Substance Over Form in Appellate Briefing and the Limits of Individual Fiduciary Duties Between Co‑Owners: Commentary on Bertucci v. Watkins

Substance Over Form in Appellate Briefing and the Limits of Individual Fiduciary Duties Between Co‑Owners: Commentary on Bertucci v. Watkins

I. Introduction

The Supreme Court of Texas’s decision in Christopher F. Bertucci, as Executor of the Estate of Anthony R. Bertucci, et al. v. Eugene L. Watkins, Jr., No. 23‑0329 (Tex. Mar. 14, 2025), is a significant business and procedural decision with implications for:

  • Appellate briefing and “waiver” (or more accurately, forfeiture) of issues;
  • The existence and scope of fiduciary duties between business co‑owners (particularly limited partners, LLC members, and closely held corporate shareholders);
  • The application of limitations and the discovery rule in fiduciary settings;
  • The treatment of court‑appointed auditor reports under Texas Rule of Civil Procedure 172; and
  • The operation of the Texas “Dead Man’s Rule” (Texas Rule of Evidence 601(b)) in summary‑judgment practice.

At bottom, the Court:

  • Reaffirms a strong “substance over form” approach to appellate briefing, limiting the circumstances under which courts may deem arguments waived for inadequate briefing;
  • Refuses to expand individual fiduciary duties between sophisticated business co‑owners on a thin record and emphasizes strict adherence to summary‑judgment preservation rules;
  • Reiterates that even in fiduciary relationships, the discovery rule does not completely eliminate a plaintiff’s duty of diligence—but also that reliance on a fiduciary and concealment can create fact issues that preclude summary judgment on limitations;
  • Signals skepticism toward the conclusive effect of an unverified, error‑ridden Rule 172 audit report, while leaving ultimate admissibility to remand; and
  • Applies the Dead Man’s Rule robustly, excluding a surviving business partner’s self‑serving testimony about the deceased partner’s alleged “approval” of disputed transactions.

Because the business dispute here arises from a long‑running low‑income housing venture structured through multiple partnerships and corporations, the ruling is particularly important for:

  • Lawyers handling derivative and individual claims in closely held entities;
  • Appellate practitioners navigating briefing pitfalls in multi‑party appeals;
  • Litigants using or challenging court‑appointed auditors; and
  • Probate and business‑litigation counsel dealing with claims involving deceased principals.

II. Factual and Procedural Background

A. The Bertucci–Watkins Relationship and the B–W Entities

Beginning in 2001, Anthony Bertucci and Eugene Watkins jointly developed low‑income housing projects. Their pattern was consistent:

  • Bertucci supplied capital, generally receiving a 60% interest; and
  • Watkins contributed industry expertise and day‑to‑day management, generally with a 40% interest.

Rather than creating a single umbrella company, they formed a constellation of project‑specific entities (the “B‑W entities”), typically including:

  • A limited partnership for each project, where:
    • Bertucci was a 60% limited partner;
    • Watkins was a 39% limited partner; and
    • A corporate general partner held the remaining 1%.
  • A corporation or LLC serving as the general partner or developer, in which:
    • Bertucci held 60% of the equity and served as president; and
    • Watkins held 40% and served as vice‑president or manager.

For example:

  • Town Vista:
    • Town Vista, LP (TVLP) – limited partnership: 60% LP (Bertucci), 39% LP (Watkins), 1% GP (Town Vista Terrace, Inc., “TVTI”).
    • TVTI – corporate GP: 60/40 shareholders (Bertucci/Watkins), Bertucci as president, Watkins as vice‑president.
    • Town Vista Development, LLC (TVD) – also 60/40, with the same officer structure.
  • MidCrowne:
    • American Affordable Homes, LP (AAHLP) – similar split, with American Affordable Homes & Properties, Inc. (AAHPI) as GP.
    • AAHPI – 60/40 shareholders.
    • MidCrowne Senior SLP, LLC (MCS) – another 60/40 entity.

B. The TCBLP Account and Alleged Misuse of Funds

Watkins managed the B‑W entities’ funds through a bank account held by Texas Community Builders, LP (“TCBLP”), an entity he and his wife owned; Bertucci had no ownership interest. Bertucci funded projects by depositing money into the TCBLP account, but only Watkins had signatory authority over it. Watkins claimed:

  • Bertucci knew funds were commingled with TCBLP and personal funds; and
  • Bertucci routinely met with him to review finances and approved his handling of the funds.

When Bertucci’s health declined, he gave his son Christopher power of attorney over his finances. In 2014, Christopher obtained and reviewed accounting records for the TCBLP account and became concerned that:

  • Watkins was misusing or misappropriating B‑W entity funds for personal purposes; and
  • Watkins refused to provide full records, insisting the account was “private.”

In 2015, Christopher (acting under the power of attorney):

  • Demanded a full accounting; and
  • Removed Watkins from his roles in the B‑W entities, then moved to sell remaining projects.

C. The Interpleader and Cross‑Claims

In 2016, lawyers and title companies holding about $4.5 million in sale proceeds filed an interpleader in district court. Both Watkins and Christopher (for Bertucci) appeared:

  • Watkins (individually and “on behalf of” the entities) asked that the proceeds be distributed in accordance with the parties’ ownership interests.
  • Christopher for Bertucci asserted both:
    • Individual claims; and
    • Derivative claims on behalf of the B‑W entities, for:
      • Violation of the Texas Theft Liability Act (TTLA);
      • Breach of fiduciary duty;
      • Breach of a duty to account;
      • Equitable disgorgement/forfeiture; and
      • Breach of contract.

Bertucci died in March 2017. Christopher was appointed executor, and the district court case was transferred to the probate court. Ultimately, the probate court:

  • Granted summary judgment for Watkins on all of Bertucci’s individual and derivative claims; and
  • Resolved certain issues concerning the interpleaded funds.

D. The Court of Appeals’ Decision

On appeal, the Austin Court of Appeals (Bertucci v. Watkins, 690 S.W.3d 341 (Tex. App.—Austin 2022) (en banc)) held:

  • Derivative claims: Waived by inadequate briefing; the court affirmed their dismissal.
  • Individual breach‑of‑fiduciary‑duty claims: Fact issues existed as to whether Watkins owed and breached duties to Bertucci individually; summary judgment was reversed.
  • Limitations, waiver, ratification: Fact issues existed on these defenses, including limitations; summary judgment was reversed.
  • Contract claims: No‑evidence summary judgment for Watkins stood (no relevant contract evidence); Bertucci did not seek further review of this aspect.
  • Auditor’s report and Dead Man’s Rule: The court:
    • Declined to reach the challenge to the Rule 172 auditor’s report as unnecessary to its disposition; and
    • Held that the Dead Man’s Rule barred Watkins’s uncorroborated testimony about Bertucci’s alleged oral approval of the challenged transactions.

The Supreme Court granted both parties’ petitions for review, addressing briefing waiver, fiduciary duties, limitations, and the evidentiary issues.

III. Summary of the Supreme Court’s Opinion

The Court’s holdings can be distilled as follows:

  1. No waiver of derivative claims through “inadequate” briefing.
    • Bertucci properly perfected an appeal in both his executor and derivative capacities.
    • His opening brief, while imperfect, sufficiently addressed issues related to the derivative claims; any deficiencies were technical and remediable.
    • The court of appeals erred in treating the derivative appeal as waived instead of, at most, requesting supplemental briefing under Texas Rule of Appellate Procedure 38.9(b).
  2. No individual fiduciary duty owed by Watkins to Bertucci on these facts.
    • Bertucci failed in the trial court to articulate or support a theory that Watkins owed him a fiduciary duty in his individual capacity, separate from the duties owed to the entities.
      • Strebel v. Wimberly) under Rule 166a(c), because it was raised only in a reply brief in the court of appeals.
    • Even if considered, the record did not establish an individual fiduciary duty.
    • Because the same alleged harm is fully addressed by the derivative claims, reinstating summary judgment on the individual fiduciary‑duty claim did not cause practical prejudice.
  3. Fact issues preclude summary judgment on limitations.
    • Even assuming the discovery rule applies, Watkins did not conclusively prove that Bertucci knew or should have known of his alleged misappropriations before the applicable limitations periods.
    • Evidence of Watkins’s exclusive control of the TCBLP account, his fiduciary obligations, assurances, refusal to disclose information, and inconsistent explanations created fact issues for the fact‑finder.
  4. Expert auditor’s report and Rule 172.
    • The Court did not resolve whether the unverified, concededly erroneous Rule 172 audit report was admissible or “conclusive.”
    • Based on Watkins’s concessions in the Supreme Court, it held that Bertucci is free to challenge the report on remand, so the court of appeals did not abuse its discretion in declining to reach the issue.
  5. Dead Man’s Rule bars Watkins’s testimony about Bertucci’s alleged approval.
    • Watkins’s testimony that Bertucci “approved” or “instructed” the challenged transactions is barred by Rule 601(b) because:
      • It concerns oral statements by a deceased in a suit involving his estate;
      • No sufficient corroborating evidence exists; and
      • Christopher did not “call” Watkins to testify about those statements.
    • The court of appeals correctly excluded this testimony.

Accordingly, the Supreme Court:

  • Reinstated the probate court’s summary judgment on Bertucci’s individual breach‑of‑fiduciary‑duty claim;
  • Remanded the case to the court of appeals to consider the merits of the derivative claims in light of the holdings on limitations and evidentiary issues; and
  • Clarified that its rulings on the auditor’s report and the Dead Man’s Rule will bind any further proceedings as law of the case.

IV. Detailed Analysis

A. Appellate Briefing Waiver: Substance Over Form and Rule 38.9(b)

1. The Court’s Approach to Briefing “Waiver”

The most important procedural holding is the Court’s refusal to affirm dismissal of the derivative claims based on “inadequate briefing.” The court of appeals had deemed those claims waived because:

  • The cover of Bertucci’s appellate brief listed Christopher only as “executor,” not as derivative representative of the entities; and
  • The brief did not separately analyze each derivative claim for each entity.

The Supreme Court rejected this approach, emphasizing two key points:

  1. Jurisdiction and intent were clear.
    • The notice of appeal explicitly stated that Christopher appealed “as executor of the estate of Anthony R. Bertucci, deceased, and derivatively on behalf of [the B‑W entities],” and named each entity.
    • The docketing statement and the court’s own case style likewise reflected that the derivative entities were parties.
    • Under Walker v. Blue Water Garden Apartments, 776 S.W.2d 578, 581 (Tex. 1989), and United Ass’n of Journeymen & Apprentices v. Borden, 328 S.W.2d 739 (Tex. 1959), filings that are a bona fide attempt to invoke appellate jurisdiction suffice, even if technically defective.
  2. The briefing actually contained derivative arguments.
    • The brief expressly argued that:
      • Watkins owed fiduciary duties to the B‑W entities (as officer, director, “control person,” manager, member, and officer of various entities); and
      • He breached those duties by diverting assets, citing authorities such as Southwest Livestock & Trucking Co. v. Dooley, 884 S.W.2d 805 (Tex. App.—San Antonio 1994, writ denied) and Drexel Highlander L.P. v. Edelman, 2014 WL 1796217 (Bankr. N.D. Tex. May 6, 2014).
    • The brief discussed the governing documents (bylaws, partnership agreements, regulations, development agreements) as sources of Watkins’s obligations and asserted Bertucci’s standing to bring derivative claims.
    • Thus, the issues were sufficiently raised to prevent forfeiture, even if not as cleanly organized as the court of appeals would have preferred.

The Court anchored its reasoning in prior decisions emphasizing that appellate rules should not be applied “overly technically” to cut off appellate rights:

  • ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 880 (Tex. 2010) (briefing must provide a “clear and concise argument,” but courts look at substance);
  • Ross v. St. Luke’s Episcopal Hosp., 462 S.W.3d 496, 500 (Tex. 2015), and RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 126 (Tex. 2018) (failure to provide analysis can lead to waiver, but is not automatic);
  • Lion Copolymer Holdings, LLC v. Lion Polymers, LLC, 614 S.W.3d 729, 732 (Tex. 2020) (courts must look at the argument under each heading to assess intent and should hesitate to resolve cases on procedural defects);
  • First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214, 221 (Tex. 2017) (courts generally hesitate to dispose of claims on waiver grounds);
  • Fredonia State Bank v. Gen. Am. Life Ins. Co., 881 S.W.2d 279, 282 (Tex. 1994) (rules should not be read to defeat the right to appeal except when absolutely necessary);
  • Weeks Marine, Inc. v. Garza, 371 S.W.3d 157, 162 (Tex. 2012), quoting Perry v. Cohen, 272 S.W.3d 585, 587 (Tex. 2008) (courts should reach the merits “whenever reasonably possible”);
  • Briscoe v. Goodmark Corp., 102 S.W.3d 714, 717 (Tex. 2003); Lehmann v. Har-Con Corp., 39 S.W.3d 191, 205 (Tex. 2001); and Verburgt v. Dorner, 959 S.W.2d 615 (Tex. 1997), all stressing non‑technical constructions of procedural rules.

The opinion also cites Justice Willett’s concurrence in Roccaforte v. Jefferson County, 341 S.W.3d 919, 929 n.20 (Tex. 2011), and United States v. Olano, 507 U.S. 725, 733 (1993), to highlight the distinction between:

  • Waiver – the intentional relinquishment of a known right; and
  • Forfeiture – the failure to timely assert a right.

The Court left open whether the distinction would lead to different outcomes in some cases, but signaled that the derivative claims here were, at worst, subject to forfeiture arguments—not an intentional waiver.

2. Rule 38.9(b) and the Preference for Supplemental Briefing

The Court emphasized that when briefing is imperfect but the issues are plainly in play, courts should employ Texas Rule of Appellate Procedure 38.9(b), which allows an appellate court to:

“require additional briefing if it determines that the case has not been properly presented in the briefs.”

Relatedly, Rule 38.7 allows amendment or supplementation of briefs “whenever justice requires.” The Court stressed that:

  • Rule 38.9(b) is a tool for courts to obtain adequate briefing, not an obligation to give parties “an additional bite at the apple”; and
  • But before declaring waiver, courts should consider whether the alleged defects are “minor and technical” and whether supplemental briefing could cure them.

Because Watkins himself had no difficulty understanding or responding to the derivative issues—as evidenced by his own detailed brief—there was no unfair surprise and no good reason to deny merits review. The Court expressly cited State ex rel. Durden v. Shahan, 658 S.W.3d 300, 305 (Tex. 2022) (per curiam), where notices of appeal that were somewhat imprecise still sufficed, partly because the parties plainly understood the scope of the appeal.

3. Practical Significance

The precedent here is consequential for appellate practice:

  • Counsel will still be expected to brief issues adequately, with citations and analysis, but an imperfect structure or failure to name every party in a header is less likely to cause outright waiver.
  • In multi‑party or derivative appeals, a global argument on fiduciary duties and wrongful conduct may suffice to keep all relevant theories alive.
  • Court of appeals panels must carefully distinguish between:
    • Arguments that are simply unpersuasive; and
    • Arguments that are so underdeveloped as to be genuinely forfeited.

The Court’s endorsement of the en banc dissent’s view in the court of appeals—that no one had identified arguments unique to the derivative claims that were omitted—underscores that “missing sub‑headings” are not the same as “missing issues.”

B. Individual Fiduciary Duties Between Co‑Owners

1. The Legal Framework

Under Texas law, the default fiduciary framework is:

  • General partners in a partnership owe statutorily defined duties of loyalty and care to one another and to the partnership. Texas Business Organizations Code (“BOC”) § 152.204; see M.R. Champion, Inc. v. Mizell, 904 S.W.2d 617, 618 (Tex. 1995).
  • Limited partners “shall not have any obligation or duty of a general partner solely by reason of being a limited partner.” BOC § 153.003(c). A limited partner, by definition, “does not take part in managing the business.” (Black’s Law Dictionary, 12th ed. 2024, “limited partner”).
  • Corporate directors and officers owe fiduciary duties to the corporation, not ordinarily to individual shareholders. Ritchie v. Rupe, 443 S.W.3d 856, 868–69 (Tex. 2014).
  • LLC members likewise do not, as a matter of Texas law, automatically owe fiduciary duties to one another simply by virtue of their co‑ownership. See Suntech Processing Sys., L.L.C. v. Sun Commc’ns, Inc., 2000 WL 1780236, at *6 (Tex. App.—Dallas Dec. 5, 2000, pet. denied); Gadin v. Societe Captrade, 2009 WL 1704049, at *3 (S.D. Tex. June 17, 2009).

At the same time, some courts (notably in Strebel v. Wimberly, 371 S.W.3d 267 (Tex. App.—Houston [1st Dist.] 2012, pet. denied)) have suggested that a limited partner may incur fiduciary duties to other limited partners if he effectively takes on the role of a general partner by “participating in the control” of the business. BOC § 153.102 (limited partner’s liability to third parties when he participates in control). Strebel held a limited partner‑officer owed fiduciary duties where he unilaterally altered another partner’s sharing ratio without proper board approval.

2. How the Issue Arose in This Case

Bertucci alleged that Watkins owed fiduciary duties to him personally because Watkins functioned as a “managing, operational and accounting partner” in their venture. He relied on:

  • Emails in which Watkins described himself to third parties as the “managing, operational and accounting partner” of various projects; and
  • The fact that Watkins managed the TCBLP account and controlled disbursement of funds.

In summary‑judgment practice, however, Bertucci did not:

  • Explain how those roles created individual fiduciary duties, distinct from the duties owed to the B‑W entities; or
  • Expressly seek a ruling that Watkins owed fiduciary duties to Bertucci individually.

Indeed, in responding to Watkins’s summary‑judgment motions, Bertucci argued that he did not need to prove a direct fiduciary duty to himself because he was suing derivatively. He effectively treated the existence of entity‑level fiduciary duties as dispositive and brushed aside the distinction between individual and derivative claims as “of no consequence.”

3. Preservation Under Rule 166a(c)

The Supreme Court’s first reason for rejecting the individual‑duty claim is procedural. Texas Rule of Civil Procedure 166a(c) provides:

“Issues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal.”

Key authorities: Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 204 (Tex. 2002); Scientific Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 912 (Tex. 1997); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex. 1993); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 679 (Tex. 1979).

Bertucci did not meaningfully argue in the trial court that:

  • Watkins, by exercising “control” akin to that of a general partner, thereby incurred fiduciary duties directly to him as a co‑limited partner or co‑member; or
  • An agency or informal fiduciary relationship existed between them as individuals.

This “control‑based” fiduciary theory, drawn from Strebel, was raised for the first time in Bertucci’s reply brief in the court of appeals. The Supreme Court held the court of appeals erred by reversing on a theory that had never been “expressly presented” to the trial court. That alone required reinstating summary judgment on the individual fiduciary‑duty claim.

4. Substantive Analysis: No Individual Duty on These Facts

The Court went further and explained why the substance of the argument also failed, even if properly preserved.

a. No automatic agency from control of funds

Bertucci argued in the Supreme Court that Watkins’s “undisputed control” over his funds created at least an agency‑like fiduciary duty to manage those funds in accordance with Bertucci’s instructions. The Court rejected this:

  • Mere transfer of money for investment does not, by itself, create an agency relationship.
  • An agent is one who acts “on the principal’s behalf and subject to the principal’s control.” See Community Health Sys. Prof’l Servs. Corp. v. Hansen, 525 S.W.3d 671, 697 (Tex. 2017) (citing Grissom v. Watson, 704 S.W.2d 325, 326 (Tex. 1986)).
  • If Watkins truly “usurped” control and excluded Bertucci from management, as Bertucci elsewhere alleged, he could not simultaneously have been acting as a traditional agent subject to Bertucci’s control.

The Court emphasized this inconsistency: either Watkins was acting under Bertucci’s control (agency) or he was unilaterally usurping authority (potential breach of entity‑level duties), but not both at once.

b. Self‑description as “managing partner” does not create a legal role

The Court also relied on Ingram v. Deere, 288 S.W.3d 886, 900 (Tex. 2009), which held that casually referring to someone as a “partner” does not, by itself, establish a legal partnership. Here:

  • Watkins’s use of “managing partner” in emails to third parties did not create the legal status of a managing partner.
  • Watkins explained that he used the phrase descriptively (for his administrative tasks, managing vendors, etc.), not as a legal conclusion or as excluding Bertucci from decision‑making.

The Court further noted that older decisions such as Huffington v. Upchurch, 532 S.W.2d 576 (Tex. 1976), and Smith v. Bolin, 271 S.W.2d 93 (Tex. 1954), which spoke of “managing partners” owing “even a greater duty of loyalty,” have been superseded in part by the statutory Revised Partnership Act (now BOC ch. 152), which:

  • Defines the duties of partners in § 152.204; and
  • Allows modification of those duties only within defined limits. BOC § 152.002.

c. Entity‑level duties v. individual duties

The key conceptual point is that Watkins undeniably owed fiduciary duties to the entities in his roles as:

  • Officer and director of corporate general partners;
  • Manager/member of certain LLCs; and
  • Control person managing partnership affairs.

But under Ritchie v. Rupe and similar authorities, those duties run to the entity, not automatically to individual investors. Any alleged misuse of entity funds primarily injures the entity; the entity (or a derivative plaintiff) is the appropriate plaintiff.

The Court also accepted Watkins’s point that, in this case, the individual and derivative claims targeted exactly the same alleged harm—the misappropriation of funds that were supposed to be used for the B‑W entities—and sought the same remedies. Because that same alleged harm can be pursued through surviving derivative claims, Bertucci suffered no cognizable prejudice from the dismissal of the individual fiduciary‑duty theory.

The Court was careful not to hold that individual and derivative claims are always interchangeable; in other contexts, an individual may have personal‑capacity injuries (e.g., minority shareholder oppression, personal guarantees, separate contracts) that are distinct from entity injuries. But here, given the plaintiff’s own characterization of the harm, the derivative route sufficed.

5. Takeaways on Fiduciary Duties Among Co‑Owners

The decision reinforces several important principles:

  • Texas courts remain reluctant to imply formal fiduciary duties between sophisticated business co‑owners (limited partners, LLC members, shareholders) absent:
    • A clear statutory or contractual basis; or
    • A proven informal fiduciary relationship arising from a relationship of pre‑existing trust and confidence (which Bertucci disavowed on appeal).
  • The Court neither embraced nor rejected Strebel’s “control test,” but its refusal to apply it on a thin and procedurally defaulted record signals that any such extension will be closely scrutinized.
  • Plaintiffs must be precise in:
    • Pleading the level at which a fiduciary duty is owed (entity v. individual); and
    • Preserving legal theories in summary‑judgment responses and trial‑court briefing.

C. Limitations and the Discovery Rule in a Fiduciary Context

1. The Competing Positions

Limitations was a central battlefield. The relevant limitations periods were:

  • Four years for breach of fiduciary duty. Tex. Civ. Prac. & Rem. Code § 16.004(a)(5).
  • Two years for theft‑based claims. Id. § 16.003(a).

Watkins argued that, even if the discovery rule applied, the evidence conclusively showed Bertucci:

  • Was the sole investor;
  • Was an officer, director, member, and limited partner in the B‑W entities;
  • Had access to records and opportunities to monitor Watkins’s uses of funds; and
  • Therefore, knew or should have known of the challenged transactions years before suit.

He relied in part on recent Supreme Court decisions stressing that a beneficiary of a fiduciary duty is not wholly excused from diligence:

  • Berry v. Berry, 646 S.W.3d 516, 526 (Tex. 2022) (a person owed a fiduciary duty is “not altogether absolved” of the duty to use reasonable diligence); and
  • Marcus & Millichap Real Estate Inv. Servs. of Nev. v. Triex Tex. Holdings, LLC, 659 S.W.3d 456, 462 (Tex. 2023) (the presence of a fiduciary duty does not eliminate the need for “diligent inquiry”).

2. The Court’s Fact‑Issue Holding

The Supreme Court agreed with the court of appeals that fact issues precluded summary judgment on limitations. It emphasized evidence showing:

  • Watkins agreed to manage the entities and handle accounting according to the governing agreements;
  • He alone had signature authority over the TCBLP account;
  • He owed fiduciary duties to the B‑W entities;
  • He repeatedly assured Bertucci that:
    • Funds were being handled appropriately; and
    • He was only taking what they had agreed he could take;
  • He in fact used entity funds for personal purposes; and
  • When Christopher requested complete records, Watkins:
    • Refused, claiming the account was “private”; and
    • Gave inconsistent statements about what he was entitled to take and what he actually took.

Against this backdrop, the Court cited:

  • Kinzbach Tool Co. v. Corbett‑Wallace Corp., 160 S.W.2d 509, 512–14 (Tex. 1942) (a fiduciary owes a duty of full disclosure); and
  • S.V. v. R.V., 933 S.W.2d 1, 8 (Tex. 1996) (a claimant’s duty of inquiry is “lessened” when dealing with a fiduciary).

These authorities confirm a nuanced rule: fiduciary relationships reduce, but do not eliminate, the beneficiary’s duty of diligence. When the fiduciary:

  • Controls information and access;
  • Provides affirmative assurances; and
  • Refuses to disclose full records when questioned;

it is difficult, as a matter of law, to charge the beneficiary with knowledge that could not reasonably have been discovered sooner. Under City of Keller v. Wilson, 168 S.W.3d 802, 813 (Tex. 2005), where circumstances are equally consistent with multiple inferences (e.g., that Bertucci either knew or was misled), courts cannot pick one inference as a matter of law.

3. Implications

This portion of the opinion:

  • Reaffirms that fiduciary‑duty plaintiffs may survive summary judgment on limitations if they can show:
    • Concealment or nondisclosure by the fiduciary;
    • Exclusive control of key records by the fiduciary; and
    • Affirmative assurances or misrepresentations that the fiduciary’s conduct was authorized.
  • Confirms, however, that beneficiaries still bear a reduced duty of inquiry; courts will not indefinitely toll limitations absent some evidence of fiduciary wrongdoing and concealment.

D. The Rule 172 Auditor’s Report: Conclusiveness, Verification, and Remand

1. What Happened

The probate court appointed a CPA under Texas Rule of Civil Procedure 172 to act as an auditor:

“When an investigation of accounts … appears necessary for the purpose of justice between the parties to any suit, the court shall appoint an auditor or auditors to state the accounts between the parties and to make report thereof to the court as soon as possible.”

The CPA:

  • Found that Watkins kept no general ledger (which he described as “not normal”);
  • “Relied substantially on Mr. Watkins’ explanation” of various checks and deposits;
  • Concluded that expenditures, including Watkins’s self‑compensation, were “properly accounted for”; but
  • Later admitted the report contained “errors or mistakes” and “assumptions … that proved to be wrong,” and sought to withdraw and amend it.

Bertucci objected to the report as erroneous and improper because it was unverified and overly reliant on Watkins. The probate court:

  • Held his objections untimely under Rule 172’s 30‑day objection deadline; and
  • Declared the (unamended) report “conclusive as to the accounts stated therein.”

On appeal, Bertucci argued that:

  • The report was not properly verified as Rule 172 requires and therefore not entitled to conclusive effect; and
  • Given the CPA’s own admission of material errors, the report could not be binding or admissible.

The court of appeals declined to reach the issue as unnecessary to its disposition, citing Rule 47.1’s requirement to decide only those issues necessary to final resolution.

2. The Supreme Court’s Treatment

The Supreme Court:

  • Expressed that it was “inclined to agree” with Bertucci that the report was neither admissible nor conclusive under Rule 172 because it:
    • Lacked the required affidavit (verification); and
    • Contained admitted errors and incorrect assumptions.
  • But held it unnecessary to decide the issue definitively because Watkins himself conceded:
    • The report is “not conclusive as to all matters in dispute”; and
    • Its admissibility at a future trial is “premature.”

The Court accepted those concessions and concluded that:

  • The report is not insulated by law‑of‑the‑case from challenge on remand; and
  • Bertucci may challenge and controvert the report, including its accuracy and admissibility, in further proceedings.

Thus, the court of appeals did not abuse its discretion in declining to address the Rule 172 issue at that stage.

3. Practical Guidance

While technically dicta, the Court’s discussion offers useful guidance:

  • For a Rule 172 auditor’s report to be conclusive as to “accounts stated,” it must:
    • Be verified by affidavit, as the rule requires; and
    • Be free of material, acknowledged error.
  • Even when no timely objection is filed within 30 days, a blatantly flawed, unverified report may not automatically bind the parties.
  • On remand or at trial, parties should be prepared to:
    • Challenge such reports on evidentiary grounds (reliability, hearsay, lack of foundation); and
    • Offer contrary expert or accounting evidence.

E. The Dead Man’s Rule and Corroboration

1. Rule 601(b): Purpose and Mechanics

Texas Rule of Evidence 601(b), the “Dead Man’s Rule,” provides that in a civil case by or against a decedent’s heirs or estate representatives, a party may not testify “about an oral statement” by the decedent unless:

  1. The testimony is corroborated; or
  2. The opposing party “calls” the witness to testify about that statement at trial.

The rule exists to prevent a living party from gaining an unfair advantage when the decedent cannot respond. See Lewis v. Foster, 621 S.W.2d 400, 404 (Tex. 1981).

2. Watkins’s Testimony and the Objection

In support of his summary‑judgment motion, Watkins offered deposition testimony that:

  • Bertucci fully understood how funds were being used; and
  • Bertucci approved or even instructed Watkins to make the challenged expenditures.

Christopher objected under Rule 601(b) because:

  • The case involved the estate of a deceased person (Bertucci); and
  • Watkins was testifying about oral statements by the decedent.

The probate court overruled the objection. The court of appeals reversed, holding that the Dead Man’s Rule barred the testimony.

3. Supreme Court’s Analysis

The Supreme Court agreed with the court of appeals, carefully analyzing both exceptions to Rule 601(b).

a. No corroboration

Watkins argued that his testimony was corroborated by:

  • Bertucci’s alleged “inaction” or lack of objection for many years; and
  • Evidence suggesting that Bertucci had access to financial information.

The Court held this was insufficient. Citing Fraga v. Drake, 276 S.W.3d 55, 61 (Tex. App.—El Paso 2008, no pet.), and Black’s Law Dictionary, it explained that:

“Corroborating evidence need not be sufficient standing alone, but must tend to confirm and strengthen the testimony of the witness and show the probability of its truth.”

The Court also applied City of Keller’s rule that when circumstances are equally consistent with two opposing facts, neither fact may be inferred as a matter of law. Bertucci’s lack of objection could be equally consistent with:

  • His tacit approval; or
  • His ignorance of the misappropriations due to concealment and reliance on Watkins.

Because neither inference was stronger, Watkins’s testimony lacked the necessary corroboration.

b. No waiver by “calling” Watkins

Watkins further contended that Christopher had effectively “called” him to testify by:

  • Referencing documents containing Watkins’s statements; and
  • Relying on some portions of those documents in summary‑judgment filings.

The Court rejected this. Rule 601(b)(3)(B) requires that “the opposing party calls the party to testify at the trial about the statement.” Christopher never did so:

  • He never called Watkins as a live witness about Bertucci’s oral statements.
  • His references to pre‑existing documents did not amount to adopting or endorsing Watkins’s testimony about Bertucci’s alleged approvals.

Moreover, even if those documents showed that Bertucci might have been aware of certain transactions, they did not corroborate Watkins’s specific assertion that Bertucci affirmatively approved or instructed the misappropriations.

4. Significance

This holding has practical consequences for probate and business‑litigation cases involving deceased principals:

  • Surviving fiduciaries cannot avoid liability simply by testifying, without more, that “the decedent told me to do it.”
  • To use such testimony, they must:
    • Produce independent evidence that materially supports the specific oral statements; or
    • Show that the decedent’s estate has itself called them to testify about those statements.
  • Courts will apply City of Keller and related doctrines strictly when assessing whether circumstantial evidence truly corroborates disputed oral statements of a deceased person.

The case also confirms that Rule 601(b) applies in summary‑judgment proceedings just as it does at trial: inadmissible Dead Man’s testimony cannot be used to support or defeat summary judgment.

V. Complex Concepts Explained

A. Individual vs. Derivative Claims

A derivative claim is brought by a shareholder, member, or partner on behalf of an entity to remedy an injury to the entity (e.g., a corporate officer looting the corporation). Any recovery belongs to the entity, which may then indirectly benefit its owners.

An individual claim seeks redress for harm done directly to the plaintiff as a person (e.g., a direct contract with the plaintiff, misrepresentation made only to the plaintiff, or a personal guarantee).

In this case:

  • The alleged misappropriation of funds that should have gone to B‑W entities is, at core, an entity‑level injury.
  • Bertucci tried to plead both individual and derivative versions of breach of fiduciary duty, but the Supreme Court concluded that:
    • He had not preserved a distinct legal theory of individual duty; and
    • He himself treated the underlying harm as the same in both the individual and derivative contexts.

The Court did not adopt a categorical rule that such misappropriation is always solely derivative, but it illustrates how the lines can blur and why precise pleading matters.

B. Limited vs. General Partners, and LLC Members

  • General partner: Manages the partnership, can bind it, and owes statutory duties of loyalty and care to the partnership and the other general partners.
  • Limited partner: Typically an investor who does not participate in managing the business and does not, by that status alone, owe management‑level duties to other partners. See BOC § 153.003(c).
  • LLC member: An equity owner in a limited‑liability company. Under Texas law, members do not automatically owe fiduciary duties to each other, absent a special relationship or contractual arrangement.

The crux in Bertucci was whether a limited partner who assumes de facto control (as in Strebel) thereby incurs individual fiduciary duties to a co‑limited partner. The Supreme Court did not endorse such an expansion on the facts presented, leaving the broader question open.

C. The Discovery Rule in Fiduciary Relationships

The discovery rule can delay the accrual of a cause of action until the plaintiff knew or, in the exercise of reasonable diligence, should have known of the wrongful act and injury. In fiduciary settings:

  • Beneficiaries are entitled to rely more heavily on fiduciaries’ representations and to expect full disclosure; but
  • They are not entirely relieved from diligence. They must still act reasonably once there are red flags or available information.

Bertucci confirms that when the fiduciary:

  • Controls the key account;
  • Assures the beneficiary that everything is proper; and
  • Resists disclosing full records;

summary judgment on limitations is unlikely, because a jury should decide when the beneficiary “should have known” of the misdeeds.

D. Rule 172 Court‑Appointed Auditors

Rule 172 allows courts to appoint auditors to “state the accounts” between parties in complex accounting disputes. The auditor must:

  • Prepare a verified (sworn) report; and
  • File it with the court, after which parties have 30 days to file exceptions (objections).

When proper procedures are followed and no timely exceptions are made, the report can be “conclusive” on certain account matters. But Bertucci strongly suggests that:

  • An unverified, admittedly error‑ridden report cannot be treated as conclusive; and
  • Even procedural noncompliance may be subject to equitable or evidentiary challenges, especially where fundamental reliability is in doubt.

E. The Dead Man’s Rule

The Dead Man’s Rule (Rule 601(b)) is a competency rule that:

  • Applies in suits by or against a decedent’s heirs or representatives;
  • Makes a party incompetent to testify about an oral statement by the decedent against the decedent’s estate; but
  • Allows such testimony if:
    • The testimony is corroborated; or
    • The estate calls the party to testify at trial about the statement.

“Corroborating” evidence must do more than suggest a possibility; it must meaningfully support the probability that the oral statement was made and is true. Equivocal circumstantial evidence that could equally support innocence or wrongdoing is not enough.

VI. Impact and Future Litigation

A. Appellate Practice

The case cements a trend in Texas appellate jurisprudence toward:

  • Preserving access to appellate review despite imperfect briefing, especially when:
    • The notice of appeal clearly signals the appellant’s capacities and parties; and
    • The appellee demonstrates no prejudice or confusion.
  • Encouraging courts to use Rule 38.9(b) to request supplemental briefing rather than imposing harsh waiver findings.

Appellate courts, however, retain full discretion to:

  • Reject poorly developed arguments as unpersuasive; and
  • Decline to address issues that are not fairly raised or preserved.

B. Entity‑Level v. Individual‑Level Fiduciary Duties

For business clients, Bertucci signals that:

  • Alleged misappropriation of entity funds by officers, managers, or control persons naturally fits within the framework of entity‑level fiduciary duties and derivative claims.
  • Attempts to transform such disputes into individual fiduciary‑duty claims between co‑investors will face serious headwinds unless:
    • There is clear evidence of an agency relationship, contractual undertaking, or informal fiduciary relationship between the individuals; and
    • The theory is properly preserved at the trial‑court level.

Future courts confronting Strebel-type arguments will likely read Bertucci as a caution against casually imposing general‑partner‑level fiduciary duties on limited partners or co‑members based only on their participation in management, especially when the harm can be fully vindicated through derivative claims.

C. Limitations in Fiduciary and Closely Held Entity Disputes

Bertucci will be invoked by both sides in future fiduciary‑duty cases:

  • Beneficiaries will cite it to argue that exclusive control of information, fiduciary assurances, and resistance to disclosure justify fact issues on the discovery rule.
  • Defendants will continue to rely on Berry and Marcus & Millichap to maintain that plaintiffs cannot be entirely passive for years and then invoke fiduciary status to salvage stale claims.

The decision thus contributes to a more granular, fact‑intensive limitations analysis in business divorce and fiduciary cases.

D. Evidentiary Strategy in Probate‑Related Business Litigation

Practitioners should note:

  • Rule 172 reports:
    • Must be scrutinized for verification and reliability;
    • Should not be assumed to be conclusive, especially where the auditor admits material errors; and
    • Can be challenged on remand even if initially treated as conclusive by the trial court, where higher courts or adversaries concede their limited effect.
  • Dead Man’s Rule:
    • Requires careful planning when a key actor is deceased;
    • Encourages reliance on documents, independent witnesses, and objective financial records rather than self‑serving oral recollections by surviving parties; and
    • Will often be dispositive at the summary‑judgment stage where a surviving party’s account of conversations with the decedent is central.

VII. Conclusion

Bertucci v. Watkins is a multi‑faceted decision with enduring implications for Texas business and appellate practice. Its central contributions are:

  • A robust reaffirmation that appellate courts should favor substance over form in evaluating briefing and should not lightly find waiver where the notice of appeal and briefs clearly indicate the issues and parties involved.
  • A cautious and preservation‑focused approach to individual fiduciary duties between business co‑owners, reinforcing that:
    • Duties typically run to the entity; and
    • Efforts to recharacterize entity injuries as personal must be carefully pled, argued, and preserved.
  • An application of the discovery rule that balances the beneficiary’s continued duty of diligence against the fiduciary’s duty of full disclosure and the reality of informational asymmetry.
  • A practical, if not definitive, warning that Rule 172 auditor’s reports are not automatically conclusive, especially when unverified and flawed.
  • A clear and rigorous application of the Dead Man’s Rule, ensuring that self‑serving oral recollections about a deceased person’s purported instructions cannot, without corroboration, defeat claims brought by the decedent’s estate.

On remand, the Austin Court of Appeals must now address the merits of the derivative claims with these guideposts in place. Whatever the ultimate outcome, Bertucci will guide Texas courts and practitioners in navigating complex business disputes intertwined with probate issues, derivative claims, and intricate procedural and evidentiary rules.

Case Details

Comments