Bernard Patrusky v. Kenneth Bloomberg and Marilyn Bloomberg ( 2015 )

VACATE and AFFIRM; and Opinion Filed June 24, 2015.
Court of Appeals
S In The
Fifth District of Texas at Dallas
No. 05-14-00175-CV
BERNARD PATRUSKY, Appellant
V.
KENNETH BLOOMBERG AND MARILYN BLOOMBERG, Appellees
On Appeal from the 44th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-11-14821
MEMORANDUM OPINION
Before Justices Fillmore, Myers, and Evans
Opinion by Justice Fillmore
Bernard Patrusky sued Kenneth Bloomberg and Kenneth’s mother, Marilyn Bloomberg, 1
alleging he relied on Kenneth’s and Marilyn’s misrepresentations in deciding to loan money to
Glen Oaks Logistics & Distribution, Ltd. (Glen Oaks) and he lost that money when Glen Oaks
declared bankruptcy. As relevant to this appeal, Marilyn filed a first amended no-evidence
motion for summary judgment and Kenneth filed first and third no-evidence motions for
summary judgment and a second traditional motion for summary judgment. 2 The trial court
granted summary judgment in favor of both Marilyn and Kenneth and ordered that Patrusky take
nothing on his claims.
1
Because appellees, as well as Stanley Bloomberg, have the same surname, we will refer to them by their first names in this opinion.
2
The record does not indicate any ruling by the trial court on Kenneth’s first traditional motion for summary judgment or second no-
evidence motion for summary judgment.
In his first three issues, Patrusky contends the trial court erred by overruling his
objections to Kenneth’s summary judgment evidence and by granting Kenneth’s third no-
evidence and second traditional motions for summary judgment. In his fourth issue, Patrusky
argues the trial court erred by granting Marilyn’s first amended no-evidence motion for summary
judgment. We vacate the trial court’s judgment to the extent it granted summary judgment on
Patrusky’s negligence claim against Kenneth and dismiss that claim for want of jurisdiction. In
all other respects, we affirm the trial court’s judgment.
Background
Glen Oaks Industries (Industries) manufactured men’s slacks. Industries was owned
primarily by Stanley Bloomberg, who was Marilyn’s husband and Kenneth’s father, and Milton
Askinas, who was Marilyn’s uncle. Beginning in the 1980’s, Patrusky, who is both a lawyer and
a certified public accountant, provided legal services to Industries. Kenneth began working for
Industries in 1986.
According to Kenneth, an agreement between Stanley and Askinas required Industries to
be liquidated or sold within two years of either man’s death. Stanley died in July 1997, and
Patrusky offered to purchase Industries. On January 28, 1999, three trusts, The Glen Oaks
Irrevocable Trust No. 1, The Glen Oaks Irrevocable Trust No. 2, and The Glen Oaks Irrevocable
Trust No. 3 (collectively, the Trusts), purchased all the stock of Industries. Patrusky’s law
partner was the trustee of the Trusts. Kenneth was president of Industries following the sale, and
personally borrowed money from Marilyn in 2001 to purchase a portion of the stock of
Industries held by the Trusts. By 2003, Industries had declared bankruptcy.
Prior to Industries filing for bankruptcy, Kenneth had approached Patrusky about
converting the company to a 3PL, or third-party logistics, business. A 3PL business handles
distribution of goods for a customer that does not have a warehouse of its own. Glen Oaks, the
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3PL company that was formed after Industries filed for bankruptcy, purchased certain assets
from the creditors’ committee in Industries’ bankruptcy and began operating in 2003. Kenneth
was Glen Oaks’ president. Over the next several years, both Kenneth and Patrusky periodically
loaned funds to Glen Oaks. Glen Oaks repaid some of the loans, but was not profitable overall.
Between April and October of 2007, Glen Oaks began installing additional equipment to
accommodate its customer’s needs. Through three loans in August, September, and October of
2007, Patrusky loaned Glen Oaks $500,000 to pay for the improvements. At the end of 2007,
Glen Oaks had outstanding loans in the amounts of $487,299.38 owing to Kenneth and
$509,250.00 owing to Patrusky. In January 2008, Glen Oaks hired Gary Ruchlin as chief
operating officer. Ruchlin recommended a number of improvements to Glen Oaks’ operations.
In January and February of 2008, Patrusky loaned Glen Oaks an additional $350,000 to complete
the improvements recommended by Ruchlin. He loaned Glen Oaks an additional $47,000 in
March and April of 2008. In April 2008, Marilyn made four loans to Glen Oaks totaling
$148,776.30. In May and June, Glen Oaks repaid $47,000 to Patrusky. As of June 10, 2008,
Glen Oaks had outstanding loans of $676,650.18 owing to Kenneth and Marilyn, combined, and
$859,250.00 owing to Patrusky.
Glen Oaks declared bankruptcy in January 2009. Patrusky sued both Marilyn and
Kenneth, seeking to recover the money he loaned to Glen Oaks. He asserted claims for fraud by
nondisclosure, common law fraud, and fraud by misrepresentation/statutory fraud against
Marilyn and Kenneth. Patrusky asserted additional claims for negligence, breach of fiduciary
duty, and negligent misrepresentation 3 against Kenneth. Patrusky’s claims were based on two
general categories of conduct. First, Patrusky alleged he was damaged by actions taken by
3
Patrusky captioned this cause of action as “Negligent and/or Intentional Misrepresentation,” but substantively pleaded only a negligent
misrepresentation claim and, in both his response to Kenneth’s third no-evidence motion for summary judgment and in his brief on appeal,
addressed only a negligent misrepresentation claim.
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Kenneth, while he was the president of Glen Oaks, and Kenneth’s failure to disclose those
actions. Second, Patrusky alleged he was damaged by Kenneth’s and Marilyn’s failure to
disclose information relating to Kenneth’s mental health, financial condition, and marital status
and by representing that a trust would fund Kenneth’s loans to Glen Oaks.
Both Marilyn and Kenneth filed no-evidence motions for summary judgment. The trial
court granted Marilyn’s first amended no-evidence motion for summary judgment on all claims
and granted Kenneth’s first no-evidence motion for summary judgment on the fraud by
misrepresentation/statutory fraud claim. 4 Approximately nineteen months later, Kenneth filed a
second traditional motion for summary judgment and a third no-evidence motion for summary
judgment. The trial court granted both motions and, following Kenneth’s nonsuit of his
counterclaims against Patrusky, signed a final judgment ordering that Patrusky take nothing on
his claims
Standing
In both his second traditional motion for summary judgment and his third no-evidence
motion for summary judgment, Kenneth asserted Patrusky was not a shareholder of Glen Oaks
and did not have standing to bring his claims. 5 Patrusky produced no evidence he was a
shareholder of Glen Oaks and admitted at the hearing on Kenneth’s second traditional motion for
summary judgment and third no-evidence motion for summary judgment that he was not a
shareholder of Glen Oaks.
Standing is a component of subject-matter jurisdiction. Tex. Ass’n of Bus. v. Tex. Air
Control Bd., 852 S.W.2d 440, 445 (Tex. 1993); Hodges v. Rajpal, 459 S.W.3d 237, 248 (Tex.
4
In his brief, Patrusky does not challenge the trial court’s grant of summary judgment to Marilyn and Kenneth on the fraud by
misrepresentation/statutory fraud claim.
5
Patrusky argues Kenneth failed to plead lack of standing as an affirmative defense. However, standing is not an affirmative defense and
cannot be waived. Fitness Evolution, L.P. v. Headhunter Fitness, L.L.C., No. 05-13-00506-CV, 2015 WL 2452980, at *11–12 (Tex. App.—
Dallas May 22, 2015, no pet. h.).
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App.—Dallas 2015, no pet.). “A court has no jurisdiction over a claim made by a plaintiff who
lacks standing to assert it.” Heckman v. Williamson Cnty., 369 S.W.3d 137, 150 (Tex. 2012).
Whether a party has standing to pursue a cause of action is a question of law subject to de novo
review. Id. at 149–50.
“The issue of standing focuses on whether a party has a sufficient relationship with the
lawsuit so as to have a ‘justiciable interest’ in its outcome.” Sneed v. Webre, No. 12-0045, 2015
WL 3451653, at *7 (Tex. May 29, 2015) (quoting Austin Nursing Ctr., Inc. v. Lovato, 171
S.W.3d 845, 848 (Tex. 2005)). The standing inquiry involves an examination of whether (1) the
plaintiff was personally injured—the plaintiff is required to plead facts demonstrating that he
(rather than a third party) suffered the injury—and the injury was concrete and particularized,
actual or imminent, and not hypothetical; (2) the plaintiff’s alleged injury is fairly traceable to
the defendant’s conduct; and (3) the plaintiff’s alleged injury is likely to be redressed by each
form of requested relief. Heckman, 369 S.W.3d at 155; see also Hodges, 459 S.W.3d at 248. A
plaintiff has standing when he is personally aggrieved by the alleged wrong. Austin Nursing
Ctr., 171 S.W.3d at 848 (quoting Nootsie, Ltd. v. Williamson Cnty. Appraisal Dist., 925 S.W.2d
659, 661 (Tex. 1996)); Hodges, 459 S.W.3d at 248.
Without a breach of a legal right belonging to a plaintiff, that plaintiff has no standing to
litigate. Hall v. Douglas, 380 S.W.3d 860, 873 (Tex. App.—Dallas 2012, no pet.); see also
Asshauer v. Wells Fargo Foothill, 263 S.W.3d 468, 471 (Tex. App.—Dallas 2008, pet. denied).
Only the person whose primary legal right has been breached may seek redress for an injury.
Hall, 380 S.W.3d at 873; Asshauer, 263 S.W.3d at 471. When standing is challenged, the burden
of proof is on the person whose interest is challenged to present sufficient evidence to prove that
he is an interested person. Fitness Evolution, L.P. v. Headhunter Fitness, L.L.C., No. 05-13-
00506-CV, 2015 WL 2452980, at *12 (Tex. App.—Dallas May 22, 2015, no pet. h.).
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In connection with Patrusky’s claims against Kenneth for breach of fiduciary duty and
negligent misrepresentation and against Kenneth and Marilyn for fraud by nondisclosure and
common law fraud, he alleged he relied on certain acts or omissions by Kenneth and Marilyn in
deciding to loan money to Glen Oaks and he lost that money when Glen Oaks declared
bankruptcy. These claims assert that Patrusky was personally aggrieved by Kenneth’s and
Marilyn’s conduct and seeks damages he claims to have suffered due to that conduct.
Accordingly, Patrusky has standing to assert these claims.
However, in connection with his negligence claim against Kenneth, Patrusky alleged that
Kenneth, acting as Glen Oaks’ president, was “negligent in the course of the performance of his
obligations and duties” by failing to properly disclose material transactions, making secret side
deals related to the business of Glen Oaks, making material contractual commitments without
proper authority, failing to disclose Glen Oaks’ true financial position, making false affirmative
statements regarding Glen Oaks’ financial condition, and violating “various state statutes,
customs and practices as an officer of a corporation in the State of Texas.” Patrusky alleged a
“reasonably prudent officer of a corporation conducting business in the State of Texas exercising
ordinary care would have adequately disclosed the material business transactions of Glen Oaks,
for the benefit of the shareholders of Glen Oaks.” Patrusky further alleged that Kenneth chose to
breach the “duties imposed by state law upon officers of a corporation.”
A corporate officer owes a duty to the corporation to exercise due care in the
management of the corporation’s affairs, and the officer may be held liable for any damages the
corporation suffers as a result of his negligence. See Fagan v La Gloria Oil & Gas Co., 494
S.W.2d 624, 628 (Tex. Civ. App.—Houston [14th Dist.] 1973, no writ). If the officer
negligently breaches that duty, the corporation is the proper party to bring the claim. Cates v.
Sparkman, 73 Tex. 619, 621, 11 S.W. 846, 848 (Tex. 1889), superseded by statute on other
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grounds as stated in Sneed, 2015 WL 3451653, at *8–9; Fagan, 494 S.W.2d at 628 (“In ordinary
circumstances where an officer or director negligently mismanages corporate business to its
injury or takes to himself that which belongs to, or in fairness and equity should be acquired by,
the corporation, a cause of action in behalf of the corporation arises.”). A creditor may not
directly prosecute such a claim. Fagan, 494 S.W.2d at 628. Although Kenneth’s alleged acts or
omissions described in Patrusky’s negligence claim, if proven, could have been breaches of
Kenneth’s duty to Glen Oaks, Patrusky, as a creditor, has no standing to assert those claims.
A party’s lack of standing deprives the court of subject-matter jurisdiction and renders
any trial court action void. Fitness Evolution, L.P., 2015 WL 2452980, at *13 (citing In re
Russell, 321 S.W.3d 846, 856 (Tex. App.—Fort Worth 2010, orig. proceeding [mand. denied]).
The court must dismiss claims of a plaintiff who lacks standing, Heckman, 369 S.W.3d at 153,
and may not render judgment that the plaintiff take nothing, as it would if the plaintiff’s claim
failed on the merits. DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299, 307 (Tex. 2008); see
also Fitness Evolution, L.P., 2015 WL 2452980, at *13.
Because Patrusky lacked standing to assert his negligence claim against Kenneth, we
conclude the trial court erred by rendering judgment that Patrusky take nothing on that claim.
Accordingly, we vacate the trial court’s judgment as to Patrusky’s negligence claim and dismiss
that claim for lack of jurisdiction. See Fitness Evolution, L.P., 2015 WL 2452980, at *17.
No-Evidence Summary Judgment
In his second and fourth issues, Patrusky contends the trial court erred by granting
Kenneth’s third no-evidence motion for summary judgment and Marilyn’s first amended no-
evidence motion for summary judgment. We review a trial court’s decision to grant summary
judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). We review
a no-evidence summary judgment under the same legal sufficiency standard used to review a
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directed verdict. TEX. R. CIV. P. 166a(i); Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex.
2009). To defeat a no-evidence summary judgment, the nonmovant is required to produce
evidence that raises a genuine issue of material fact on each challenged element of his claim.
Gish, 286 S.W.3d at 310; see also TEX. R. CIV. P. 166a(i). In reviewing a no-evidence summary
judgment, we consider the evidence in the light most favorable to the nonmovant. Gish, 286
S.W.3d at 310. We credit evidence favorable to the nonmovant if reasonable jurors could, and
we disregard evidence contrary to the nonmovant unless reasonable jurors could not. Id.
Marilyn’s First Amended No-Evidence Motion for Summary Judgment
In his fourth issue, Patrusky asserts the trial court erred by granting Marilyn’s first
amended no-evidence motion for summary judgment on his fraud by nondisclosure and common
law fraud claims. In her motion, Marilyn asserted Patrusky had no evidence of any element of
these claims.
1. Summary Judgment Evidence
In his response to Marilyn’s no-evidence motion for summary judgment, Patrusky,
relying on his own affidavit, alleged Marilyn (1) represented to Patrusky that either she or a trust
of which Kenneth was a beneficiary would fund Kenneth’s contributions to Glen Oaks, and (2)
failed to disclose certain facts that would have been material to Patrusky’s decision to continue
to loan money to Glen Oaks. Patrusky cited the trial court to paragraph 11 of his affidavit in
which he attested:
During a face to face meeting with [Patrusky] in his New York office, [Marilyn]
failed to state that:
a. [Kenneth], her son, had a history of mental illness and had been
taking medications for [Kenneth’s] psychiatric problems;
b. [Kenneth]’s psychiatric issues extended continuously since high
school;
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c. [Kenneth] was a spendthrift, having already “borrowed”
substantial sums from his mother; and
d. [Marilyn] had been to Dallas on prior occasions to help patch up
her son’s marriage due to his money problems.
The summary judgment evidence established this meeting occurred in April 2008.
Patrusky’s affidavit contains no information describing how he had knowledge of these
“facts” that Marilyn allegedly failed to disclose and, standing alone, is conclusory. See S & I
Mgmt., Inc. v. Choi, 331 S.W.3d 849, 855–56 (Tex. App.—Dallas 2011, no pet.) (conclusory
statement is one that does not provide the underlying facts to support the conclusion). Affidavits
consisting only of conclusions are insufficient to raise an issue of fact to defeat a motion for
summary judgment. Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984); Selz v. Friendly
Chevrolet, Ltd., 152 S.W.3d 833, 837 (Tex. App.—Dallas 2005, no pet.); see also Wal-Mart
Stores, Inc. v. Merrell, 313 S.W.3d 837, 839 (Tex. 2010) (noting in summary judgment case that
“conclusory statements cannot support a judgment even when no objection was made to the
statements at trial” (quoting Coastal Transp. Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d
227, 232 (Tex. 2004)). We, therefore, look to whether any other summary judgment evidence
relied upon by Patrusky supports the “facts” that Marilyn allegedly failed to disclose.
In his response to Marilyn’s first amended no-evidence motion for summary judgment
and in his brief on appeal, Patrusky relied upon a single question and answer in the transcript of
Kenneth’s deposition to support the claim Kenneth had a mental illness:
Q. And did you ever tell [Patrusky] that you were suffering from depression?
A. No.
Both in the trial court and on appeal, Patrusky failed to cite the very next two questions to
Kenneth:
Q. And have you ever been?
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A. No.
Q. Ever been diagnosed as suffering from depression?
A. I have not been diagnosed as suffering from depression.
Accordingly, the one question and answer relied upon by Patrusky does not support the “fact”
that Kenneth suffered from a mental illness.
As to whether Kenneth has suffered from a mental illness since high school, Patrusky,
evidently relying on a question to Kenneth about any mental health professionals Kenneth had
seen since 2001, asserted, both in the trial court and in this Court, that Kenneth admitted he had
been under the care of a mental health professional since 2001. However, Kenneth identified
only a psychiatrist he began seeing in 2004 for difficulty sleeping and a psychologist he began
seeing in 2009. He was prescribed medication for the sleeping problem as well as for
“concentration and focus.” There is no testimony by Kenneth that he been seeing a mental
health professional since 2001, much less that he had “psychiatric issues extend[ing]
continuously since high school.”
Patrusky also relied on excerpts from Marilyn’s deposition in an attempt to establish she
knew that Kenneth had mental health issues. However, Marilyn testified she knew only that
Kenneth had been seeing a psychiatrist in the last five to seven years because he was under stress
and having trouble sleeping. She denied Kenneth had mental health issues in high school or
college or had seen a psychiatrist during that time frame. We conclude Patrusky directed the
trial court to no evidence that Kenneth “had a history of mental illness” and Kenneth’s
“psychiatric issues extended continuously since high school.”
Patrusky next alleged that Marilyn failed to disclose she had been to Dallas to “patch up
her son’s marriage due to money problems.” The only evidence relied upon by Patrusky to
support his assertion that Marilyn came to Dallas to address problems in Kenneth’s marriage is
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his own affidavit. The affidavit does not indicate how Patrusky was aware of this “fact,” and
Patrusky cited the trial court to no summary judgment evidence to support this fact.
Patrusky complains Marilyn failed to disclose the “facts” that Kenneth had mental health
issues, had those issues for many years, and had difficulties in his marriage, but failed to provide
any summary judgment evidence in support of those “facts.” Indeed, we question whether
Patrusky’s representation of the summary judgment evidence to the trial court and to this Court
was candid. Although a party responding to a no-evidence motion for summary judgment is
required only to produce evidence that raises a genuine issue of material fact on each challenged
element of his claim, the party cannot do so by producing a conclusory affidavit and supporting
that affidavit by citing to portions of the summary judgment evidence in a misleading fashion.
2. Analysis
To establish common law fraud, a plaintiff must prove (1) a material misrepresentation
was made, (2) the representation was false, (3) when the representation was made, the speaker
knew it was false or made it recklessly without any knowledge of the truth and as a positive
assertion, (4) the speaker made the representation with the intent the other party should act upon
it, (5) the party acted in reliance on the representation, and (6) the party thereby suffered injury.
Blankinship v. Brown, 399 S.W.3d 303, 308 (Tex. App.—Dallas 2013, pet. denied). Fraud by
nondisclosure is considered a subcategory of fraud because, where a party has a duty to disclose,
the non-disclosure may be as misleading as a positive misrepresentation of facts. Schlumberger
Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1987). To establish fraud by nondisclosure,
a plaintiff must prove (1) the defendant failed to disclose facts to the plaintiff, (2) the defendant
had a duty to disclose those facts, (3) the facts were material, (4) the defendant knew the plaintiff
was ignorant of the facts and the plaintiff did not have an equal opportunity to discover the facts,
(5) the defendant was deliberately silent when she had a duty to speak, (6) by failing to disclose
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the facts, the defendant intended to induce the plaintiff to take some action or refrain from acting,
(7) the plaintiff relied on the defendant’s nondisclosure, and (8) the plaintiff was injured as a
result of acting without that knowledge. Blankinship, 399 S.W.3d at 308.
We conclude there is no evidence that Kenneth had mental health issues continuously
since high school or that Marilyn came to Dallas to “patch up” Kenneth’s marriage due to
financial issues. Accordingly, Marilyn had no duty to disclose these “facts” to Patrusky.
Further, even assuming Marilyn had a duty to disclose to Patrusky that Kenneth was taking
medication to assist him with sleeping and with concentration and focus, there is no evidence
that Patrusky would have found this fact alone material to his decision-making process. See id.
The final fact that Patrusky asserted Marilyn failed to disclose was that Kenneth was a
“spendthrift” who had borrowed a substantial amount of money from her. Patrusky cited the trial
court to portions of Kenneth’s and Marilyn’s deposition testimony to support the proposition that
Kenneth had borrowed a substantial amount of money from Marilyn. However, by April 2008,
when Patrusky claimed Marilyn failed to disclose this information, Patrusky had already loaned
the money to Glen Oaks that he attempts to recover in this case. Therefore, he could not have
relied upon Marilyn’s failure to disclose any information about Kenneth’s financial condition in
deciding to loan those funds to Glen Oaks.
Patrusky finally complains Marilyn made affirmative misrepresentations to him on which
he relied in deciding to loan money to Glen Oaks. In the affidavit attached to his response to
Marilyn’s no-evidence motion for summary judgment, Patrusky stated that, during the “face to
face meeting” in 2008, Marilyn “gave me the impression that she would fund [Kenneth’s]
contributions individually or from a purported trust in favor of’ Kenneth.” Patrusky loaned to
Glen Oaks the money he seeks to recover in this appeal prior to the April 2008 meeting.
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Accordingly, he could not have relied on Marilyn’s purported representation in deciding to loan
that money to Glen Oaks.
Patrusky failed to produce summary judgment evidence that raised an issue of material
fact on every challenged element of his claims against Marilyn based on fraud by nondisclosure
and common law fraud. Therefore, the trial court did not err by granting summary judgment in
favor of Marilyn. We resolve Patrusky’s fourth issue against him.
Kenneth’s Third No-Evidence Motion for Summary Judgment
In his second issue, Patrusky asserts the trial court erred by granting Kenneth’s third no-
evidence motion for summary judgment. In his third no-evidence motion for summary
judgment, Kenneth contended Patrusky had no evidence of any element of the five live causes of
action asserted against Kenneth. We have already concluded Patrusky did not have standing to
assert the negligence claim. Accordingly, we need address only Patrusky’s claims for breach of
fiduciary duty, negligent misrepresentation, fraud by nondisclosure, and common law fraud.
1. Breach of Fiduciary Duty
The elements of a breach-of-fiduciary-duty claim are: (1) a fiduciary relationship
between the plaintiff and defendant, (2) the defendant breached the fiduciary duty to the plaintiff,
and (3) the defendant’s breach resulted in injury to the plaintiff or benefit to the defendant.
Jones v. Blume, 196 S.W.3d 440, 447 (Tex. App.—Dallas 2006, pet. denied). “‘Where the
underlying facts are undisputed, determination of the existence, and breach, of fiduciary duties
are questions of law, exclusively within the province of the court.’” Meyer v. Cathey, 167
S.W.3d 327, 330 (Tex. 2005) (per curiam).
In his response to Kenneth’s third no-evidence motion for summary judgment, Patrusky
asserted he had both a formal and an informal fiduciary relationship with Kenneth. Patrusky first
appears to argue that, as a corporate officer, Kenneth owed him a formal fiduciary duty. A
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corporate officer owes a fiduciary duty to the corporation he serves and may owe fiduciary duties
to the shareholders of the corporation if there is some contract or special relationship between
them in addition to the corporate relationship. Mary E. Bivens Found. v. Highland Capital Mgmt
L.P., 451 S.W.3d 104, 113 (Tex. App.—Dallas 2014, no pet.). However, Patrusky was not a
shareholder of Glen Oaks; rather, he was a lender. The relationship between a borrower and
lender is usually neither a fiduciary relationship nor a special relationship. Wil-Roye Inv. Co. II
v. Wash. Mut. Bank, FA, 142 S.W.3d 393, 410 (Tex. App.—El Paso 2004, no pet.); see also
Thigpen v. Locke, 363 S.W.2d 247, 249, 253 (Tex. 1962) (debtor-creditor relationship involving
personal loans from a bank officer did not create fiduciary relationship). When a special
relationship between a borrower and lender has been found, it has rested on extraneous facts and
conduct, such as excessive lender control over, or influence in, the borrower’s business activities.
Wil-Roye Inv. Co. II, 142 S.W.3d at 410. In arguing a formal fiduciary relationship existed with
Kenneth, Patrusky did not rely on a special relationship existing between him, as a lender, and
Glen Oaks, as a borrower, and did not direct the trial court to any evidence that would have
established such a relationship between him and Glen Oaks, much less between him and
Kenneth. See id. Accordingly, we conclude there was no formal fiduciary relationship between
Patrusky and Kenneth. 6
Patrusky also argued an informal fiduciary relationship existed between him and
Kenneth because of his long working relationship with Kenneth. An informal duty may arise
from “a moral, social, domestic or purely personal relationship of trust and confidence.’” Meyer,
167 S.W.3d at 331 (quoting Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276,
6
In asserting there was a formal fiduciary relationship, Patrusky relies heavily on Kenneth’s deposition testimony that he owed Patrusky a
fiduciary duty and a duty of full and fair disclosure and Kenneth’s counterclaim in which he stated there was a fiduciary relationship between the
parties. Because the existence of a formal fiduciary relationship is a question of law, Kenneth’s testimony that he owed Patrusky a fiduciary duty
does not impact our analysis. Further, Kenneth pleaded in his counterclaim that Patrusky owed a fiduciary duty to Kenneth, not that Kenneth
owed a fiduciary duty to Patrusky.
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287 (Tex. 1998)). However, such a relationship is not created lightly and “not every relationship
involving a high degree of trust and confidence rises to the stature of a fiduciary relationship.”
Schlumberger Tech. Corp., 959 S.W.2d at 176–77. “To impose an informal fiduciary duty in a
business transaction, the special relationship of trust and confidence must exist prior to, and apart
from, the agreement made the basis of the suit.” Meyer, 167 S.W.3d at 331 (quoting Associated
Indem, Corp., 964 S.W.2d at 288).
Patrusky’s claims that he trusted Kenneth did not transform their business relationship
into a fiduciary relationship. See Meyer, 167 S.W.3d at 331. Further, Patrusky provided the trial
court with no summary judgment evidence of a preexisting relationship with Kenneth beyond
their business relationship that would support a finding that Kenneth owed Patrusky a fiduciary
duty based on an informal fiduciary relationship. See Berry v. First Nat’l Bank of Olney, 894
S.W.2d 558, 560 (Tex. App.—Fort Worth 1995, no writ) (to avoid summary judgment on breach
of fiduciary duty claim, plaintiff is required to allege in his petition or response to motion for
summary judgment specific facts showing special or fiduciary duty to create material issue of
fact on whether fiduciary or special relationship existed).
Because there was neither a formal nor an informal fiduciary relationship between
Kenneth and Patrusky, the trial court did not err by granting Kenneth’s third no-evidence motion
for summary judgment on Patrusky’s breach-of-fiduciary duty claim.
2. Negligent Misrepresentation
The elements of negligent misrepresentation are: (1) a representation is made by a
defendant in the course of his business, or in a transaction in which he has a pecuniary interest,
(2) the defendant supplies false information for the guidance of others in their business, (3) the
defendant did not exercise reasonable care or competence in obtaining or communicating the
information, and (4) the plaintiff suffers pecuniary loss by justifiably relying on the
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representation. McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787,
791 (Tex. 1999); Bank of Tex., N.A. v. Glenny, 405 S.W.3d 310, 313 (Tex. App.—Dallas 2013,
no pet.). To support a claim for negligent misrepresentation, the false information provided must
concern an “existing fact” rather than a promise of future conduct. AKB Hendrick, LP v.
Musgrave Enters., Inc., 380 S.W.3d 221, 237–38 (Tex. App.—Dallas 2012, no pet.); Scherer v.
Angell, 253 S.W.3d 777, 781 (Tex. App.—Amarillo 2007, no pet.).
Patrusky’s claim for negligent misrepresentation against Kenneth was based on facts
about Glen Oaks’ financial condition that Kenneth, “as an officer of Glen Oak,” “in connection
with his position as an officer of Glen Oaks,” and “in the course of Glen Oaks’ business,” failed
to disclose to Patrusky. In his response to Kenneth’s third no-evidence motion for summary
judgment, Patrusky specifically argued Kenneth falsely represented his ability to provide needed
capital contributions to Glen Oaks and Kenneth failed to disclose credits to customers, billing
write offs, and an “off the books” contract.
We turn first to Patrusky’s complaint that Kenneth falsely represented his ability to
provide needed capital contributions to Glen Oaks. Patrusky specifically argued that Kenneth
promised to make contributions to fund Glen Oaks that were equal to Patrusky’s contributions
and represented he had the resources available to make the contributions. A promise of future
conduct is not a misstatement of existing fact and will not support a negligent misrepresentation
claim. Scherer, 253 S.W.3d at 781; Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141 (Tex. App.—
Houston [14th Dist.] 1999, pet. denied) (representations by defendant that he would provide all
equipment needed to start recycling plant and would pay plaintiff an annual salary while
attempting to start plant were “insufficient to establish negligent misrepresentation as a matter of
law because they do not constitute a representation of existing fact”). Assuming Kenneth
promised, at some point, to make future contributions to Glen Oaks equal to Patrusky’s
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contributions, that promise of future conduct will not support a negligent misrepresentation
claim.
We next consider Patrusky’s complaint that Kenneth failed to disclose certain actions that
he took in his capacity as a corporate officer in the course of Glen Oaks’ business. In his
response to Kenneth’s third no-evidence motion for summary judgment Patrusky specifically
complained that Kenneth failed to disclose “off the books” credits, billing write offs, and an “off
the books” contract. Because it is dispositive of this claim, we will address only whether
Patrusky justifiably relied on any misrepresentation by Kenneth. See TEX. R. APP. P. 47.1.
As indicated previously, in order to establish a negligent misrepresentation claim, the
plaintiff must prove, inter alia, actual and justifiable reliance on a misrepresentation of an
existing fact. Miller Global Prop., LLC v. Marriott Int’l, Inc., 418 S.W.3d 342, 347–48 (Tex.
App.—Dallas 2013, pet. denied) (in negligent misrepresentation claim, plaintiff must show both
actual and justifiable reliance on alleged misrepresentation); AKB Hendrick, LP, 380 S.W.3d at
237–38. As relevant to Kenneth’s conduct while acting as president of Glen Oaks, Patrusky
pointed to no affirmative misrepresentation of an existing fact that Kenneth made to Patrusky
about any of the complained-about conduct. See Spethmann v. Anderson, 171 S.W.3d 680, 688,
690–91 (Tex. App.—Dallas 2005, no pet.) (reversing jury’s verdict based on negligent
misrepresentation because there was no evidence defendant made an affirmative
misrepresentation or supplied false information to plaintiff). Rather, Patrusky asserts Kenneth
failed to disclose the complained-about conduct.
In Patrusky’s response to Kenneth’s third no-evidence motion for summary judgment, the
only statement about reliance attributable to Kenneth’s failure to disclose certain actions he took
as Glen Oaks’ president was that Patrusky “relied upon the financial statements of [Glen Oaks],”
not knowing there were “off the books” liabilities. However, Patrusky cited to no summary
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judgment evidence to support that statement. Further, Patrusky did not state in his affidavit that
he relied on the financial statements of Glen Oaks in deciding to loan money to Glen Oaks in
2007 and 2008. 7 Therefore, Patrusky failed to produce summary judgment evidence that raised
an issue of material fact on each element of his claim for negligent misrepresentation based on
Kenneth’s failure to disclose certain actions he took as president of Glen Oaks.
We conclude the trial court did not err by granting Kenneth’s no-evidence motion for
summary judgment on Patrusky’s negligent misrepresentation claim.
3. Fraud by Nondisclosure and Common Law Fraud
For both of these causes of action, 8 Patrusky, relying on his own affidavit, asserted in his
response to Kenneth’s third no-evidence motion for summary judgment that Kenneth failed to
disclose his long history of mental illness, spendthrift issues, and Marilyn’s attempts to address
Kenneth’s marital problems arising from financial difficulties. He also contended Kenneth failed
to disclose information regarding off-the-books credits given to Glen Oaks’ clients, the failure to
have written contracts with certain clients, and an off-the-books contractual hiring of a
consultant. With regard to the common law fraud cause of action, Patrusky also asserted that
Kenneth misrepresented he had assets available to make contributions to Glen Oaks in the same
amount as Patrusky’s contributions.
7
As to Kenneth, the only statements in Patrusky’s affidavit that address reliance are paragraphs 13, 14, and 18, in which he states:
• Had . . . [Kenneth] disclosed [his] mental problems to me, I would have liquidated Glen Oaks at the outset and
never advanced any additional funds to Glen Oaks in reliance upon false representations of [Kenneth];
• Had . . . [Kenneth] disclosed [his] money problems to me, I would have liquidated Glen Oaks at the outset and
never advanced any additional funds to Glen Oaks in reliance upon false representations of [Kenneth]. At that
time, the liquidation value was approximately $3.0 MM to $3.5 MM.
• I relied upon the statements and omissions of [Kenneth] when deciding not to liquidate Glen Oaks and making
additional financial contributions to fund the cash flow needs of Glen Oaks.
All of these statements about reliance were made immediately after Patrusky addressed Kenneth’s failure to disclose his alleged mental health
and financial issues and relate to Patrusky’s decision, at the time Industries was in bankruptcy, to loan funds to allow Glen Oaks to begin
operating as a 3PL company. Patrusky then discussed in paragraph 19 of the affidavit the “material financial misrepresentations and omissions
and false statements in connection with [Kenneth’s] management of Glen Oaks.” Although Patrusky listed the alleged financial
misrepresentations and omissions, he did not state he relied upon them in deciding to provide additional loans to Glen Oaks in 2007 and 2008.
8
The elements of these causes of action are set out above in our discussion of Marilyn’s first amended no-evidence motion for summary
judgment.
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As set out above in our discussion of Marilyn’s first amended no-evidence motion for
summary judgment, Patrusky’s affidavit stating he was not informed of Kenneth’s mental health
issues or marriage problems is conclusory and not supported by any evidence relied on by
Patrusky. Because there is no evidence of any “facts” that existed, there can be no fraud by
Kenneth in failing to disclose these facts.
We next turn to Patrusky’s complaint that Kenneth failed to disclose either that he had
borrowed money from his mother or taken certain actions while he was president of Glen Oaks.
For fraud by nondisclosure to be actionable, there must be, inter alia, a duty to disclose. Ins. Co.
v. N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998); White v. Pei, 452 S.W.3d 527, 537 (Tex.
App.—Houston [14th Dist.] 2014, no pet.). Whether such a duty exists is a question of law.
Bradford v. Vento, 48 S.W.3d 749, 755 (Tex. 2001); White, 452 S.W.3d at 537. A duty to
disclose may arise in four situations: (1) where there is a special or fiduciary relationship; (2)
where one voluntarily discloses partial information, but fails to disclose the whole truth; (3)
where one makes a representation and fails to disclose new information that makes the earlier
representation misleading or untrue; and (4) where one makes a partial disclosure and conveys a
false impression. White, 452 S.W.3d at 537–38.
As relevant here, Patrusky specifically argued in his response to Kenneth’s third no-
evidence motion for summary judgment that Kenneth “never disclosed” information relating to
“3 or more side deals” at Glen Oaks, off-the-books credits, the failure to have written contracts
with certain clients, and an “off the books” contract with a consultant. Patrusky asserted
Kenneth owed a duty to disclose this information because he created a false impression through
making a partial disclosure and through voluntarily disclosed partial information:
in his meeting with Patrusky in early 2008 with regards to additional capital
contributions for [Glen Oaks], disclose information with regards to trusts and
assets that would enable [Kenneth] to make all payments required in connection
with the contributions discussed for [Glen Oaks.] [At] [t]his meeting in early
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2008, Patrusky discussed concerns he had with [Kenneth] and whether the
required capital contributions were to be made. Nonetheless, despite the nature of
this meeting, [Kenneth] did not disclose the above information. [Kenneth] also
had a duty to disclose the unreported liability he incurred on behalf of [Glen
Oaks].
(Citations to summary judgment evidence omitted).
The only partial or voluntary disclosure identified by Patrusky to the trial court that
purportedly created a duty requiring Kenneth to disclose the complained-about information was a
representation by Kenneth in April 2008 that he had sufficient assets to fund contributions to
Glen Oaks. This disclosure came after Patrusky had loaned the money to Glen Oaks that he
seeks to recover in this case. Accordingly, even assuming this partial disclosure created a duty
for Kenneth to disclose other information and that Kenneth breached that duty by failing to
disclose the information, there is no summary judgment evidence that Patrusky relied on that
failure to disclose in deciding to lend money to Glen Oaks in 2007 and January and February of
2008.
Patrusky finally argues Kenneth falsely represented during the April 2008 meeting that he
had trusts and assets that would enable him to make all payments required in connection with the
needed capital contributions to Glen Oaks. However, by April 2008, Patrusky had already
loaned to Glen Oaks the money he seeks to recover in this case. Therefore, Patrusky could not
have relied upon any representation by Kenneth in April 2008, that would have required
disclosure of the complained-about information. 9 We conclude Patrusky failed to raise a
material issue of fact as to each element of his fraud by nondisclosure or common law fraud
claims against Kenneth.
9
Further, the record is clear that, before the April 2008 meeting, Patrusky was aware of all the allegedly undisclosed conduct of Kenneth
while Kenneth was acting as Glen Oaks’ president.
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Because Patrusky failed to produce summary judgment evidence to create a material
issue of fact on each element of his claims against Kenneth for breach of fiduciary duty,
negligent misrepresentation, fraud by nondisclosure, and common law fraud, the trial court did
not err by granting Kenneth’s third no-evidence motion for summary judgment. We resolve
Patrusky’s second issue against him. Based on our resolution of Patrusky’s second issue, we
need not address his first and third issues pertaining to the trial court granting Kenneth’s second
traditional motion for summary judgment on the same claims. See TEX. R. APP. P. 47.1.
Conclusion
We conclude the trial court did not err by granting Marilyn’s first amended no-evidence
motion for summary judgment on Patrusky’s fraud by nondisclosure and common law fraud
claims or Kenneth’s third no-evidence motion for summary judgment on Patrusky’s breach of
fiduciary duty, negligent misrepresentation, fraud by nondisclosure, and common law fraud
claims. We conclude the trial court erred by granting Kenneth’s third no-evidence motion for
summary judgment on Patrusky’s negligence claim because Patrusky did not have standing to
assert that claim against Kenneth. We vacate the trial court’s judgment as to Patrusky’s
negligence claim against Kenneth and dismiss that claim for want of jurisdiction. We affirm
the trial court’s judgment in all other respects. We deny appellees’ motion, in their brief, for
sanctions under rule of appellate procedure 45.
/Robert M. Fillmore/
ROBERT M. FILLMORE
JUSTICE
140175F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
BERNARD PATRUSKY, Appellant On Appeal from the 44th Judicial District
Court, Dallas County, Texas,
No. 05-14-00175-CV V. Trial Court Cause No. DC-11-14821.
Opinion delivered by Justice Fillmore,
KENNETH BLOOMBERG AND Justices Myers and Evans participating.
MARILYN BLOOMBERG, Appellee
In accordance with this Court’s opinion of this date, we VACATE the trial court’s
judgment as to appellant Bernard Patrusky’s claim for negligence against appellee Kenneth
Bloomberg and dismiss that claim for lack of jurisdiction. In all other respects, the judgment of
the trial court is AFFIRMED.
It is ORDERED that appellees Kenneth Bloomberg and Marilyn Bloomberg recover
their costs of this appeal from appellant Bernard Patrusky.
Judgment entered this 24th day of June, 2015.
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