Court Reversed Judgment  Where A Stareholder And Controller Did Not Owe An Informal Fiduciary Duty

By David Fowler Johnson

In Herman v. Metz, in 1989, Robert P. Metz and Dwayne Herman formed GBH Enterprises, Inc., and Metz owned 20% and Herman owned 80%. No. 14-24-00277-CV, 2025 Tex. App. LEXIS 6408 (Tex. App.—Houston [14th Dist.] August 21, 2025, no pet.). In 2003, Herman sold real property owned by GBH to himself without Metz’s knowledge. When Herman died in 2018, his shares passed to his wife Mary, who took over management of GBH. In 2022, upon discovering the property transaction, Metz sued Mary for breach of fiduciary duty. The case went to trial, and the jury returned a verdict in favor of Metz. The trial court rendered judgment on the jury’s verdict, ordering the equitable remedy of disgorgement in the amount of $63,000—approximately the amount of money Mary received when she sold the real property.

The central legal issue addressed was whether a corporation’s director can owe an informal fiduciary duty to manage the corporation in the best interest of an individual shareholder. The court held that, as a matter of law, such a duty does not exist. A director’s fiduciary duties run solely to the corporation, not to individual shareholders. The court concluded: “[W]e conclude the trial court erred in submitting Question 1 because Mary could not, as a matter of law, owe an informal fiduciary duty to Metz to operate GBH in a manner consistent with his best interests.” Id.

The trial court erred by submitting a jury question that allowed the jury to find liability based on the invalid legal theory that a director could owe an informal fiduciary duty to an individual shareholder. This error was deemed harmful because all subsequent jury questions and the verdict were premised on this invalid theory.

The appellate court reversed the trial court’s judgment and rendered a take-nothing judgment in favor of the defendant, concluding that the plaintiff could not recover on the asserted legal theory.