor of the estate (the “Estate”) of Anthony R. Bertucci,
       deceased (“Bertucci”), files this Sixth Amended Counterclaim against Plaintiff.
       The claims herein are maintained on behalf of the Estate (which includes the
       entire community property interest of Bertucci and his widow in the causes of
       action), and derivatively on behalf of [the B-W Companies].

                                                  6
Though Executor brought both sets of claims, the claims are distinct because claims of the Estate

are Anthony’s individual claims, while the derivative claims are the claims of the B-W

Companies—not Anthony (or his Estate) directly. See Pike v. Texas EMC Mgmt., 610 S.W.3d

763, 776 (Tex. 2020); Shurberg v. La Salle Indus. Ltd., No. 04-15-00320-CV, 2016 WL

1128291, at *6 (Tex. App.—San Antonio Mar. 23, 2016, no pet.) (mem. op.). When introducing

his motion for partial summary judgment, Executor noted that he had “asserted claims against

Eugene L. Watkins, Jr. (‘Watkins’) on behalf of the Estate and derivatively on behalf of certain

companies that Bertucci and Watkins formed (the ‘B-W Companies’).” In summary-judgment-

related filings, Watkins distinguished between claims brought on behalf of the Estate and those

brought derivatively on behalf of the B-W Companies.          For example, in his response to

Executor’s objections to his summary-judgment evidence, Watkins argued that Executor did not

have standing as Executor to bring claims for harm done to the B-W Companies but must instead

bring those claims derivatively on behalf of those entities, citing Wingate v. Hajdik, 795 S.W.2d

717, 719 (Tex. 1990). In his no-evidence motion for summary judgment, Watkins asserted that

Executor had no evidence “that Watkins intended to deprive the Decedent or the Entities of their

property, or that the Entities or Decedent did not effectively consent” to the disputed

expenditures. (Emphases added.)

              When initiating this appeal, Executor maintained the distinction in his capacities.

He filed the notice of appeal “as executor of the estate of Anthony R. Bertucci, deceased, and

derivatively on behalf of (i) American Affordable Homes & Properties, Inc., (ii) American

Affordable Homes, LP, (iii) Town Vista Development, LLC, (iv) Town Vista Terrace, Inc., and

(v) MidCrowne Senior SLP, LLC.”

                                               7
                However, on the cover page of Appellants’ Brief, Christopher listed only his

executor capacity and did not list a derivative capacity or the B-W Companies, captioning the

brief as follows: “Christopher F. Bertucci, Executor, Estate of Anthony R. Bertucci, Appellants

v. Eugene L. Watkins, Jr., Appellee.” In the Identity of Parties and Counsel section of his brief,

Executor lists only “Appellants:       Christopher R. Bertucci, Executor, Estate of Anthony R.

Bertucci.” See Tex. R. App. P. 38.1(a) (“Identity of Parties and Counsel. The brief must give a

complete list of all parties to the trial court’s judgment or order appealed from . . . .”).

                In his appellee’s brief, Watkins raises the issue: “Whether the unchallenged

judgment dismissing all derivative claims must be affirmed, where Executor did not file a brief

in a derivative capacity for any Company.” Watkins argues, “By filing his Brief identifying his

Executor capacity as the only appellant, [Executor] deliberately pursues his appeal only on the

claims [Anthony] could pursue personally, for the benefit of the Estate; he does not pursue

claims for the benefit of the [B-W] Companies.”

                In his reply brief, Executor argues that this Court should liberally construe his

opening brief so that his right to appellate review of the judgment on the derivative claims is not

lost by waiver. See First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214,

221-22 (Tex. 2017). He notes, “The Brief refers to ‘Appellants’ 51 times” and “is signed by

counsel for Appellants” and “discusses each derivative claim and the leading cases,” citing three

different pages of the opening brief. The use of the word “Appellants” is consistent with his use

of the word “Appellants” on the cover page and the “Identity of Parties” section—both of which

mention his status as executor of Anthony’s Estate and neither of which mention the derivative

status or claims. The first cited page is Executor’s response to Watkins’s argument “that the

Dead Man’s Rule does not apply because Bertucci asserted derivative claims for the B-W

                                                   8
Companies.”     Executor argued that the rule should apply because Anthony had asserted

individual claims and “had standing to assert his derivative claims”; this passage does not,

however, show that Executor is raising appellate issues regarding the derivative claims. On the

second cited page, Executor cites cases that discuss derivative claims, but he cites them only for

the proposition that Watkins was a fiduciary through his status within various B-W Companies.

Executor argues that Watkins owed him a fiduciary duty by virtue of his status within the B-W

Companies—an argument that is consistent with Watkins having a fiduciary duty to Anthony as

seen below. On the third cited page, Executor asserts that, because the law generally affords a

remedy for a corporate officer’s breach of fiduciary duty to a company, an exculpatory clause is

against public policy; that argument is not so plainly a derivative claim that it implies that

Christopher is making it as a derivative claim.      The absence of arguments specific to the

derivative claims constitutes waiver of the appeal of those derivative claims. See Tex. R. 38.1(i);

RSL Funding, 569 S.W.3d at 126.

               Executor also argues that Watkins “could have corrected the inadvertent

omission,” but it is neither appellee’s responsibility nor his role to decide which appellate

challenges an appellant is pursuing against a trial court’s judgment or in what capacity and

whether any apparent omission is intentional or inadvertent. Although Executor argues in his

reply brief that Watkins owed fiduciary duties to the companies in addition to duties Watkins

owed duties to Anthony, new issues are waived if raised only in the reply brief. See McKinnon

v. Wallin, No. 03-17-00592-CV, 2018 WL 3849399, at *5 n.11 (Tex. App.—Austin Aug. 14,

2018, pet. denied) (mem. op.).

               A person appealing in his individual capacity is distinct from the same person

appealing in his representative capacity. See Elizondo v. Texas Nat. Res. Conservation Comm’n,

                                                9
974 S.W.2d 928, 931 (Tex. App.—Austin 1998, no pet.). This Court has held that an appellant

waived a challenge to a judgment favoring an adverse party when the appellant failed to name

the party as an appellee on the cover of its appellant’s brief, name the party as an appellee in its

list of parties and counsel in its appellant’s brief, list the party as an appellee in its docketing

statement, or serve the party with copies of any of its filings in this Court. Pante Tech. Corp.

v. Austin Concrete Sols., Inc., No. 03-10-00059-CV, 2010 WL 3927598, at *8 (Tex. App.—

Austin Oct. 7, 2010, no pet.) (mem. op.). While in this case, Executor was appellant in a

different capacity, the principle still applies. Parties not named in a brief have not filed a brief,

and arguments and claims not presented on their behalf are not before the appellate court.

Accordingly, we do not reach issues concerning the judgment on the claims brought by Executor

as derivative claims on behalf of the B-W Companies. 4

II.    Judgment on the Executor’s claims on behalf of the Estate

               A person appointed as executor of a person’s estate steps into the place of the

deceased regarding the deceased’s claims. Smith v. O’Donnell, 288 S.W.3d 417, 421 (Tex.

2009). Executor contends that the trial court erred by granting summary judgment favoring

Watkins on Executor’s claims for breach of contract, civil theft, and breach of fiduciary duty,

including the duty to account.

       A.      Executor’s partial summary-judgment motions

               This Court cannot address the full extent of the trial court’s denial of Executor’s

motions for partial summary judgment in this appeal. Generally, when opposing parties file

       4   We need not and do not address any issues related to a claim that Executor was not
entitled to maintain claims in a derivative capacity at the trial court.
                                                 10
cross-motions for summary judgment and the trial court grants one motion and denies the other,

the appellate court can determine all questions presented in the motions and render the judgment

the trial court should have rendered. Lancer Ins. v. Garcia Holiday Tours, 345 S.W.3d 50, 59

(Tex. 2011). But before we can reverse summary judgment for one party and render judgment

for the other, both parties must have sought final-judgment relief by their motion for summary

judgment. CU Lloyd’s of Tex. v. Feldman, 977 S.W.2d 568, 569 (Tex. 1998). Executor did not

seek final judgment by his motion for summary judgment. We can nevertheless consider issues

in cross-motions for partial summary judgment that overlap with issues raised in the opposing

party’s motion for final summary judgment. See Federal Deposit Ins. Corp. v. Lenk, 361 S.W.3d

602, 611-12 (Tex. 2012).

               Executor’s cross-motions for partial summary judgment expressly limited their

scope. In his first motion, Executor requested judgment that:

       (i)     as the manager of the business operations and accounting manager for the B-W
               Companies, Watkins was a fiduciary during the Relevant Period;

       (ii)    Watkins has a duty to account for the B-W Funds that came into in his possession;

       (iii)   Watkins commingled the B-W Funds with other funds in his TCB account; and

       (iv)    the commingling shifts to Watkins the burden to prove that his use of the B-W
               Funds was legitimate and complied in all respects with his fiduciary duty.

Executor expressly “reserved for ultimate determination by the Court (or the jury) whether

Watkins has succeeded in proving compliance with his obligations.” In his second motion for

partial summary judgment, Executor requested judgment that Watkins had inappropriately used

Anthony’s funds (including Anthony’s share of Project funds) and had not provided an adequate

                                               11
accounting. He requested that the trial court reserve judgment as to the appropriate remedy to be

granted Executor “on behalf of [Anthony’s] estate.”

               We will consider these issues from Executor’s motions only to the extent that they

overlap with our review of the trial court’s orders on Watkins’s no-evidence and traditional

motions for summary judgment. See Lenk, 361 S.W.3d at 611-12; Feldman, 977 S.W.2d at 569.

       B.      Watkins’s no-evidence summary-judgment motion

               Watkins moved for summary judgment on Executor’s claims, contending that he

had no evidence of breach of contract, theft liability, or breach of a fiduciary duty including the

breach of duty to account.

               When a trial court grants summary judgment but does not specify the grounds, we

must affirm summary judgment if any of the grounds asserted are meritorious. Lightning Oil Co.

v. Anadarko E&P Onshore, LLC, 520 S.W.3d 39, 45 (Tex. 2017). A movant seeking no-

evidence summary judgment must assert that there is no evidence to support an essential element

of the non-movant’s claim or defense on which the non-movant would have the burden of proof

at trial. See Tex. R. Civ. P. 166a(i); Boerjan v. Rodriguez, 436 S.W.3d 307, 310 (Tex. 2014).

Once the motion is filed, the burden shifts to the non-movant to present evidence raising a

genuine issue of material fact as to each challenged element. Mack Trucks, Inc. v. Tamez,

206 S.W.3d 572, 582 (Tex. 2006). If a party moves for summary judgment on both traditional

and no-evidence grounds, we generally consider the no-evidence motion first. Lightning Oil,

520 S.W.3d at 45. If the non-movant carries its appellate burden, we then consider whether the

movant for traditional summary judgment satisfied its burden of proving that there is no genuine

                                                12
issue of material fact as to at least one essential element of the cause of action being asserted and

that it is entitled to judgment as a matter of law. Id.

                A motion for summary judgment must stand or fall on the grounds expressly

presented in the motion, and a trial court considering such a motion is restricted to the issues

presented in the motion, response, and replies.           See Tex. R. Civ. P. 166a(c); McConnell

v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 342 (Tex. 1993).

                1.     Breach of contract

                The elements of breach of contract are: “(1) a valid contract exists; (2) the

plaintiff performed or tendered performance as contractually required; (3) the defendant

breached the contract by failing to perform or tender performance as contractually required; and

(4) the plaintiff sustained damages due to the breach.” Pathfinder Oil & Gas, Inc. v. Great W.

Drilling, Ltd., 574 S.W.3d 882, 890 (Tex. 2019). A binding contract requires: (1) an offer; (2) an

acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each

party’s consent to the terms; (5) consideration; and, if the contract is in writing; and (6)

execution and delivery of the contract with the intent that it be mutual and binding. St. David’s

Healthcare P’ship v. Fuller, 627 S.W.3d 707, 710 (Tex. App.—Austin 2021, pet. filed); Cessna

Aircraft Co. v. Aircraft Network, L.L.C., 213 S.W.3d 455, 465 (Tex. App.—Dallas 2006,

pet. denied).

                In his motion for summary judgment, Watkins asserted that Executor had no

evidence of any offer, acceptance, mutual assent, execution and delivery, or consideration to

establish a valid and enforceable contract. He urged that there was no evidence that Anthony

performed or tendered performance and no evidence that Watkins breached a contract or caused

                                                  13
injury by breaching one. Specifically, Watkins asserted that there was no evidence of a contract

that required him to account to Anthony for B-W Companies’ funds entrusted to his control. We

agree that the record contains no evidence of such a contract between Watkins and Anthony.

               On appeal, Executor focuses on Watkins’s alleged obligation to account based on

a B-W Company’s governing documents and Watkins’s role as “comptroller or treasurer of the

various entities”:

       Bertucci’s breach of contract claim rests on Watkins’ duty to account for the
       proper use of funds, an obligation embedded in the B-W Company documents.
       Serving as comptroller or treasurer of the various entities, Watkins was bound to
       account under (i) Sections 4.11(D), (E), and (F) of TVT’s bylaws; (ii) Sections
       11.1 and 11.3 of AAH’s limited partnership agreement; (iii) Section 12.1 of Town
       Vista, LP’s limited partnership agreement; (iv) Section 5.09 of MCS’s
       regulations; and (v) TVD’s development agreement.

(Record references omitted.) These documents require, variously, that books of account be kept

by the treasurer, the general partner, or the developer.     Watkins noted on appeal that the

“Executor cites provisions in the governing documents that address the duties of an office,

treasurer, that Watkins did not hold.” Executor alleged at trial that Watkins “acted as financial

controller and treasurer” of TVT, for example, but does not cite evidence in the record that

Watkins was comptroller or treasurer or general partner of the B-W Companies. Executor does

not identify evidence that Watkins, individually, held these roles or had concomitant obligations

to account to the B-W Companies such that Watkins might have breached a contract with

Anthony rather than the B-W Companies.

               In his reply brief, Executor raises a new issue that Watkins owed a contractual

duty to account to Anthony in his individual capacity because “in effectuating the entity

agreement [Anthony] and Watkins signed, Watkins voluntarily undertook to maintain accurate

                                               14
books and records; his failure to do so is a breach of their implied, if not explicit agreement.”

But Executor does not explain how voluntarily undertaking a responsibility creates an

implied contract. 5

               Because no evidence in the record supports a finding of a contract between

Watkins and Anthony, we overrule Executor’s issues concerning the take-nothing judgment on

Executor’s breach-of-contract claim. We affirm the summary judgment that Executor take

nothing by his breach-of-contract claim.

               2.      Civil theft

               To prevail on a claim under the Texas Theft Liability Act (TTLA), Executor must

establish that Anthony had a possessory right to property, that Watkins unlawfully appropriated

the property in violation of the Penal Code, and that Anthony sustained damages as a result of

the theft.   See Tex. Civ. Prac. & Rem. Code §§ 134.002, .003, .005; Morrison v. Gage,

No. 02-15-00026-CV, 2015 WL 4043260, at *4, n.7 (Tex. App.—Fort Worth July 2 2015, no

pet.) (mem. op.). A person commits an offense of theft if he unlawfully appropriates property

with intent to deprive the owner of property; appropriation of property is unlawful if it is without

the owner’s effective consent. Tex. Penal Code § 31.03.

               Watkins filed both no-evidence and traditional motions for summary judgment on

the theft claim. He contended that there was no evidence that Anthony had a possessory right to

the money in the TCB account and that his allegation that the funds in part belonged to the B-W

       5  Moreover, the only mention of an implied agreement in Executor’s opening brief is an
assertion that an agreement for compensation of a managing partner may not be inferred contrary
to his express declaration. See Conrad v. Judson, 465 S.W.2d 819, 824 (Tex. App.—Dallas
1971, writ ref’d n.r.e.). Appellants may use reply briefs to respond to existing issues, not to raise
new issues. See, e.g., In re K.R.S., No. 14-07-00080-CV, 2008 WL 2520812, at *2 (Tex. App.—
Houston [14th Dist.] June 24, 2008, no pet.) (mem. op.).
                                                 15
Companies conclusively established that Anthony did not have the required present possessory

interest. Watkins also contended that Executor had no evidence that Watkins intended to deprive

Anthony of his property or that Anthony did not effectively consent to any of the expenditures

Executor characterized as misappropriation. Finally, Watkins contended that Executor had no

evidence that the challenged expenditures harmed Anthony.            We will address Watkins’s

limitations-based traditional motion later in the opinion.

               Anthony undisputedly provided over $1.8 million in investments and loans for the

projects that went into the TCB account. Watkins testified that “there were dollars in my TCB

account that were attributable to Mr. Bertucci’s contributions and then there were other dollars in

the account not attributable to Mr. Bertucci’s contributions” and admitted that he incurred

expenditures in 2005 and 2006 “out of one or more of the TCB Bank Accounts for [his] personal

and/or family purposes (as distinguished from purposes related to the Bertucci-Watkins

Companies).”

               Executor claims that Watkins misappropriated $475,000 6 that had been placed in

the TCB account and that Watkins first claimed in 2018 litigation spreadsheets that these

amounts were for compensation, including $201,500 in administrative fees; a $50,000 goodwill

bonus; and $224,000 in office, board, and mileage (OBM) allowances.

               A person’s intent to deprive and lack of consent are often inferred from the

circumstances, including from the person’s words and conduct. See McCullough v. Scarbrough,

Medlin & Assocs., Inc., 435 S.W.3d 871, 907 (Tex. App.—Dallas 2014, pet. denied). Here,

       6   Executor’s counsel stated at a hearing that the damages would be slightly less than this
amount due to various allowances; the precise amount of the non-zero damages in evidence does
not affect our analysis and is not necessary to assess whether a genuine issue of material fact on
the theft claims exists.

                                                 16
when viewing the evidence in the light most favorable to the non-movant, see Lightning Oil,

520 S.W.3d at 45, we conclude that the circumstances, including Watkins’s words and conduct,

constitute more than a scintilla of evidence from which a fact issue as to Watkins’s intent to

deprive and Anthony’s lack of consent could reasonably be inferred.

               In July 2014, Watkins stated in an email to Executor, “I maintain financial

spreadsheets of expenses. I have everything that went through the TCB books. . . . I have

maintained accounting records for all our projects. . . . [Watkins’s wife] and my retirement were

to be funded by my investment of (12 years) of non-salaried professional services and

management of the partnership projects.” In a February 2015 email, Watkins stated that for

thirteen of the fifteen years of his “partnership” with Anthony, Watkins “maintained daily and

ongoing management, and operational oversight of our projects without pay,” and that the other

two years he was compensated at $6,500 a month equally with Anthony and Anthony’s wife,

Mildred; a spreadsheet of checks shows that Anthony and Mildred received six months of $6,500

payments between September 2005 and January 2006. Watkins stated, “[Since] construction was

completed neither Tony nor I have received administrative salaries or management payments.”

In another February 2015 email, he said, “I do not have the luxury of a monthly pay check or

being on salary.”

               In 2017, Watkins produced spreadsheets for the years 2005 and 2006 that focused

on the TCB account. In January 2018, Watkins produced a series of spreadsheets (the 2018

Spreadsheets) for the same years that showed the $475,000 amount with the $201,500 in

administrative fees, a $50,000 goodwill bonus, and $224,000 in OBM allowances. Then in 2019,

Watkins presented new spreadsheets for years 2002 to 2008 reflecting no OBM. Executor noted

                                               17
inconsistencies between spreadsheets produced in 2017 and those produced in 2018, which were

both included in the summary-judgment record. 7

               Watkins admitted that there was no written document in which Anthony agreed

Watkins could take the $475,000. At deposition, Watkins stated, “I have nothing in writing [to

show his entitlement to the fees] other than what’s been the history of how we operated the

company.” However, Watkins asserted that Anthony knew of these transactions and approved

them. Watkins testified at his deposition, “Essentially, on a weekly, monthly basis, I would

review those. And most of the time for TCB—or for TCB activities that involved Bertucci

funds, I’d review those along with Anthony Bertucci.” 8 And in an affidavit, Watkins averred:

       7  Although Executor challenges the admission of the court-appointed auditor’s report, we
note that the auditor reported that the parties agreed that audit report was not conclusive as to the
OBM fees. The audit report states, “In this analysis, we have relied substantially on [Watkins’s]
explanation of the checks and deposits in the TCB accounts. Either party may dispute some of
those allocations or determinations and such, if determined to be different from the information
we have relied upon, might change the analysis we have completed.” In his response to
Executor’s motion to exclude the report, Watkins stated that “the Report expressly recognizes
that the determination of whether [Watkins’s] allocations and information is correct depends
upon the trier of fact.” And at the hearing on the motion to deny the auditor’s request to file a
new report and to discharge the auditor as an expert, Executor’s counsel stated that the auditor
“has said this, is that the Court has to decide whether these—these OBM fees are valid charges,”
and Watkins’s counsel responded, “I do not disagree. When the report says these are disputes,
those are disputes. I’m not trying to take that away at all.” Indeed, Watkins argues before this
Court that the “Executor’s assertion that resolution of this case depends on the existence of an
adequate accounting is wrong” and “[h]is first issue, complaining of the Auditor’s Report, is
irrelevant and unnecessary to this appeal because that Report played no role in the Probate
Court’s grant of [Watkins]’s two [motions].”
        Based on these considerations and the other law and evidence presented, we conclude
that resolution of Executor’s issues regarding the auditor’s report would not alter our review and
is unnecessary to the disposition of this appeal. See Tex. R. App. P. 47.1.
        8 Watkins also points to his responses to requests for disclosures where he states, “The

TCB account contained funds from various sources that were mixed, but that was done at the
request, indeed insistence, of Bertucci, who was fully informed of and approved in regular
meetings each transaction involving Bertucci funds in the TCB account, and the Watkins
Bertucci projects.” But answers to interrogatories and discovery responses may only be used
against the party who answered them and a party’s reliance upon answers it provided to
                                                 18
       In fact, Bertucci was so involved in the day-to-day operations of the businesses
       that from 2002 to 2014, we often times met every single day of the week, either at
       my house, which served as the headquarters and office of our various businesses,
       or at other places. It was at these times that Bertucci considered transactions,
       went over expenses and revenue with me, discussed payments to vendors with
       me, reviewed spreadsheets and bank statements with me, and decided every
       significant aspect of the company and partnership businesses, typically with my
       agreement. In short, Bertucci was informed of and approved of the transactions at
       or before the time they occurred, including deposits into the TCB account,
       payments of expenses from that account, and disbursements to Bertucci
       and myself.

Executor objected under the Dead Man’s Rule to this statement and other statements by Watkins

regarding Anthony’s oral statements, including that he “approved of the transactions.”

               The Dead Man’s Rule applies “in a civil case . . . by or against a party in the

party’s capacity as an executor” and provides that “a party may not testify against another party

about an oral statement by the testator” unless “the party’s testimony about the statement is

corroborated.” Tex. R. Evid. 601(b)(1)(A), (2), (3)(A). Because this is a civil case by “a party in

the party’s capacity as an executor,” the Dead Man’s Rule applies. When reviewing evidentiary

rulings in summary-judgment proceedings, we review for an abuse of discretion.              Galvan

v. Camden Prop. Tr., No. 03-19-00774-CV, 2020 WL 3887975, at *2 (Tex. App.—Austin

July 10, 2020, no pet.) (mem. op.) (collecting authorities); see also Caffe Ribs, Inc. v. State,

487 S.W.3d 137, 142 (Tex. 2016). A trial court abuses its discretion if it acts without regard for

any guiding rules or principles. Caffe Ribs, 487 S.W.3d at 142.

discovery does not provide competent summary judgment evidence. Gomez v. American Honda
Motor Co., No. 04-16-00342-CV, 2017 WL 3159703, at *4 (Tex. App.—San Antonio July 26,
2017, pet. denied) (mem. op.); Schulz v. State Farm Mut. Auto. Ins., 930 S.W.2d 872, 876 (Tex.
App.—Houston [1st Dist.] 1996, no writ).
                                                19
               We conclude that the Dead Man’s Rule excludes Watkins’s testimony of

Anthony’s oral statements indicating that he “approved of the transactions,” unless corroborated.

See Tex. R. Evid. 601(b)(3); cf. Lewis v. Foster, 621 S.W.2d 400, 402 (Tex. 1981) (“[T]he

purpose of the Dead Man’s Statute is threefold: (1) to put the parties on an equal footing at trial,

(2) to prevent one, to the detriment of the other, from taking advantage of the fact that the lips of

the deceased have been sealed, and (3) to render incompetent testimony as to conversations and

transactions with a deceased in a suit in which the deceased might deny the conversations and

transactions if he were alive.”). For corroboration, Watkins points to the declaration of his wife,

who confirmed that she witnessed meetings between Anthony and Watkins during which they

discussed expenses paid by funds in the TCB account. But this does not corroborate testimony

that Anthony approved of the expenses at issue. See Coleman v. Coleman, 170 S.W.3d 231, 238

(Tex. App.—Dallas 2005, pet. denied) (testimony that brothers were agreeable to arrangement

does not corroborate terms of agreement). Accordingly, we sustain Executor’s issue regarding

the trial court’s overruling of his objection and conclude that the probate court abused its

discretion in permitting Watkins’s testimony regarding Anthony’s uncorroborated oral

statements, including that he “approved of the transactions.”

               After excluding Watkins’s testimony regarding Anthony’s oral statements and

when viewing the evidence in the light most favorable to the non-movant, we conclude that the

record contains more than a scintilla of evidence on each of the elements of the TTLA claim.

Some of the money in the account was Anthony’s deposits and loans, and there is evidence that

none of it was supposed to be paid in compensation to Watkins. A factfinder could reasonably

infer that Watkins directed a payment intending to deprive Anthony of money without Anthony’s

consent. See McCullough, 435 S.W.3d at 906-07 (depositing money belonging to company into

                                                 20
personal accounts and not accounting for money or remitting it to company, plus refusing

requests to provide information to company, is some evidence of intent to deprive company of

money); cf. Tex. R. Civ. P. 166a(c); Casso v. Brand, 776 S.W.2d 551, 558 (Tex. 1989) (“If the

credibility of the affiant or deponent is likely to be a dispositive factor in the resolution of the

case, then summary judgment is inappropriate.”). 9

               We reverse the probate court’s summary judgment on the TTLA claim.

               3.      Breach of fiduciary duty

               Executor alleged that Watkins breached his fiduciary duties to Anthony by

commingling B-W Companies’ funds with his personal funds and engaging in a long course of

self-dealing whereby he took monies belonging to Anthony. The elements of a claim for breach

of fiduciary duty are: (1) the existence of a fiduciary duty, (2) breach of the duty, (3) causation,

and (4) damages. First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214, 220

(Tex. 2017). Though the existence of a duty is a question of law for the court, the underlying

elements of a fiduciary duty are questions for the factfinder. Dernick Res., Inc. v. Wilstein,

312 S.W.3d 864, 877 (Tex. App.—Houston [1st Dist.] 2009, no pet.). A party asserting breach

of fiduciary duty must establish the existence of a confidential or similar relationship giving rise

to a fiduciary duty. Doonan v. Wood, 224 S.W.3d 271, 275 (Tex. App.—El Paso 2005, no pet.).

       9  Although the purposes underlying the standard for the testimony of interested witnesses
in summary-judgment proceedings and the Dead Man’s Rule are similar, Executor relied only
upon the Dead Man’s Rule in the proceedings below and did not object to Watkins’s statements
as failing to satisfy the standard of testimony that is “clear, positive and direct, otherwise
credible and free from contradictions and inconsistencies, and could have been readily
controverted.” Tex. R. Civ. P. 166a(c). Objections that evidence “is not clear, positive, direct,
or free from contradiction” is a formal defect that is waived if not raised in the trial court.
UT Health Sci. Ctr.-Houston v. Carver, No. 01-16-01010-CV, 2018 WL 1473897, at *5 (Tex.
App. —Houston [1st Dist.] Mar. 27, 2018, no pet.) (mem. op.).
                                                21
               Watkins contends that no evidence establishes the existence of a fiduciary duty

owed by Watkins to Anthony, individually. He contends that neither Watkins’s nor Anthony’s

status as a shareholder, officer, director, limited partner, member, or manager of any of the B-W

Companies creates a fiduciary relationship between Watkins and Anthony. He further contends

that Executor produced no evidence that Watkins breached the duty or that any damages were

caused by any breach. He also argues that there is no evidence that Anthony did not approve and

agree to the expenditures. He further asserts that, as an officer or other participant in the B-W

Companies, Anthony had responsibilities to maintain books and records, to account, and to act in

the best interest of the B-W Companies, and that Executor produced no evidence that Anthony

did not do so, thereby participating in or knowing of the disputed transactions.

               Executor moved for partial summary judgment that, as the person controlling the

TCB account containing funds entrusted to him, Watkins owed a fiduciary duty and that a

fiduciary has an ongoing duty to account fully for assets within his trust, citing Sierad v. Barnett,

164 S.W.3d 471, 477 (Tex. App.—Dallas 2005, no pet.). On appeal, Executor characterizes the

duty to account as part of Watkins’s fiduciary duty.

               While status as a limited partner alone does not give rise to a fiduciary duty to

other limited partners, a party who is a limited partner can owe fiduciary duties to other limited

partners when that party, wearing a different hat, exerts operating control over the affairs of the

limited partnership. Strebel v. Wimberly, 371 S.W.3d 267, 281 (Tex. App.—Houston [1st Dist.]

2012, pet. denied). 10 Anthony and Watkins were limited partners in AAH, a limited partnership.

       10 See Tex. Bus. Orgs. Code § 153.003 (provisions of Chapter 152 governing non-limited
partnerships apply unless inconsistent with the nature and role of a limited partner); see also id.
§§ 152.204(a)(1) (“A partner owes to . . . the other partners . . . a duty of loyalty[.]”), .205(1)(B)
(“a partner’s duty of loyalty includes accounting to and holding for the partnership property,
                                                 22
Executor relies in part on Watkins’s statement in an email that he is “the managing, operational

and accounting partner” to argue that Watkins thereby assumed fiduciary duties to Anthony.

Watkins disputes the amount of control he had over the Companies, arguing that he “was a

minority stakeholder in the [B-W] Companies, holding subordinate positions at [Anthony’s]

pleasure” and “[t]he only ‘control persons’ were [Anthony] and, after his disability and

death, Executor.”

                We conclude that fact issues bar summary judgment on the existence of a

fiduciary duty. For the same reasons that we concluded there is more than a scintilla of evidence

supporting the TTLA theft claim, we conclude that there exists more than a scintilla of evidence

of a breach of fiduciary duty that caused damages: namely, that there is more than a scintilla of

evidence that Watkins received $475,000 for administrative fees, a goodwill bonus, and OBM

allowances from an account that included Anthony’s funds that were not designated to provide

income to Watkins and that were not approved or properly accounted for by Watkins. See

Sierad, 164 S.W.3d at 477.

                Watkins contends that the Executor fails to distinguish between TCB and

Watkins. Watkins claims that funds in the partnership account, even if they are undistributed

partnership profits, are not the property of, subject to the control of, or income to the partners.

He posits that TCB’s account was not his individual account and thus, when he wrote a check on

that account, he did so as an agent of the partnership, and not as an individual. He argues that

profit, or benefit derived by the partner . . . from use by the partner of partnership property”),
.210 (“A partner is liable to . . . the other partners for . . . a violation of a duty to the partnership
or other partners under this chapter that causes harm to the partnership or the other partners”), ,
.211(b)(2) (“A partner may maintain an action against the partnership or another partner for legal
or equitable relief, including an accounting of partnership business, to: . . . enforce a right under
this chapter.”).
                                                   23
evidence of funds entrusted to or disbursed by TCB is no evidence of a claim against him

individually because deposits into the TCB account did not entrust funds to him individually. He

concludes that TCB, not Watkins, had possession of the funds in its account and that TCB made

the criticized distributions.

               However, in his sworn declaration attached to his response to Executor’s motion

for partial summary judgment, Watkins declared that “[Anthony] was aware that TCB, an

original limited partner in TVLP, had a bank account at Bank of Texas under my control,” that

“[Anthony] was aware that I also used the TCB account for TCB and my business, and that

TVLP funds would be mixed with funds that solely belonged to TCB and myself”; and that

“[Anthony] knew that the TCB account contained TCB money [as] well as my funds.”

(Emphases added.) We conclude that at least a fact issue exists as to whether funds placed in the

TCB account were entrusted to Watkins individually. 11

                We conclude that neither party is entitled to summary judgment on the issue of

whether a fiduciary relationship existed or whether evidence supports a claim for its breach. The

trial court did not err by denying Executor’s motion for partial summary judgment on the

fiduciary-duty issue but erred by granting Watkins’s motion for summary judgment against

Executor’s claim for breach of fiduciary duty.

        11 Watkins also argues that, because Watkins’s commingling of his funds with the funds
from Anthony in the TCB account was with Anthony’s permission, the Executor had the burden
of tracing such funds for each of the Companies that he alleges were misappropriated, citing
Logan v. Logan, 156 S.W.2d 507, 510-11 (Tex. 1941) and In re Estate of Brimberry,
No. 12-04-00154-CV, 2006 WL 861483, at *5 (Tex. App.—Tyler Mar. 31, 2006, pet. denied)
(mem. op.). That, however, was an argument made in the event the derivative claims were
presented to and considered by this Court. Because we have found that only Executor’s non-
derivative claims were presented, the tracing argument is inapposite.
                                                 24
       C.      Watkins’s traditional summary-judgment motion

               Watkins moved for traditional summary judgment, arguing that Executor’s claims

were barred or defeated by his defenses. He contended that the claims were barred by statutes of

limitations that were not tolled. He also contended that the claims were waived, that the

complained-of actions were ratified, or that the claims were barred by exculpation clauses in

certain B-W Companies’ documents.

               A traditional summary judgment is proper if the movant submits sufficient

evidence to establish that there is no genuine issue of material fact and that the movant is entitled

to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Amedisys, Inc. v. Kingwood Home

Health Care, LLC, 437 S.W.3d 507, 511 (Tex. 2014). If the movant meets this burden, the

burden shifts to the non-movant to raise a fact issue. Amedisys, 437 S.W.3d at 511. We review

summary judgments de novo, taking as true evidence favorable to the non-movant and indulging

reasonable inferences and resolving doubts in the non-movant’s favor. Valence Operating Co.

v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). A defendant moving for summary judgment on an

affirmative defense has the burden to conclusively establish that defense. Draughon v. Johnson,

631 S.W.3d 81, 88 (Tex. 2021).

               1.      Limitations and tolling

               In his traditional motion for summary judgment, Watkins asserted that, because

Anthony filed this suit after the applicable statutes of limitations ran, Executor’s suit is time-

barred. He contended that the theft claim was barred by limitations except for a claim regarding

a $2,168.83 transaction in August 2014. Watkins asserted that the statute of limitations was not

tolled by the discovery rule because the check transactions were not inherently undiscoverable.

                                                 25
He argued that, as an officer and member of the B-W Companies, Anthony had the power and

responsibility to monitor the accounts from which the funds were allegedly stolen. Watkins

contended that Anthony monitored the accounts by meeting with Watkins and approving

payments as they were made. Watkins also argued that the transactions made more than two

years before the litigation was filed on December 15, 2015, were discoverable because the

records were kept in a shared storage unit. Executor responded that limitations was tolled by the

discovery rule and fraudulent concealment, among other theories.

               A defendant has the burden to plead, prove, and secure findings to sustain the

limitations affirmative defense. See Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 517

(Tex. 1988); see also Tex. R. Civ. P. 94 (statute of limitations is affirmative defense). In

response, a plaintiff may raise the discovery rule and, if it applies to the claim asserted, may seek

to have his failure to file suit within the normal limitations period excused. Woods, 769 S.W.2d

at 517. In cases in which the plaintiff pleads the discovery rule, the defendant moving for

summary judgment on limitations bears the additional burden of negating the rule by either

conclusively establishing that (1) the discovery rule does not apply, or (2) if the rule applies, the

summary-judgment evidence negates it. Schlumberger Tech. Corp. v. Pasko, 544 S.W.3d 830,

834 (Tex. 2018) (per curiam).

               The statute of limitations for claims of breach of fiduciary duties is four years.

Tex. Civ. Prac. & Rem. Code § 16.004(a)(5). Claims of civil theft of personal property are

limited after two years. Id. § 16.003(a); Gonyea v. Scott, 541 S.W.3d 238, 248 (Tex. App.—

Houston [1st Dist.] 2017, pet. denied).

               Absent tolling, Executor’s claims are barred by limitations. Executor’s claims

against Watkins were filed in February 2016. In his traditional motion, Watkins asserted that the

                                                 26
Executor’s sworn answers to interrogatories show that the alleged comingling that forms the

basis of his breach-of-fiduciary-duties claim began in 2002 and ended on May 25, 2011—the

date of the last alleged deposit of Anthony’s funds into TCB’s account. 12 Watkins further

asserted that Executor identified only one “potential” misappropriation of Anthony’s funds that

occurred after the year 2008 and that Executor appears to have dropped his claim for that amount

on appeal to focus on the $475,000 OBM payments from 2005 and 2006.

                 Executor disagrees, contending that the discovery rule bars the running of

limitations. He contends that Anthony did not prove the absence of a genuine issue of fact about

when Anthony or Executor discovered or should have discovered the nature of the injury. The

discovery rule has been applied in limited categories of cases to defer accrual of a cause of action

until the plaintiff knew or, exercising reasonable diligence, should have known of the facts

giving rise to a cause of action. HECI Expl. Co. v. Neel, 982 S.W.2d 881, 886 (Tex. 1998). For

the discovery rule to apply, “the nature of the injury must be inherently undiscoverable” and “the

injury itself must be objectively verifiable.” Id.

                 Watkins presented evidence intended to prove that Anthony was aware of the

deposited funds, distributions, and expenditures from the TCB account. In a deposition, Watkins

responded to a question about how he kept track of the transactions in the bank accounts

by testifying:

       Essentially, on a weekly, monthly basis, I would review those. And most of the
       time for TCB—or for TCB activities that involved Bertucci funds, I’d review
       those along with Anthony Bertucci. . . . If you’re asking me on a monthly,

       12 We note that Watkins’s contention that “comingling ended” on May 25, 2011 relies on
evidence in spreadsheets that payments by Anthony and Mildred Bertucci to Watkins or the TCB
account ended then, but those spreadsheets do not show when or if the deposited funds were no
longer present in the account along with other funds.
                                                 27
       weekly basis did we know the balance and know what checks had been written,
       the answer is yes.

(Emphasis added.) In a declaration, Watkins averred:

       [Anthony] Bertucci reviewed the pertinent receipts and expenses with me
       regularly, and was fully informed of receipts and disbursements for TVLP from
       the TCB account. When Bertucci and Watkins created [AAHP] the general
       partner of [AAH], Bertucci instructed me to continue to utilize the TCB account
       for those receipts and disbursements as well. And Bertucci continued to regularly
       review expenditures and receipts for the entities with me.

When asked how he kept the books, Watkins responded:

       Basically I would identify the expenses that we incurred. Tony and I—excuse
       me—Mr. Bertucci and I would sit down and on a monthly basis just go over what
       it is that we needed to pay, who we could afford to pay and when and then
       basically just make those payments.

Watkins also averred in a declaration:

       In fact, [Anthony] Bertucci was so involved in the day-to-day operations of the
       businesses that from 2002 to 2014, we often times met every single day of the
       week, either at my house, which served as the headquarters and office of our
       various businesses, or at other places. It was at these times that Bertucci
       considered transactions, went over expenses and revenue with me, discussed
       payments to vendors with me, reviewed spreadsheets and bank statements with
       me, and decided every significant aspect of the company and partnership
       businesses, typically with my agreement. In short, Bertucci was informed of and
       approved of the transactions at or before the time they occurred, including
       deposits into the TCB account, payments of expenses from that account, and
       disbursements to Bertucci and myself. 13

       13   Watkins continued in the declaration:

       The basis of [the Executor’s] claim asserted in this lawsuit, that I did not account to
       Bertucci for the use of partnership or company funds, is simply false. I fully accounted to
       Bertucci years ago, when the transactions occurred, and Bertucci was completely
       satisfied with the accounting. Never once did Bertucci ask for an additional audit of the
                                                28
(Emphasis added.)

               Executor argued, however, that “Watkins presented no competent evidence that

Bertucci was aware of Watkins’ diversions prior to 2014.” 14 We have held above that the trial

court erred by overruling Executor’s Dead Man’s Rule objection to Watkins’s evidence to the

extent that the court permitted testimony that Anthony approved of these transactions, as

approval would generally be considered an “oral statement by the testator.” Watkins’s various

statements cited above are inconsistent regarding how often he and Anthony met to review

transactions, undermining their definitiveness. Most critically, however, Watkins testified in his

deposition that he met with Anthony “most of the time.” That qualification creates at least a fact

       books and records of any of the entities and any time he had questions regarding
       particular expenses, I fully explained them to him. What [the Executor] is actually
       complaining of is that a decade or more subsequent to Bertucci and I fully accounting for
       and going over every expenditure, he is not satisfied that I have ‘reaccounted’ to him, but
       wants a retroactive audit of our businesses.
       14  The Executor also argues that Watkins admitted that he was “the only individual with
personal knowledge of the funds deposited into that account or the checks written from that
account.” But the full quote of this “admission” in Watkins’s response to the Executor’s motion
to exclude the auditor’s report is:

       In section D of his Motion, [the Executor] complains that [the auditor] has
       somehow demonstrated that he is partisan and biased because of the number of
       email communications he had with counsel for Watkins versus counsel for [the
       Executor] during the period of September to October 2018. It is an odd assertion,
       given the fact that it was during this period that [the auditor] was attempting to
       complete his reconciliation of the TCB account, and therefore had to
       communicate with the only individual with personal knowledge of the funds
       deposited into that account or the checks written from that account.

       Thus, Watkins’s admission concerned the period of “September to October 2018” after
Anthony’s passing and has no bearing on whether Anthony had knowledge of the funds
deposited into TCB and the checks written from that account.

                                               29
question regarding whether Anthony reviewed or approved all of the transactions involving his

funds flowing through the TCB account.

                   Watkins argues that the evidence nevertheless showed that Anthony was informed

of the transactions sufficiently to prompt a duty of inquiry that starts the running of the

limitations period. See HECI, 982 S.W.2d at 886 (discovery rule delays accrual of claim until

“the plaintiff knew or, exercising reasonable diligence, should have known of the facts giving

rise” to claim).

                   However, our holding that fact issues persist on whether Watkins owed a

fiduciary duty to Anthony and Executor also prevents summary judgment that Anthony should

have known of facts giving rise to his claim. The Texas Supreme Court has held that a

fiduciary’s misconduct is inherently undiscoverable. Willis v. Maverick, 760 S.W.2d 642, 645

(Tex. 1988) (breach of attorney’s duty to disclose material facts to client is tantamount to

concealment); Slay v. Burnett Tr., 187 S.W.2d 377, 394 (Tex. 1945) (trustee’s actions did not

prompt duty to investigate). The Texas Supreme Court explained that the reason underlying both

decisions is that a person to whom a fiduciary duty is owed is either unable to inquire into the

fiduciary’s actions or unaware of the need to do so. S.V. v. R.V., 933 S.W.2d 1, 8 (Tex. 1996)

(citing Willis, 760 S.W.2d at 645 (“Facts which might ordinarily require investigation likely may

not excite suspicion where a fiduciary relationship is involved.”), and Slay, 187 S.W.2d at 394

(knowledge of facts did not cause trust beneficiaries or co-trustees to suspect wrongdoing by

other co-trustees)). However, while a person to whom a fiduciary duty is owed is relieved of the

responsibility of diligent inquiry into the fiduciary’s conduct so long as that relationship exists,

when the fact of misconduct becomes apparent, it can no longer be ignored, regardless of the

nature of the relationship. S.V., 933 S.W.2d at 8; see also Sandt v. Energy Maint. Servs. Grp. I,

                                                 30
LLC, 534 S.W.3d 626, 640 (Tex. App.—Houston [1st Dist.] 2017, pet. denied) (“While a

company has no duty to inquire into the conduct of its officers or other fiduciaries, ‘when the fact

of misconduct becomes apparent it can no longer be ignored, regardless of the nature of the

relationship.’ Moreover, even ‘a person owed a fiduciary duty has some responsibility to

ascertain when an injury occurs.’” (citations omitted)).

               The apparent inconsistency in Watkins’s assertions from 2014 through 2019

regarding his entitlement to income flowing from the TCB account provides more than a scintilla

of evidence that no misconduct previously had become apparent to Anthony that prompted a

duty to diligently inquire into Watkins’s actions more than four years before his claims were

filed in February 2016. Watkins said in 2014 and 2015 that he was not paid for his work, but his

2018 spreadsheets indicate he received money for his work. These apparent inconsistencies

provide some evidence creating a fact question regarding Watkins’s assertions that he disclosed

data that informed Anthony about the transactions, prompting at least a duty to inquire further.

               We emphasize that we are not concluding that Executor’s suit was timely filed.

We conclude only that fact issues exist regarding whether Executor’s claims for theft and breach

of fiduciary duty are barred by limitations. We conclude that the trial court erred to the extent it

found otherwise. 15

       15  Because we conclude that there is at least a fact issue regarding whether the discovery
rule tolled limitations long enough to preserve Executor’s claims, we need not consider his
alternate claim that limitations were tolled by fraudulent concealment or that he timely filed his
claims as counterclaims arising out of the same transaction or occurrence as other claims filed in
the underlying cause, see Tex. Civ. Prac. & Rem. Code § 16.069.

                                                31
                 2.     Waiver, ratification, and exculpation

                 In his traditional motion, Watkins urged that Executor’s counterclaims were

barred, as a matter of law, by Anthony’s waiver and ratification of the acts Executor alleges form

the basis of his claims, and as to the TVLP Partnership and MidCrowne Senior Pavilion, LP, by

exculpatory provisions of their governing documents. Watkins alleged that Anthony approved

and accepted the conduct and transactions Executor sued upon, barring Executor’s claims. 16

                 Ratification occurs when a person who knows all the material facts confirms or

adopts a prior act that did not then legally bind him and which he could have repudiated.

Lawrence v. Reyna Realty Grp., 434 S.W.3d 667, 674 (Tex. App.—Houston [1st Dist.] 2014, no

pet.). The elements of ratification are: (1) approval by act, word, or conduct; (2) with full

knowledge of the facts of a prior act; and (3) with the intention of giving validity to the prior act.

Id. Waiver is an intentional relinquishment of a known right or intentional conduct inconsistent

with claiming that right. Jernigan v. Langley, 111 S.W.3d 153, 156-57 (Tex. 2003). The

elements of waiver include (1) an existing right, benefit, or advantage held by a party; (2) the

party’s actual knowledge of its existence; and (3) the party’s actual intent to relinquish the right,

or intentional conduct inconsistent with the right.       Ulico Cas. Co. v. Allied Pilots Ass’n,

262 S.W.3d 773, 778 (Tex. 2008). Waiver is ordinarily a question of fact unless the surrounding

facts and circumstances are undisputed, in which case the question becomes one of law.

Jernigan, 111 S.W.3d at 156-57.

                 We have held that a fact question exists regarding whether Anthony knew or

should have known of Watkins’s alleged breach of fiduciary duty and theft and that the Dead

        16    The absence of special exception to this pleading does not affect our analysis of
this issue.
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Man’s Rule bars Watkins’s testimony to the extent it is offered to show that Anthony approved

the disputed transactions from the TCB account. The record similarly reveals a fact issue

regarding whether Anthony approved the disputed transactions with full knowledge of the facts

and with an intent to give validity to the prior acts. It similarly reveals a fact question regarding

whether Anthony intentionally relinquished a known right when signing the MidCrowne

document. Further, Watkins’s insistence that the TVLP and MidCrowne documents waived

Anthony’s claims raised here does not address the fact question regarding whether a fiduciary

duty arose under the AAH relationship. Finally, the TVLP and MidCrowne documents do not

purport to absolve Watkins of all potential wrongdoing regarding the TCB account and

funds therein.

                 We conclude that the trial court erred by granting summary judgment based on

waiver, ratification, or exculpation.

                                         CONCLUSION

                 We affirm the take-nothing judgment rendered on Executor Christopher

Bertucci’s breach-of-contract claim and on the derivative claims brought on behalf of American

Affordable Homes & Properties, Inc.; American Affordable Homes, LP; Town Vista

Development, LLC; Town Vista Terrace, Inc.; and MidCrowne Senior SLP, LLC (the B-W

Companies).

                 We reverse the trial court’s overruling of Executor Christopher Bertucci’s

objection based on the Dead Man’s Rule to the extent that it admitted evidence indicating that

Anthony Bertucci orally approved transactions; we otherwise overrule Executor’s appellate

complaint regarding the trial court’s ruling on that objection.

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               We reverse the trial court’s take-nothing summary judgment on Executor’s claims

for breach of fiduciary duty, including the duty to account, and for recovery under the Texas

Theft Liability Act. We reverse the trial court’s summary judgment to the extent it was based on

Watkins’s affirmative defenses of limitations, waiver, ratification, and exculpation.

               Because we did not need to address the issues regarding the auditor’s report to

dispose of this appeal, we expressly do not rule on the trial court’s decisions regarding the

auditor’s report. See Tex. R. App. P. 47.1 (opinions must be as brief as practicable while

addressing every issue raised and necessary to final disposition of appeal).

               Except for the breach-of-contract claim and the derivative claims brought on

behalf of the B-W Companies, we remand this cause for further proceedings.

                                             __________________________________________
                                             Darlene Byrne, Chief Justice

Before Chief Justice Byrne, Justices Goodwin, Baker, Triana, Kelly, and Smith
       Concurring and Dissenting Opinion by Justice Triana, joined by Justice Kelly

Affirmed in Part, Reversed in Part, Remanded

Filed: December 30, 2022

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