Reversed and Remanded and Opinion Filed May 3, 2022
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-19-01557-CV
CRAIG PATRICK POWER, Appellant
V.
BRADEN RICHARD POWER, Appellee
On Appeal from the 134th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-15-14415
MEMORANDUM OPINION
Before Justices Molberg, Nowell, and Goldstein
Opinion by Justice Nowell
This appeal aris es from a dispute between brothers Craig Patrick Power and
Braden Richard Power1 who worked together to develop real estate. Craig appeals
from the trial court’s judgment entered following a jury trial. In seven issues, Craig
argues: (1) Braden lacked capacity to recover the damages he sought; (2) Braden’s
claims are barred by the applicable statutes of limitations; (3) testimony by Braden’s
damages expert was inadmissible and legally insufficient to support the verdict and
judgment; (4) the jury’s answers to Questions 12(b) and 12(c) should be disregarded;
1
Because the parties have the same surname, we will refer to them by their first names.
(5) the trial court abused its discretion by imposing a constructive trust on Craig’s
trust; (6) the trial court abused its discretion by admitting evidence of spoliation and
instructing the jury on spoliation; and (7) the attorney’s fees awarded to Braden are
erroneous. We reverse the trial court’s judgment and remand the cause to the trial
court for further proceedings.
FACTUAL BACKGROUND
In the mid-1990s, the brothers began developing apartment complexes
together, and they eventually acquired, developed, and managed more than thirty
properties. Several years later, the brothers also began developing condominiums.
Overall, their real estate business was successful. For each property they developed,
the brothers formed a Texas-based entity (collectively the Jointly Owned Entities).
With one exception, the brothers (either individually or through their respective
trusts) each own fifty percent of each of the Jointly Owned Entities. One Jointly
Owned Entity, Power Property Management, Inc. (PPM), provided property
management services for the other Jointly Owned Entities.
Testimony at trial showed Craig, who has a master’s degree in accounting,
primarily was responsible for operating the business while Braden primarily was
responsible for designing and overseeing the renovations of the older buildings the
brothers purchased. Braden testified he began inquiring about the finances of the
Jointly Owned Entities in 2011, and he asked Craig and their CPA for a
“reconciliation about everything that’s happened.” Braden received that
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reconciliation in December 2013. Braden then decided to investigate the finances of
the Jointly Owned Entities himself and, after doing so, Braden concluded Craig had,
among other things, diverted a higher share of distribution income from the Jointly
Owned Entities to himself and failed to disclose the true amount of profits the Jointly
Owned Entities earned on an annual basis.
Braden in his individual capacity sued Craig in his individual capacity for
breach of fiduciary duty, fraud, fraud by non-disclosure, statutory fraud, breach of
contract, and civil theft. Craig asserted counterclaims for breach of fiduciary duty
and set-off. At trial, the jury found, among other things, that the brothers created a
partnership to purchase, develop, and sell properties; a relationship of trust and
confidence existed between the brothers; Craig managed the accounting, books, and
records for their relationship upon which Braden justifiably relied; Craig did not
comply with his fiduciary duty to Braden; Braden failed to comply with his fiduciary
duty to Craig; and Craig committed fraud by nondisclosure and civil theft. The trial
court entered judgment following the trial, and this appeal followed.
LAW & ANALYSIS
Braden’s Capacity to Recover Damages
In his first issue, Craig argues Braden lacked capacity to recover the damages
Braden sought because the alleged damages resulted from injuries incurred solely
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by the Jointly Owned Entities or the partnership found by the jury.2 In response,
Braden argues Craig did not appeal the jury’s finding that the brothers formed a
partnership, and the Texas Business Organizations Code permits one partner to
maintain an action against another partner.
“Whether a claim brought by a partner actually belongs to the partnership is .
. . a matter of capacity because it is a challenge to the partner’s legal authority to
bring the suit.” Pike v. Tex. EMC Mgmt., LLC, 610 S.W.3d 763, 779 (Tex. 2020).
Section 152.210 of the Texas Business Organizations Code provides that one partner
is liable to other partners for violating a duty to the other partners that causes harm
to the other partners. TEX. BUS. ORGS. CODE § 152.210(2). A partner owes other
partners a duty of care. See id. § 152.204(a)(2). A partner’s duty of care to other
partners “is to act in the conduct and winding up of the partnership business with the
care an ordinarily prudent person would exercise in similar circumstances.” Id.
§ 152.206(a). A partner shall discharge his duties to the partnership and other
partners in good faith and in a manner the partner reasonably believes to be in the
best interest of the partnership. Id. § 152.204(a), (b).
Section 152.211 delineates the authority of partners and partnerships to bring
claims and seek various remedies. Pike, 610 S.W.3d at 779-80. Section 152.211
provides that one partner “may maintain an action against . . . another partner for
2
The parties dispute whether Craig properly preserved this argument for appeal. For purposes of our
analysis, we will assume without deciding that it was preserved.
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legal or equitable relief” to, among other things, enforce a partner’s rights under
Sections 152.204 and 152.206 and to “enforce the rights and otherwise protect the
interests of the partner, including rights and interests arising independently of the
partnership relationship.” See TEX. BUS. ORGS. CODE § 152.211(b)(2)(A), (b)(3).
The jury found Craig and Braden created a partnership to purchase, develop,
and sell properties. Craig does not challenge this finding and, thus, it is binding on
this Court. See Daugherty v. Highland Capital Mgmt., L.P., No. 05-14-01215-CV,
2016 WL 4446158, at *5 (Tex. App.—Dallas Aug. 22, 2016, no pet.) (mem. op.)
(citing Carbona v. CH Med., Inc., 266 S.W.3d 675, 687 (Tex. App.—Dallas 2006,
no pet.)). As a partner, Craig owed a duty of care to Braden, see TEX. BUS. ORGS.
CODE § 152.206(a), and was required to discharge his duties to Braden in good faith,
see id. § 152.204(a), (b). The business organizations code allowed Braden to
maintain an action against Craig for relief from Craig’s violations, if any, of these
duties and to enforce and protect his interest as a partner. Braden did just that.
Braden in his individual capacity sued Craig in his individual capacity for
breach of fiduciary duty, fraud, fraud by non-disclosure, statutory fraud, and civil
theft alleging Braden was injured by Craig’s actions. Braden produced evidence
showing that Craig failed to pay Braden his proportionate share of profits generated
by the partnership and made false representations to Braden about the financial
condition of their businesses. In doing so, Craig breached his duty of care to Braden
and caused injury to Braden. Braden’s alleged damages were suffered by him
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personally rather than by the partnership. Thus, Braden had capacity to assert the
claims he did. We note that Braden did not claim, for example, that Craig’s actions
reduced the value of the partnership or devalued his ownership interest, which would
be an injury to the partnership. Rather, he contended Craig hid assets from him and
failed to pay him his share of the partnership profits. Any recovery Braden sought
was not a partnership asset; it was his individual share of the partnership assets that
Craig allegedly took and to which Braden personally was entitled. We overrule
Craig’s first issue.
Statutes of Limitations
In his second issue, Craig argues Braden’s claims are barred by the applicable
statutes of limitations because the evidence conclusively establishes Braden knew
or should have known about the facts giving rise to his claims more than four years
before he filed suit on November 27, 2015. In response, Braden argues the jury was
properly instructed on the tolling doctrine of fraudulent concealment, and
considering the jury instruction, the evidence supports the jury’s findings that
limitations was tolled until December 31, 2013.
As a general matter, a cause of action accrues and the statute of limitations
begins to run when facts come into existence that authorize a claimant to seek a
judicial remedy. Valdez v. Hollenbeck, 465 S.W.3d 217, 229 (Tex. 2015). The
supreme court recognizes two doctrines that may delay the accrual or toll limitations:
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(1) the discovery rule3 and (2) fraudulent concealment. Id. Fraudulent concealment
is a fact-specific equitable doctrine that tolls limitations until the fraud is discovered
or could have been discovered with reasonable diligence. Id. When a defendant has
a duty to make a disclosure but instead conceals the existence of a cause of action
from the party to whom it belongs, the defendant is estopped from relying on the
defense of limitations until the party learns of the right of action or should reasonably
have discovered it. Id. at 229–30. “[F]raud vitiates whatever it touches,” and the
supreme court has held that “a party will not be permitted to avail himself of the
protection of a limitations statute when by his own fraud he has prevented the other
party from seeking redress within the period of limitations.” Id. at 230.
The existence of a fiduciary relationship may affect a person’s ability to
discover a concealed cause of action. See id. at 231. “A person to whom a fiduciary
duty is owed may be unable to inquire into the fiduciary’s actions or may be unaware
of the need to do so.” Id. “Moreover, even if inquiry is made, facts which might
ordinarily require investigation likely may not excite suspicion where a fiduciary
relationship is involved.” Id. (cleaned up). However, once the misconduct is evident,
diligent inquiry is required. Id.
Braden’s claims are subject to two-year and four-year statutes of limitations.
See TEX. CIV. PRAC. & REM. CODE §§ 16.003(a) (two-year limitations period),
3
The discovery rule is not at issue in this appeal.
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16.004(a) (four-year limitations period). Braden filed this lawsuit on November 27,
2015. Relevant to this issue, the jury made the following findings, which have not
been challenged on appeal: (1) a relationship of trust and confidence existed between
Craig and Braden; (2) Craig did not comply with his fiduciary duty to Braden; (3)
Craig managed the accounting, books, and records for the brothers’ relationship
upon which Braden justifiably relied; and (4) Craig committed fraud by
nondisclosure.4 Additionally, the jury found that, in the exercise of reasonable
diligence, Braden should have discovered Craig’s breach of fiduciary duty and fraud
by non-disclosure by December 31, 2013.5
Despite the jury’s findings, Craig argues that the evidence conclusively
establishes that Braden knew or should have known of the conduct giving rise to his
claims “long before” November 2011 or more than four years before the lawsuit was
filed. Craig asserts that Braden had access to the books and records of the Jointly
Owned Entities before November 2011 in his capacity as an owner, shareholder,
4
The jury charge states that fraud by non-disclosure occurs when a party fails to disclose a material
fact within the knowledge of that party, the party knows that the other party is ignorant of the fact and does
not have an equal opportunity to discover the truth, the party intends to induce the other party to take some
action by failing to disclose the fact, and the other party suffers injury as a result of acting without
knowledge of the undisclosed fact.
5
Jury Question 21 states:
By what date should Braden Power, in the exercise of reasonable diligence, have
discovered the conduct complained of with respect to the following claims?
You are instructed that fraudulent concealment tolls limitations until the plaintiff
discovers the fraud or could have discovered the fraud with reasonable diligence. To
establish fraudulent concealment, the plaintiff must show the defendant actually knew a
wrong occurred, had a fixed purpose to conceal the wrong, and did conceal the wrong from
the plaintiff.
The jury answered with the date December 31, 2013, with respect to breach of fiduciary duty, justifiable
reliance, fraud, fraud by nondisclosure, statutory fraud, and civil theft.
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officer, member, partner, director, or manager of the entities. Further, Craig argues,
the evidence shows that, as early as 2005, Braden claimed he was being treated
unfairly by Craig, which was why the brothers hired a CPA in 2006 to analyze their
financial records.
Craig’s argument disregards the jury’s unchallenged findings (discussed
above) and Braden’s testimony. As a fiduciary, Craig had a duty to make full
disclosure of all material facts to Braden. See Valdez, 465 S.W.3d at 230. However,
the jury found that despite Braden’s justifiable reliance on Craig to do so, he did not
disclose all material facts even though he managed the accounting, books, and
records.
At trial, Braden testified that Craig failed to disclose information to him and
instead sought to placate Braden. Braden testified he did not know how their
accounting functions within the business were managed or how the documentation
was maintained. Evidence showed the brothers’ money was comingled and, for a
long time, they did not maintain separate accounts for each of the Jointly Owned
Entities. Craig was responsible for tracking how much of the money in the
comingled account belonged to each brother.
In 2008, Craig told Braden the businesses were having financial problems, but
he also told Braden that all of the relevant financial information was stored in the
company’s bookkeeping software. Further, Craig told Braden that “[w]e’re going to
get this reconciled and I’ll treat you fairly. But we just have to get through this.”
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Braden believed that Craig would “figure it out.” In December 2008, Craig sent an
email to Braden stating: “Braden, I want you to know we are in this together and that
I love you.” Braden testified Craig’s email made him “feel safe.”
Braden testified he began asking questions about their finances in 2011. He
asked for a “reconciliation about everything that’s happened,” particularly related to
the finances of their last three condo projects. However, the more questions he asked,
“the more places I kept being sent to.” He continued asking for a reconciliation, but
did not receive one until December 2013. Until he received the reconciliation,
Braden allowed Craig to maintain financial control. Braden testified that, during that
time, Craig did not fully disclose the financial information related to the businesses.
Although Craig argues Braden had access to all financial information, an email from
November 2013 indicates Braden did not have an account to access the financial
information maintained by PPM, which managed the properties for all of the Jointly
Owned Entities.
Braden testified that even after he received the reconciliation in December
2013 and he asked Craig more questions, Craig did not provide information to him.
Beginning in 2014, Braden realized the finances were “the Pandora’s box. Basically
one thing every day that I was learning about the fraud my brother was doing to me.”
Braden then began his own investigation.
In light of the jury charge as given, the jury’s unchallenged findings, and the
evidence presented at trial, we conclude the evidence does not conclusively establish
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Braden knew, or in the exercise of ordinary diligence should have known, about his
causes of action more than two or four years before this lawsuit was filed. Rather,
the jury could have concluded Braden, in the exercise of reasonable diligence, should
not have discovered Craig’s conduct before December 31, 2013, and Craig’s
fraudulent concealment, as defined in the jury charge, tolled the statute of limitations
until that time. We conclude the evidence is legally sufficient to support the jury’s
answer that, in the exercise of reasonable diligence, Braden should have discovered
Craig’s breach of fiduciary duty and fraud by non-disclosure on December 31, 2013.
We overrule Craig’s second issue.
Spoliation Evidence & Jury Instruction
In his sixth issue, Craig argues the trial court abused its discretion by admitting
evidence of spoliation and instructing the jury on spoliation. In response, Braden
argues the instruction is not a spoliation instruction and is not a sanction for
misconduct.
Braden testified that Craig was responsible for operating the business and
managing financial aspects of the brothers’ ventures. Over Craig’s objection, the
jury heard testimony from Chenoa May, a PPM employee who worked in accounts
payable. May testified the process for managing invoices changed in 2013, and PPM
adopted a paperless system. About six to twelve months after implementing the new
system, she asked Craig if she could dispose of old invoices that dated back to 2003,
and Craig gave permission to do so. May explained a paper shredding company
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collected about ten banker’s boxes or four filing cabinets of old invoices. However,
she did not destroy “important files,” including files relating to Craig’s and Braden’s
personal matters, mortgage statements, and insurance.
In the jury charge, the trial court instructed:
Invoices and documents which would demonstrate or reflect
expenses relating to Craig Power and Braden Power [sic] real estate
transactions have been destroyed.
You may consider that the invoices, documents, and records
destroyed would have been unfavorable to the party who destroyed the
invoices, documents, and records on the issues of whether the party
complied with the party’s legal duties and the failure to properly
account for money under the party’s care and control.
Braden argues this instruction is not a spoliation instruction because it does
not indicate a particular party destroyed documents. Although the instruction does
not identify which party destroyed documents, all evidence and arguments presented
to the jury show that Craig (or those working for him) destroyed the documents at
issue. The evidence shows Craig had primary responsibility operating the business,
including managing Chenoa May. May testified she asked Craig’s permission to
destroy the documents, and he gave it. No witnesses testified that Braden authorized
any document destruction. Additionally, Braden’s counsel specifically informed the
jury that Craig destroyed documents. For example, in Braden’s opening statement,
his lawyer told the jury:
So in 2014 and 2015 when you have additional forensic
accountants coming in to try to see what’s going on, you’re going to
hear testimony that Craig approved and ordered the destruction of four
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file [sic] cabinets full of documents, invoices, receipts, checks. That’s
what the testimony’s going to be.
And so what you’re going to have is when we talked about the
Yardi [sic],6 the books and the records, you’re going to hear that the
books are not reliable. And the way you verify and test, check, confirm,
is you go back and you have to rebuild from the underlying hard
records, the checks, the invoices, other things like that.
Why in the world when two, three accountants are coming in and
asking questions and telling you that that’s exactly what you need, why
did he destroy those documents? He’s going to tell you, oh, we were
going to electronic files. My understanding of electronic files is I can
go electronic, but I certainly keep everything that I had before. Moving
to an electronic-based system is a conversion, not an I’m-going-to-take-
everything-that-came-before-and-chunk-it-out-the-window.
Likewise, during his closing statement, Braden’s counsel drew the jury’s attention
to the court’s instruction about destroyed documents and told the jury: “that
destruction of documents alone is a breach of fiduciary duty. Because nobody can
go back and undestroy those documents.”
Based on the evidence and arguments presented at trial, we conclude the
evidence pointed to Craig (or those working for him) destroying documents, but no
evidence indicated Braden (or those working for him) destroyed documents.
Accordingly, in this case, the fact the instruction does not specifically name Craig is
not determinative.
We review a trial court’s imposition of a spoliation remedy, including the
submission of a spoliation instruction to the jury, for an abuse of discretion.
6
Yardi is the accounting software used by PPM.
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Brookshire Bros., Ltd. v. Aldridge, 438 S.W.3d 9, 27 (Tex. 2014). We also evaluate
the court’s admission of evidence under an abuse-of-discretion standard. Id.
A spoliation jury instruction is a “severe spoliation sanction” that can shift the
focus of the case from the merits to improper conduct allegedly committed by one
party during the litigation. Id. at 13. “The problem is magnified when evidence
regarding the spoliating conduct is presented to a jury.” Id. Presenting spoliating
conduct to the jury can unfairly skew a jury verdict, resulting in a judgment that is
based on the conduct of the parties during or in anticipation of litigation rather than
the facts of the case. See id. at 13–14.
Before allowing spoliation evidence to be presented to the jury, the trial court
must perform a two-step spoliation analysis: (1) the trial court must determine, as a
question of law, whether a party spoliated evidence, and (2) if spoliation occurred,
the court must assess an appropriate remedy. Id. at 14. To conclude a party spoliated
evidence, the trial court must find (1) the spoliating party had a duty to reasonably
preserve evidence, and (2) the party intentionally or negligently breached that duty
by failing to do so. Id. Spoliation findings must be made by the trial court outside
the presence of the jury. Id.
The record does not show the trial court performed the two-step spoliation
analysis. The trial court made no finding that a party, presumably Craig, had a
reasonable duty to preserve evidence and intentionally or negligently breached that
duty by failing to do so. See id. The trial court was required to make these findings
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before permitting spoliation evidence to be presented to the jury. See id. Because
the trial court did not make the required findings, we conclude the trial court abused
its discretion by admitting spoliation evidence and subsequently giving the
spoliation instruction.
However, we will reverse the trial court’s judgment on account of these errors
only if they “probably caused the rendition of an improper judgment.” Id. at 29
(quoting TEX. R. APP. P. 61.1(a)); see also TEX. R. APP. P. 44.1(a) (reversible error
in civil cases). “[I]f a spoliation instruction should not have been given, the
likelihood of harm from the erroneous instruction is substantial, particularly when
the case is closely contested.” Brookshire Bros., 438 S.W.3d at 29. Such a likelihood
of harm exists in this case.
Both liability and the extent of each party’s damages, if any, were closely
contested at trial, and Braden emphasized the spoliation issue. Craig and his expert
maintained Braden was owed less than $400,000 from the Jointly Owned Entities,
while Braden’s expert put that number at nearly $14 million. Craig argued Braden
had access to all documents and accounting records and the brothers shared
responsibility for operating the business; Braden maintained Craig controlled the
businesses’ finances and Braden limited his role to the creative, development, and
property management aspects of the businesses. In opening and closing arguments,
Braden’s counsel informed the jury that Craig destroyed documents and even told
the jury that the destruction of documents was a breach of Craig’s fiduciary duty.
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The jury concluded Craig failed to comply with his fiduciary duty to Braden, and
the jury assessed damages.
In light of the contested liability and damages, Braden’s counsel’s opening
and closing statements, and the spoliation evidence presented and jury instruction
given without the requisite findings, we conclude the likelihood of harm from the
erroneous admission of evidence and jury instruction is substantial. “[I]t is ‘very
difficult to overlook the likely impact’ of the spoliation evidence and the instruction”
in this case. See id. (quoting Kia Motors Corp. v. Ruiz, 432 S.W.3d 865, 883–84
(Tex. 2014)). We conclude the trial court’s errors probably caused the rendition of
an improper judgment. We sustain Craig’s sixth issue.
Unaddressed Issues
In light of our resolution of Craig’s first, second, and sixth issues, we need not
address the arguments Craig raises in his third, fourth, fifth, and seventh issues. See
TEX. R. APP. P. 47.1.
CONCLUSION
Having concluded Braden had capacity to sue Craig, the statutes of limitations
had not run on Braden’s causes of action, and the trial court’s admission of spoliation
evidence and corresponding jury instruction probably caused the rendition of an
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improper judgment, we reverse the trial court’s judgment and remand the case to the
trial court for a new trial.
/Erin A. Nowell//
191557f.p05 ERIN A. NOWELL
JUSTICE
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
CRAIG PATRICK POWER, On Appeal from the 134th Judicial
Appellant District Court, Dallas County, Texas
Trial Court Cause No. DC-15-14415.
No. 05-19-01557-CV V. Opinion delivered by Justice Nowell.
Justices Molberg and Goldstein
BRADEN RICHARD POWER, participating.
Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial
court is REVERSED and this cause is REMANDED to the trial court for a new
trial.
It is ORDERED that each party bear its own costs of this appeal.
Judgment entered this 3rd day of May 2022.
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