GRANT ME WISDOM FOUNDATION INC v. BOYAR III YMCA (2025)

OPINION

The founders of Grant Me the Wisdom Foundation, Inc., (Wisdom) had a vision to create a community center to connect an underserved community to the services of other nonprofits. “Connect@6800 Bellaire, Inc.” (Connect) was formed for this purpose; its members were Wisdom and four other nonprofits. After the other members of Connect withdrew from the organization and formed a different nonprofit for the same purpose, Wisdom, individually and on Connect's behalf, sued Connect's former members, its attorneys, and its capital-campaign consultant, asserting a host of contract and tort claims against them. The trial court dismissed Wisdom's derivative claims for lack of standing and granted the defendants’ no-evidence motion for summary-judgment on Wisdom's direct claims. We affirm the trial court's judgment.

I. Background

Debra McLeod and Jay Sears formed Grant Me the Wisdom Foundation, Inc., as a private family foundation for charitable works. Wisdom wished to collaborate with other nonprofits in creating a “neighborhood hub” in an underserved area of the Houston community. In the spring of 2013, Wisdom's co-founder Sears met to discuss the project with representatives of KIPP, Inc. d/b/a/ Kipp Houston Public Schools (KIPP), St. Luke's United Methodist Church of Houston (the Church), Legacy Community Health Services (Legacy), and the YMCA of Greater Houston (the YMCA). We refer to KIPP, the Church, Legacy, and the YMCA collectively as “the Nonprofits.”

The idea was to form a new organization, tentatively referred to at that time as the Bellaire Project Lead Organization, the Bellaire Lead Organization, or the Bellaire Project, which would lease property on which would be built the “Connect Community Center.” The chairman of KIPP's board of directors, attorney Bill Boyar of the law firm Boyar & Miller (the Law Firm), agreed to draft the new organization's Articles of Incorporation and Bylaws. We refer to Boyar and the Law Firm collectively as “the Lawyers.” The certificate of formation for the new organization, then called “6800 Bellaire Project, Inc.,” was filed later that year. Its initial members were KIPP, the Church, and Wisdom, but the organization's bylaws were subsequently amended to add Legacy and the YMCA as members and to change the organization's name to “Connect@6800 Bellaire, Inc.”

Each member was permitted to appoint one or more members of Connect's board of directors. Wisdom appointed its founders Sears and McLeod as directors, and they served as co-chairs of the board.

A. Connect Contracts with Sterling.

In the summer of 2014, Wisdom invited Kimberly Sterling Associates, Inc., a capital-campaign consultant, to submit a proposal “to create the nonprofit entity Connect@6800 Bellaire, develop plans for the community center to be located on the 6800 Bellaire campus, and plan a campaign to fund construction of the proposed campus facilities.” The proposal was accepted and Sterling and Connect executed a contract in July 2014.

B. Connect Engages the Law Firm.

KIPP and the Church owned adjoining properties, and in March 2015, they entered into a nonbinding “Tri-Party Letter of Intent” with Connect, under which Connect would lease a portion of those properties as the site on which to build the nonprofit community center and a related parking garage.

The following month, the Law Firm sent Connect an engagement letter for the Law Firm “to represent the Company in connection with the development of a community center and related parking garage.” In the letter, the Law Firm confirmed Connect's awareness that Boyar was the chairman of KIPP's board of directors and stated, “Mr. Boyar will not be involved with any work on behalf of the Company, and the Firm will maintain the confidentiality of our attorney-client communications with you.” The Law Firm added that it would not represent KIPP, the Church, or Wisdom “in any aspects of this transaction” unless Connect gave prior written consent to the dual representation. Sears signed the engagement letter two months later as co-chair of Connect's board of directors.

The relationship was unsatisfactory, and on August 20, 2015, the Law Firm notified Sears that it was withdrawing as Connect's counsel.

C. Connect's Members Sign a Memorandum of Understanding.

Sometime on or after July 16, 2015, Connect's Members entered into a memorandum of understanding (the MOU), under which Wisdom agreed to fund 100% of Connect's “operating and pre-development expenses” through August 31, 2015. These expenses included the salary of Connect's founding director (and sole employee) Anne Whitlock,¹ branding and marketing, community engagement, legal expenses, and Sterling's fees. From September to December 2015, the Nonprofits were to pay Connect's expenses, and in 2016, Wisdom was to pay half of Connect's expenses, with the remainder to be borne by the Nonprofits.

By the end of August 2015, Wisdom had paid around $400,000.00 of Connect's expenses. But before the Nonprofits had begun paying Connect's expenses in September 2015, the organization fell apart.

D. Sterling and the Nonprofits Have “the Big Conversation.”

On September 17, 2015, Connect held a board meeting while directors Sears and McLeod were out of the country. Sterling's principal, Kim Sterling, also attended the meeting. We refer to her by her first name to distinguish her from the company.

During the meeting, Kim and the directors then present had a discussion that the parties refer to as “the Big Conversation.” The Nonprofits agreed that they no longer wished to work with McLeod and decided on an ultimatum: either McLeod would resign from Connect's board of directors, or the Nonprofits would withdraw from the organization.

Although neither Kim nor Boyar were members of Connect's board, Kim emailed Boyar a few days later to ask “how to remove” McLeod and Sears from Connect's board of directors or remove Wisdom as a member. Kim stated that she saw no provision in the bylaws for removing members, and she did not think McLeod and Sears could be removed without removing Wisdom. Finally, she asked, “Would the other members all have to resign or withdraw and form a new organization?”

A few days later, Kim emailed the directors appointed by the Nonprofits, “Bill Boyar confirms that the by-laws do not speak directly to how this should be handled from a legal standpoint,” and that if McLeod would not resign as a director, or Wisdom would not withdraw as a member, then the Nonprofits would have to withdraw as members “and find a different way to get this done.”

When the matter was discussed with McLeod and Sears on September 30, 2015, they declined to resign or to withdraw Wisdom's membership. As planned, the Nonprofits withdrew from Connect. Kim Sterling wrote the initial draft of the Nonprofits’ withdrawal letters, which Boyar then reviewed and revised. On October 20, 2015, each of the Nonprofits sent an identical withdrawal letter to McLeod and Sears at Wisdom's address. Each enclosed a check representing that member's share of Connect's operating expenses for September 2015.

E. The Nonprofits Form “Connect 2.0.”

Even before sending their withdrawal letters, the Connect directors appointed by the Nonprofits held a “Connect 2.0 Meeting” with Kim Sterling and Anne Whitlock, informed “community friends” about the “organizational change,” and spoke with Houston Endowment about applying for a grant. Although the new organization was later incorporated as“My Connect Community,” the Nonprofits essentially treated it as a continuation of Connect rather than as a distinct entity. Indeed, it is stated in the “Connect 2.0 Meeting Notes” that Kim would “draft talking points and a draft email for members of the board to use in contacting community members who need to be informed about Jay [Sears] and Debbie [McLeod]’s withdrawal from the organization.”

Before returning the laptop provided for her work for Connect, Whitlock “copied everything off the drop box and hard drive,” “scrubbed her email,” and stated she would recirculate Connect's budget to the individuals who previously had been appointed by the Nonprofits as Connect's directors. The new organization purposely chose a similar name, repurposed Connect's logo, and relied on the plans that Sterling provided to Connect.

F. Wisdom Sues Sterling, the Lawyers, and the Nonprofits.

In September 2017, Wisdom sued Sterling, the Lawyers, and the Nonprofits, asserting its own direct claims as well as derivative claims on Connect's behalf. The defendants moved for summary judgment on Wisdom's direct claims on no-evidence grounds, but the trial court did not rule on this motion. The defendants also sought traditional summary judgment on Wisdom's derivative claims on Connect's behalf, arguing that Wisdom lacked standing to assert those claims. The trial court agreed and dismissed Wisdom's derivative claims on Connect's behalf. Wisdom's direct claims were left pending for a time while the lawsuit focused on Connect's attempts to enter the lawsuit so as to litigate the derivative claims itself.

1. Connect's Petition in Intervention and Interlocutory Appeal

After its derivative claims were dismissed, Wisdom first moved for leave to amend its pleadings to add Connect as a plaintiff, but the trial court denied the motion. Connect then filed its own petition in intervention, reasserting Wisdom's dismissed derivative claims as Connect's own direct claims.

Pursuant to the Texas Citizens Participation Act (TCPA), the defendants moved to dismiss all of Connect's claims with the exception of its fraud claim, arguing that the claims were made in response to their exercise of the rights of free speech and association. The trial court denied the motion. The defendants appealed the ruling, and also moved for summary judgment on the ground that Connect's claims were time-barred. That motion, too, was left pending during the interlocutory appeal of the denial of the defendants’ TCPA motion.

On appeal, we concluded that the TCPA applied to all of Connect's challenged claims except for its claims that Boyar and the Law Firm committed legal malpractice in that they allegedly failed “to (1) ‘make appropriate disclosures [and] obtain the necessary consents or waivers,’ (2) ‘draft legal documents which provided necessary and desired legal rights and protections for Connect,’ and (3) ‘provide (and in fact withheld[ ]) appropriate legal advice to Connect.’ ” KIPP, Inc. v. Grant Me the Wisdom Found., Inc., 651 S.W.3d 530, 538–39 (Tex. App.—Houston [14th Dist.] 2022, pet. denied) (alterations in original); see also id. at 541 (“Carving out the legal[-]malpractice claims discussed above, the remaining claims ․ were within the scope of the TCPA.”).² Because the defendants met their burden to show that the TCPA applied to the remaining claims, the burden shifted to Connect “to establish by clear and specific evidence a prima facie case for each essential element of its claims.” Id. In the absence of a record of the TCPA hearing, we presumed that the omitted portion of the record would support the trial court's ruling denying the motion, i.e., that Connect had made the required showing. See id. at 541–42.

The burden then shifted to the defendants to prove a valid defense to the claims. The defendants had maintained that Connect's claims were time barred. Limitations had expired by the time Connect filed its petition in intervention, but Connect argued that the claims related back to the filing of Wisdom's original petition because Wisdom had attempted to bring a derivative action, asserting the same claims on Connect's behalf. See id. at 542. We held that the claims did not relate back to a pending claim because “members of a nonprofit corporation lack such derivative standing,” and during the period between the dismissal of Wisdom's derivative claims for lack of standing and the filing of Connect's petition in intervention, “Connect had no pending claims in this lawsuit.” Id. at 545. We accordingly partially affirmed and partially reversed the trial court's denial of the defendants’ TCPA motion, and we remanded for further proceedings “including dismissal of all Connect's claims against [the defendants] except fraud and the specifically enumerated malpractice claims.” Id. at 546.

2. Resumption of Proceedings in the Trial Court

When proceedings resumed in the trial court, the defendants moved for entry of final judgment, seeking dismissal of Connect's claims in accordance with this Court's mandate and reurging their no-evidence motion for summary judgment on Wisdom's direct claims and their traditional motion for summary judgment on Connect's claims on the ground of limitations. The trial court granted the motions, rendering a take-nothing judgment on all of Wisdom's and Connect's claims and denying Wisdom's motion for new trial.

Connect has not appealed the judgment, but Wisdom has. It identifies three appellate issues, complaining of both the trial court's earlier traditional summary judgment on its derivative claims and the trial court's later no-evidence summary judgment on its direct claims. In its first two issues, Wisdom argues that the trial court erred in granting summary judgment (a) on its derivative claims on the ground that Wisdom lacks standing to assert them, and (b) on its direct claims on no-evidence grounds.

Although Wisdom lists a third issue concerning its allegations of commercial bribery, Wisdom expressly states that its third issue is unbriefed.³ In a petition for review to the Supreme Court of Texas, “[t]he argument need not address every issue or point included in the statement of issues or points.” Tex. R. App. P. 53.2(j). But there is no similar exception in the intermediate appellate courts. See Tex. R. App. P. 38.1(i) (“The brief must contain a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record.”); In re M.T.R., 579 S.W.3d 548, 573 (Tex. App.—Houston [14th Dist.] 2019, pet. denied) (“[E]very issue presented by a party must be supported by argument and authorities in the party's brief on the merits, or it is waived.”). Because Wisdom has waived its challenge to the judgment on the issue of commercial bribery, we overrule its third issue.

II. Standard of Review

We review summary judgments and challenges to standing de novo. See Boerjan v. Rodriguez, 436 S.W.3d 307, 310 (Tex. 2014) (per curiam) (summary judgments); Comcast Corp. v. Houston Baseball Partners LLC, 627 S.W.3d 398, 408 (Tex. App.—Houston [14th Dist.] 2021) (standing), aff'd sub nom. McLane Champions, LLC v. Houston Baseball Partners LLC, 671 S.W.3d 907 (Tex. 2023).

To prevail on a traditional motion for summary judgment, the movant must show that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); see Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215–16 (Tex. 2003). If the movant makes this showing, the burden shifts to the nonmovant to raise a genuine issue of material fact precluding summary judgment. See Lujan v. Navistar, Inc., 555 S.W.3d 79, 84 (Tex. 2018) (citing Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995)). On review, we construe the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if a reasonable juror could and disregarding contrary evidence unless a reasonable juror could not. See Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).

In a no-evidence motion for summary judgment, the movant asserts that there is no evidence of one or more essential elements of the claim or defense for which the nonmovant bears the burden of proof at trial. Tex. R. Civ. P. 166a(i); see Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009). The burden then shifts to the nonmovant to present evidence raising a genuine issue of material fact as to the elements specified in the motion. See Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). We will affirm a no-evidence summary judgment when (a) there is a complete absence of evidence of a vital fact, (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact, (c) the evidence offered to prove a vital fact is no more than a mere scintilla, or (d) the evidence conclusively establishes the opposite of the vital fact. See City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005).

III. Wisdom's Derivative Claims

Wisdom asks that we reverse the dismissal of its derivative claims for two reasons.

First, Wisdom contends that its claims against the Nonprofits for breach of fiduciary duty are ultra vires claims for which Texas Business Organizations Code section 20.002 authorizes derivative claims. As we explained in Carmichael v. Tarantino Properties, Inc., 604 S.W.3d 469, 478–81 (Tex. App.—Houston [14th Dist.] 2020, no pet.), common-law equitable theories of derivative standing have been supplanted by statute. Now, Title 2 of the Texas Business Organizations Code addresses Texas law concerning corporations, and within the Code, Chapter 20 contains general provisions, Chapter 21 pertains to for-profit corporations, and Chapter 22 deals with nonprofit corporations. Although Chapter 21 confers derivative standing on shareholders of for-profit corporations,⁴ Chapter 22 lacks a parallel provision conferring derivative standing on members of nonprofit corporations. However, Chapter 20, which applies to both for-profit and nonprofit corporations, includes section 20.002, which confers derivative standing for a member of a corporation to sue the corporation's current or former officers or directors for their ultra vires acts. See Tex. Bus. Orgs. Code § 20.002(c)(2) (authorizing a member of a nonprofit corporation to bring a representative suit on nonprofit's behalf “against an officer or director or former officer or director of the corporation for exceeding that person's authority”). But Wisdom cannot rely on this provision as grounds for reversal because Wisdom did not raise this argument in the trial court. See Tex. R. Civ. P. 166a(c); Castro v. H.E.B. Grocery Co., L.P., No. 14-18-00277-CV, 2019 WL 2518481, at *2 (Tex. App.—Houston [14th Dist.] June 18, 2019, no pet.) (“We cannot reverse a summary judgment on grounds not raised in the summary judgment response.”). Indeed, Wisdom neither alleged nor offered evidence that any defendant is, or ever has been, an officer or director of Connect.

As second reason for reversal, Wisdom contends that, contrary to our reasoning in the prior appeal in this case, we should recognize equitable derivative standing for members of nonprofits as a matter of common law. In particular, Wisdom asks that we “reconsider the holdings” in two cases by other Texas courts. See Tran v. Hoang, 481 S.W.3d 313 (Tex. App.—Houston [1st Dist.] 2015, pet. denied); Flores v. Star Cab Coop. Ass'n, Inc., No. 07-06-00306-CV, 2008 WL 3980762 (Tex. App.—Amarillo Aug. 28, 2008, pet. denied) (mem. op.). But as Wisdom concedes, “neither Tran nor Flores undertook considering whether equitable standing principles [are] applicable to nonprofits.” Thus, those cases are inapposite. Wisdom also describes three cases from other states as persuasive authority for recognizing equitable derivative standing for members of nonprofits. See, e.g., Fox v. Prof'l Wrecker Operators of Fla., Inc., 801 So. 2d 175, 179–80 (Fla. 5 Dist. Ct. App. 2001); Kirtley v. McClelland, 562 N.E.2d 27, 29–31 (Ind. Ct. App. 1 Dist. 1990); Bourne v. Williams, 633 S.W.2d 469, 470–73 (Tenn. Ct. App. 1981). But each of those cases dealt with derivative claims against the nonprofit corporation's present or former officers and directors for their ultra vires acts. As previously explained, members of Texas nonprofits already have statutory standing to bring derivative ultra vires claims, but Wisdom has asserted none.

The cases Wisdom cites from other states also reflect a different judicial philosophy than that of Texas courts. When addressing remedies available among corporations and those who participate in them, the Supreme Court of Texas has consistently recognized that these are “largely matters governed by statute and contract.” Ritchie v. Rupe, 443 S.W.3d 856, 879 (Tex. 2014). The court further stated that, “[a]s we consider existing statutory remedies, we are mindful of the principle that, when the Legislature has enacted a comprehensive statutory scheme, we will refrain from imposing additional claims or procedures that may upset the Legislature's careful balance of policies and interests.” Id. at 880. In Ritchie, as here, the “comprehensive statutory scheme” at issue was the Texas Business Organizations Code, and the court declined to add to the Code's remedies. We reach the same result here—and not for the first time.

Although Wisdom asserts that our decision in Carmichael requires that we reverse the judgment on Wisdom's derivative claims, the case instead mandates affirmance. In Carmichael, as here, we were asked to recognize equitable derivative standing for a nonprofit's members to bring claims for which standing was not conferred by statute, by the nonprofit's governing documents, or by contract, and after reviewing the history of derivative standing and its codification, we concluded that “the legislature's decision to include a general derivative-standing provision only as to for-profit corporations must be seen as deliberate.” Carmichael, 604 S.W.3d at 479. We accordingly declined to judicially amend the statute.

Because Wisdom's arguments do not persuade us to depart from that sound precedent, we overrule this issue.

IV. Wisdom's Direct Claims

On appeal, Wisdom also challenges the judgment on its negligence and breach-of-fiduciary-duty claims against Sterling and the Lawyers, its breach-of-contract and fraud claims against Sterling and the Nonprofits, its tortious-interference claims against Sterling and the Lawyers, and its civil-conspiracy theory of liability against all of the defendants for each of these causes of action.⁵ We agree with the trial court that no evidence supports the claims and liability theories that are the subject of Wisdom's appeal.⁶

The judgment as to most of these overlapping claims and theories can be affirmed on more than one ground, but the ground that disposes of the most claims against the most defendants is that there is no evidence of actual damages. See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997) (“Actual damages are those damages recoverable under common law.”). All of the defendants moved for summary judgment on this ground, and with the possible exception of Wisdom's claims for breach of fiduciary duty, all of Wisdom's theories of liability required it to prove that it suffered some injury, damage, or loss as a result of the wrongful conduct alleged. This is true of Wisdom's theories of breach of contract,⁷ fraud by misrepresentation,⁸ fraud by nondisclosure,⁹ fraudulent inducement,¹⁰ simple negligence,¹¹ gross negligence,¹² professional negligence (i.e., legal malpractice),¹³ tortious interference with an existing contract,¹⁴ tortious interference with a prospective contract or business relations,¹⁵ and civil conspiracy.¹⁶ For each of these claims, Wisdom was required to provide more than a scintilla of evidence that the challenged conduct caused Wisdom actual damages, but it failed to do so, as discussed further below.

We say that breach of fiduciary duty is a possible exception to the general rule requiring evidence of actual damages, because whether the exception applies depends upon the remedy sought. To recover actual damages for breach of fiduciary duty, the plaintiff generally must prove (1) the existence of a fiduciary duty, (2) breach of the duty, (3) causation, and (4) damages. First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214, 220 (Tex. 2017). But if the first two elements are satisfied, equitable remedies such as profit disgorgement and fee forfeiture ¹⁷ may be available even absent proof of causation and damages. See Burrow v. Arce, 997 S.W.2d 229, 240 (Tex. 1999). Because equitable remedies are available in some circumstances for a breach of fiduciary duty, the absence of actual damages might not dispose of these claims entirely. Thus, we address additional grounds on which the trial court could have granted summary judgment on Wisdom's breach-of-fiduciary-duty and related claims. Specifically, Wisdom contends that Sterling breached fiduciary duties to Wisdom that Sterling assumed in a contract, and that the Lawyers breached fiduciary duties owed to Wisdom as their client. But the defendants moved for summary judgment on the grounds that there was no evidence that Sterling contracted with Wisdom, and no evidence that the Lawyers had an attorney-client relationship with Wisdom; thus, they argued, there is no evidence that the defendants owed Wisdom fiduciary duties. We will discuss Wisdom's claims that are predicated on a contractual relationship with Sterling or an attorney-client relationship with the Lawyers after first addressing the problems with Wisdom's damages arguments.

A. No Evidence Supports Wisdom's Claims That Its Contributions to Connect Constitute Actual Damages

Wisdom argued in its response to the summary-judgment motion that, with few exceptions, all of the defendants’ allegedly wrongful conduct caused the same actual damages consisting of its payments of Connect's expenses (including legal fees, Sterling's fees, and Whitlock's salary) and its in-kind contributions to Connect of labor, services, equipment, materials, and supplies. According to Wisdom, it was injured because it made these contributions for the benefit of Connect, but the defendants took those contributions for their own benefit.

Although Wisdom claims it was damaged inasmuch as it lost the value of these contributions, these were charitable contributions to Connect,¹⁸ not loans to be repaid or investments from which Wisdom could have expected a return. Wisdom has not explained what value it could have expected from charitable gifts that, once made, became Connect's property. Thus, assuming, without deciding, that conduct by the Lawyers, Sterling, or the Nonprofits deprived Connect of the full benefit of Wisdom's contributions, that harm was sustained by Connect, not by Wisdom. And as previously explained, Wisdom lacks standing to sue on Connect's behalf. See Meyers v. JDC/Firethorne, Ltd., 548 S.W.3d 477, 485 (Tex. 2018) (explaining that the first step in analyzing a plaintiff's standing is “determining whether the plaintiff has personally been injured,” rather than a third party or the public at large).

1. Wisdom's Restricted-Gift Argument

Although Wisdom acknowledges that donors have no expectation of a return from a charitable donation, it asserts that an exception applies because Wisdom's contributions were restricted gifts. Unlike true gifts, “restricted gifts,” also referred to as “conditional gifts,” are “premised upon the fulfillment of a condition by the donee.” 38 Am. Jur. 2d Gifts § 68. Generally speaking, if the donee performs the condition, then the gift becomes the donee's property; if not, then the gift must be returned. Id.

But although Wisdom states that its contributions were “for a specific purpose and set forth in a contract,” and were also “made with anticipation of certain benefits,” Wisdom has never identified the conditions it claims to have attached to its contributions to Connect, or the existence of a contract between Wisdom and Connect, or the benefits Wisdom expected from Connect in return for its contributions. As evidence of a restricted gift, Wisdom cites only the Memorandum of Understanding among Connect's members. The MOU does not support Wisdom's position, not only because Connect is not a party to it, but also because it imposes no conditions on Wisdom's contributions. The MOU simply states, without limitation, that “[Wisdom] agrees to fund 100% of expenses for FYE 2015 through August 31, 2015, and 50% of expenses for FYE 2016.” The “expenses” are the “operating and pre-development expenses associated with the community center to be built in the Sharpstown/Gulfton neighborhood” and include, but are not limited to, Connect's legal expenses, Sterling's fees, and the salary of Connect's founding director. Moreover, Wisdom does not contend that its contributions were not used to pay Connect's expenses; to the contrary, Wisdom admits that it paid Connect's expenses directly, both before and after the MOU was executed.

There being no evidence to support its conditional-gift argument, Wisdom has failed to show that its monetary and in-kind contributions to Connect constitute actual damages sustained by Wisdom and caused by the wrongful conduct at issue.

2. Wisdom's Direct-Damages Argument

Wisdom also argues that it suffered direct damages rather than damages dependent on harm to Connect. But in this argument, Wisdom has conflated two unrelated concepts: direct v. consequential damages and direct v. derivative actions.

All actual damages are either “direct” or “consequential.” Arthur Andersen & Co., 945 S.W.2d at 816. “Direct damages compensate the plaintiff for the loss that is conclusively presumed to have been foreseen by the defendant from his wrongful act.” Id. “Consequential damages, on the other hand, result naturally, but not necessarily, from the defendant's wrongful acts.” Id. Thus, direct damages differ from consequential damages in that direct damages have a more direct causal link to the wrongful conduct than consequential damages do.

In contrast, whether a plaintiff is pursuing a direct or derivative action depends on whether the plaintiff is suing for injuries to itself or to a third party. A direct action is one in which the plaintiff pursues its own claims,¹⁹ while a derivative action is one in which a corporate shareholder “steps into the shoes of the corporation” to pursue the corporation's claims. Moody v. Nat'l W. Life Ins. Co., 634 S.W.3d 256, 274 (Tex. App.—Houston [1st Dist.] 2021, no pet.). Even assuming, without deciding, that the defendants caused Connect to lose the value of Wisdom's charitable contributions and that the loss would properly be characterized as direct damages, these would be Connect's direct damages, not Wisdom's. And as discussed above, Wisdom lacks standing to bring a derivative action to pursue Connect's claims––regardless of whether Connect's damages were direct or consequential.

We overrule Wisdom's challenge to the judgment against it on all of its claims that rely on the characterization of Wisdom's contributions to Connect as actual damages.

B. No Evidence Supports Wisdom's Claims That It Was Damaged by the Nonprofits’ Failure to Pay a Portion of Connect's Expenses After August 31, 2015.

For some of its claims, Wisdom argues that it was damaged by the Nonprofits’ failure to pay their full share of Connect's estimated expenses after August 31, 2015. The MOU called for the Nonprofits to pay a portion of Connect's actual costs incurred from September 1, 2015, through December 31, 2016, “including a 10% contingency should expenses exceed [the] estimated budget.” The Nonprofits paid a total of $19,138, which is a fraction of the amount called for in the MOU.

But as previously discussed, payment of Connect's expenses constitutes a charitable contribution to Connect. If Connect had incurred actual expenses exceeding $19,138 during the relevant time period—and there is no evidence that it did—then the Nonprofits’ underpayment would have harmed Connect, not Wisdom.²⁰ Any claim for such damages would belong to Connect, and Wisdom lacks standing to seek them on Connect's behalf.

The only other actual damages Wisdom asserted in the summary-judgment proceeding was an alleged overpayment to Sterling. That argument fails for the same reason that Wisdom's claims against Sterling for breach of fiduciary duty and breach of contract fail: as discussed below, there is no evidence of a contract between Wisdom and Sterling.

C. No Evidence Supports Wisdom's Claims Predicated on a Contract with Sterling.

Wisdom asserts that Sterling owed it fiduciary duties because “Sterling was a contractor, agent, and advisor to [Wisdom], working for the benefit of Connect,” and Sterling “agreed by contract to these duties.” Wisdom also asserted a breach-of-contract claim against Sterling and sought to recover amounts paid to Sterling in excess of the contractually agreed-upon amount. Sterling sought summary judgment on the grounds, among others, that there is no evidence that Sterling had a contract with Wisdom or owed it fiduciary duties.

As evidence for its breach-of-contract and breach-of-fiduciary-duty claims, Wisdom relies upon a single contract. But, Sterling's contract is not with Wisdom; it is with Connect. The document had signature lines only for Sterling and Connect, and only Sterling and Connect executed it. Indeed, Wisdom conceded in its summary-judgment response that McLeod signed “on behalf of Connect.”

Wisdom nevertheless contends that it is a party to the contract based on contractual language that Sterling would “partner with” Wisdom. For example, in the first line of the contract, Sterling wrote, “Thank you for inviting Sterling Associates to submit a proposal to partner with [Wisdom] to create the nonprofit entity Connect@6800 Bellaire, develop plans for the community center to be located on the 6800 Bellaire campus, and plan a campaign to fund construction of the proposed campus facilities.”²¹ But Wisdom does not explain the significance it attaches to such language and admittedly “did not argue there was a true legal partnership formed.”

As the following examples illustrate, context shows that the word “partner” and its variants were used throughout the contract only in the collaborative sense, that is, to refer to “[o]ne who is associated in any function, act, or course of action; one who takes part with another or others in doing something; an associate, [or] colleague”:²²

• “We propose to work in close partnership with [Wisdom's] leadership to accomplish the following.”

• “[Wisdom] wants to leverage the power of healthy partnerships to create a dynamic place of hope and health. Accordingly, the plan is to form a new nonprofit organization that will manage the collaborative efforts of various service providers on a campus to be located at 6800 Bellaire Boulevard.”

• “A community center facility will serve as the central hub for the collaborative, and several high-performing nonprofit partners will provide effective and needed programs and services ․”

• “At present, the partners include [KIPP, the Church, Legacy, the YMCA, and Houston Center for Literacy].”

• Among other “critical startup activities,” Sterling will “[p]artner closely with an architectural team to create a master plan for the campus.”

Indeed, this use of the word “partner” by Sterling is consistent with the way Wisdom uses the word. For example, McLeod testified on Wisdom's behalf that “we consider ourselves partners and collaborators with everybody we fund.” In discovery responses, Wisdom identified Houston Center of Literacy as “a collaborating partner” of both Wisdom and Connect, and Wisdom referred to Purpose Built Communities as “a strategic partner.”

Wisdom additionally points out that Sterling admitted “that Sterling was engaged by [Wisdom] to provide consultation services regarding Connect and the Community Center.” But this is not an admission that Wisdom is a party to the contract. Wisdom solicited the proposal for Sterling's consultation services, but Sterling's proposal was in the form of a draft contract with Connect, and Connect alone approved and executed it.

Finally, Wisdom points out that from 2013 to 2019, Sterling's website contained statements that Sterling followed the ethical standards for fundraising practices stated in the Association of Fundraising Professionals’ Code of Ethics and was committed to upholding the principles set forth in the “Donor Bill of Rights.” Because Wisdom is not a party to Sterling's contract with Connect and does not contend that it is a third-party beneficiary of the contract, the question of whether those standards and principles were incorporated into Sterling's contract with Connect is not before us. Wisdom offered no evidence that it relied on such statements or even that it visited Sterling's website, and Wisdom does not argue that the mere presence of such statements on Sterling's website, where it was available for the general public to read, created a contractual or fiduciary relationship between Sterling and Wisdom.

In sum, Wisdom does not contend that its claims against Sterling for breach of contract, and for breach of fiduciary duties assumed in a contract, fall within any recognized exception to the general rule that “the benefits and burdens of a contract belong solely to the contracting parties.” First Bank v. Brumitt, 519 S.W.3d 95, 102 (Tex. 2017). Because Wisdom is not a party to the contract with Sterling, we affirm the portion of the judgment dismissing Wisdom's claims against Sterling for breach of contract and breach of fiduciary duties.

D. No Evidence Supports Wisdom's Claims Predicated on an Attorney-Client Relationship with the Lawyers.

Wisdom's claims against the Lawyers for breach of fiduciary duty and legal malpractice fail for much the same reasons that Wisdom's claims against Sterling fail. The duties that Wisdom claims the Lawyers breached are duties owed to clients. Attorneys owe their clients a duty to act with the ordinary care expected to be exercised by a reasonably prudent attorney. Cosgrove v. Grimes, 774 S.W.2d 662, 664 (Tex. 1989) (sub. op. on mot. for reh'g). If the attorney breaches the duty of care, and the breach proximately causes damage to the client, then the client has a professional-negligence or legal-malpractice claim. See Rogers v. Zanetti, 518 S.W.3d 394, 400 (Tex. 2017). In addition to the duty of ordinary care, and as a matter of law, attorneys also owe their clients fiduciary duties as to matters within the scope of the representation. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 159 (Tex. 2004). Wisdom contends that the Lawyers breached both types of duties owed to Wisdom as their client, and the Lawyers sought summary judgment on those claims on the ground, among others, that there is no evidence they owed these duties to Wisdom. More specifically, they stated there is no evidence that Wisdom was their client. We agree.

The attorney-client relationship is a contractual relationship in which an attorney agrees to render professional services for a client. Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 105 S.W.3d 244, 254 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). For an attorney-client relationship to exist, “the parties must explicitly or by their conduct manifest an intention to create it. To determine whether there was a meeting of the minds, we use an objective standard examining what the parties said and did and do not look at their subjective states of mind.” Stephens v. Three Finger Black Shale P'ship, 580 S.W.3d 687, 721 (Tex. App.—Eastland 2019, pet. denied) (quoting Roberts v. Healey, 991 S.W.2d 873, 880 (Tex. App.—Houston [14th Dist.] 1999, pet. denied) (citation omitted))). Wisdom failed to produce more than a scintilla of evidence that the Lawyers objectively manifested an intention to create an attorney-client relationship with Wisdom. See Kiger v. Balestri, 376 S.W.3d 287, 291 (Tex. App.—Dallas 2012, pet. denied) (“[T]here must be evidence both parties intended to create an attorney-client relationship—one party's subjective belief is insufficient to raise a question of fact to defeat summary judgment.”).

Wisdom relies most heavily on the Lawyers’ references, before Connect's formation, to the “lead organization.” For example, Wisdom points out that the Law Firm's “Conflict New Client Form” from that time identifies the client as “Bellaire Lead Organization” and Jay Sears as the lead organization's contact “for billing purposes.” Bills for the legal work from that period were directed to “Jay Sears, Bellaire Lead Organization.”²³ Wisdom seems to imply that Wisdom was therefore the “lead organization.”

But there is no evidence that the “lead organization” the Lawyers accepted as a client is Wisdom. To the contrary, in all of the evidence Wisdom cites concerning the “lead organization,” the term is used to refer to the nascent form of Connect as it existed prior to its incorporation. See, e.g., Tex. Bus. Orgs. Code § 252.006 (an unincorporated nonprofit association “is a legal entity separate from its members for the purposes of determining and enforcing rights, duties, and liabilities in contract and tort”). For example, in the same conflict-check form, the scope of representation is described as follows: “We have been retained to form a non-profit corporation that will be the lead organization in a community redevelopment project in Gulfton.”²⁴ The lead organization could not have been Wisdom because it was already in existence, and the lead organization actually formed was Connect.

Wisdom also cites a document titled, “Meeting Notes – Lead Organization Discussion,” but there, too, “lead organization” is used to refer to Connect, in its as-yet unincorporated and unnamed state. For example, the meeting attendees discussed “Legacy in terms of being part of the lead org board.” In discussing the “lead org board's scope of authority,” it was noted that KIPP and the Church have more “skin in the game.” There is no evidence that Legacy, KIPP, or the Church played any role in Wisdom's board, but all three became members of Connect with the power to appoint members to Connect's board of directors. In contrast, Wisdom is identified in the meeting notes as an entity funding the “lead organization,” not as the “lead organization” itself.

Another document cited by Wisdom as proof of an attorney-client relationship is an email chain in which one of Connect's early strategists asked Boyar about the next steps to be taken concerning “the lead organization.” Boyar responded that he needed someone to prepare and file an application for tax-exempt status. The strategist included Sears in the email chain, and Sears said, “I've copied Jeff Sher. Jeff can help us with that. He represents our foundation.” Sears’ statement that Wisdom is represented by another attorney at a different firm is not evidence of an attorney-client relationship with the Lawyers in this case.

Wisdom also cites Sears’ deposition testimony that he believed Wisdom was the Lawyers’ client because Wisdom paid the Lawyers’ bills, but his subjective belief is irrelevant. There is no evidence that Sears communicated his belief to the Lawyers, and although Wisdom paid the Lawyers’ bills (as it paid all of Connect's bills), the Lawyers’ services were performed for, and billed to, the lead organization later known as Connect. Moreover, in the MOU, Wisdom included the cost of legal services among Connect's expenses.

Wisdom additionally cites, without explanation, an email exchange between an attorney at the Law Firm and Wisdom employee Duyen Le. In this exchange, Le emailed Connect's signed bylaws to the Law Firm and asked for the date of the original and amended bylaws, given that the documents themselves are undated. The attorney responded that he never received the original bylaws, so “let's just use the date of the original formation (9/5/2013) and for the amendment, the date that the amendment was approved at the board meeting.” But the subject of the email exchange was Connect's corporate documents, which were drafted for, and billed to, Connect. Moreover, Wisdom identified Le as a Wisdom employee “who assisted with Connect matters,” and sought as damages “the value of [Wisdom's] and its founders’ contributions of labor [and] services.”²⁵ In other words, the email exchange shows a question from a person whose labor was contributed to Connect asking a question of Connect's counsel about Connect's corporate documents. It is not evidence of an attorney-client relationship between the Lawyers and Wisdom.

Wisdom's remaining evidence concerns the Firm's relationship with clients Connect (under its post-incorporation name as Connect, rather than as the “lead organization”) and NewQuest, a for-profit company in which Jay Sears is a partner. Regarding Connect, Wisdom cites the Law Firm's 2015 engagement letter stating that the Law Firm had been engaged by Connect@6800 Bellaire, defined in the letter as “the Company,” “to represent the Company in connection with the development of a community center and related parking garage” and “will not represent KIPP, [the Church], or the Company's current major benefactor, Give Me the Wisdom Foundation, in any aspects of this transaction” absent Connect's “prior written consent to such dual representation.” But Wisdom does not contend that such written consent exists. Wisdom also cites the conflict-check form for client “Connect@6800 Bellaire” and emails referring to a discussion in which an attorney at the Law Firm informed Sears that it was withdrawing as Connect's counsel in August 2015. As for NewQuest, Wisdom refers to Boyar's deposition testimony regarding duties owed to clients generally, to client NewQuest in particular, and to NewQuest's client representatives, Jay Sears, Kyle Lippman, and Steve Alvis. But Wisdom is an entity distinct from Connect and NewQuest. See Amneal Pharm., Inc. v. Cnty. of Dallas, 694 S.W.3d 875, 889 (Tex. App.—Houston [14th Dist.] 2024, no pet.) (“Texas law presumes that separate companies are distinct.”). The Lawyers’ acknowledgement that they owe fiduciary duties to their clients is not an admission that Wisdom is their client.

Because Wisdom failed to produce evidence sufficient to raise a fact question as to whether it was the Lawyers’ client, we affirm the portion of the judgment dismissing Wisdom's claims against the Lawyers for professional negligence and breach of fiduciary duty.

V. Conclusion

We agree with the trial court that Wisdom lacks standing to assert derivative claims on Connect's behalf; thus we overrule Wisdom's first issue. We likewise overrule Wisdom's second issue regarding Wisdom's direct claims, because Wisdom failed to produce evidence sufficient to raise a genuine issue of material fact as to at least one essential element of each claim or theory of liability. Finally, we overrule Wisdom's unbriefed third issue, which has been waived. We accordingly affirm the trial court's judgment.

FOOTNOTES

1.   There is evidence that Wisdom paid Whitlock's salary through September 30, 2015, and Wisdom characterizes Whitlock as a Connect employee whose salary was paid by Wisdom's charitable contributions, rather than a Wisdom employee whose services were donated to Connect.

2.   In the opinion, Kimberly Sterling Associates, Inc., is incorrectly identified as a law firm and its consultants referred to as lawyers. See id. at 535–36.

3.   The third issue appears as follows: “3. Whether the trial court erred by granting summary judgment on Appellant's ‘claim’ for commercial bribery when it is an issue for the award of (and limits on) exemplary damages under Tex. Civ. Prac. & Rem. Code § 41.008(c)(9). [Unbriefed].”

4.   See Tex. Bus. Orgs. Code § 21.552.

5.   We do not refer to civil conspiracy as a “claim” because it is not an independent cause of action but is instead a vicarious-liability theory allowing co-conspirators to be held jointly and severally liable for the injury from an underlying wrong. See Agar Corp., Inc. v. Electro Circuits Int'l, LLC, 580 S.W.3d 136, 140 (Tex. 2019).

6.   We address only those claims and liability theories for which Wisdom has presented some argument, for Wisdom has waived any challenge to the judgment concerning unargued claims and liability theories.

7.   See, e.g., Houston Baseball Partners, 627 S.W.3d at 423 (breach of contract must result in damage to plaintiff).

8.   See, e.g., Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 496 (Tex. 2019) (justifiable reliance on the fraudulent misrepresentation must cause the plaintiff injury).

9.   See, e.g., White v. Zhou Pei, 452 S.W.3d 527, 537 (Tex. App.—Houston [14th Dist.] 2014, no pet.) (plaintiff must be injured as a result of its reliance on the nondisclosure).

10.   See, e.g., Int'l Bus. Machines Corp. v. Lufkin Indus., LLC, 573 S.W.3d 224, 228 (Tex. 2019) (fraudulent inducement must cause the plaintiff injury).

11.   See, e.g., Elephant Ins. Co., LLC v. Kenyon, 644 S.W.3d 137, 144 (Tex. 2022) (negligence must proximately cause damage).

12.   Zhahong Wu v. Lumber Liquidators, Inc., No. 14-20-00765-CV, 2024 WL 3160554, at *16 (Tex. App.—Houston [14th Dist.] June 25, 2024, no pet. h.) (sub. mem. op. on reh'g) (gross negligence requires proof of simple negligence and two additional elements).

13.   See, e.g., Rogers v. Zanetti, 518 S.W.3d 394, 400 (Tex. 2017) (legal malpractice must proximately cause damage).

14.   See, e.g., Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000) (tortious interference with an existing contract must proximately cause actual damage or loss).

15.   See, e.g., Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013) (tortious interference with prospective contracts or business relations must proximately cause actual damage or loss).

16.   See, e.g., First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214, 222 (Tex. 2017) (civil conspiracy requires proof that an unlawful, overt act in furtherance of the conspiracy proximately caused damage).

17.   See ERI Consulting Eng'rs, Inc. v. Swinnea, 318 S.W.3d 867, 873 (Tex. 2010) (identifying profit disgorgement and fee forfeiture as equitable remedies for breach of fiduciary duty).

18.   See Tex. Bus. Orgs. Code § 1.002(9) (defining “contribution” as “a tangible or intangible benefit” that a member transfers to an entity, and includes “cash, services rendered, a contract for services to be performed,” and an “obligation of a person to pay cash or transfer property to the entity”).

19.   See, e.g., In re Estate of Poe, 648 S.W.3d 277, 281 (Tex. 2022).

20.   In its summary-judgment response, Wisdom stated that its “Connect-related expenses after August 31, 2015 were negligible, meaning [Wisdom] contributed most, if not all of [Connect's] Pre-Development expenses ․ before September 1, 2015.”

21.   Emphasis added.

22.   Compact Edition of the Oxford English Dictionary 2087 (Oxford University Press 1971).

23.   McLeod agreed that Wisdom “took it upon itself to pay these invoices or predevelopment expenses for Connect” and that she considered the payments a “grant” to Connect. But Wisdom also cites evidence that Sears nevertheless believed that because Wisdom paid the legal bills, Wisdom was the client. Wisdom does not contend that Sears or McLeod disclosed their respective beliefs to the Lawyers, and these conflicting views about the effect of the payments do not raise a question of fact because both are subjective. Neither belief is evidence that the Lawyers and Wisdom objectively manifested an intention to create an attorney-client relationship with one another.

24.   Converted to standard capitalization and emphasis added.

25.   Emphasis added.

Kevin Jewell, Justice