Opinion ID: 2284361
Heading Depth: 4
Heading Rank: 2

Heading: Beckman: Failure of Proof of Injury

Text: Beckman contends that the remedy of an accounting nullifies a legal claim for fiduciary breach by cancelling out any special damages: the plaintiff can prove no injury in fact when he has a right to recover in equity. We reject this contention. First, contrary to Beckman's claim, a breach of fiduciary duty arising from a failure to render an account is not a novel theory of tort recovery. The Partnership Act recognizes a partner's duty to account as a trustee to the partnership for any profits derived without the consent of the other partners in any transaction connected with the conduct or liquidation of the partnership. D.C.Code § 41-120(a). Considering this statutory scheme, it is not startling that a refusal to wind up and to account for profits received during the liquidation phase should be treated as a fiduciary breach. Cases cited earlier involving retention of legal fees received by former partners after dissolution for unfinished business of the partnership follow the sound rule that each partner has a clear duty to wind up unfinished business for the partnership's benefit. E.g., Ellerby, supra, 138 Ill.App.3d at 80-81, 92 Ill.Dec. at 605, 485 N.E.2d at 416; Rosenfeld, supra, 146 Cal.App.3d at 216-17, 194 Cal.Rptr. at 189-90. In completing unfinished business, each partner remains accountable as a fiduciary to the former partners, Resnick, supra, 49 Md.App. at 506-07, 434 A.2d at 587, and any diversion of benefits for the former partner's own personal or professional gain is also a breach of fiduciary duty. See Rosenfeld, supra, 146 Cal.App.3d at 217, 194 Cal.Rptr. at 190. [41] The present case thus involves no unheard-of new tort, but rather a failure to observe the duties of loyalty and fair dealing that partners have been recognized to owe one another for centuries. [42] Second, Beckman is incorrect in assuming that the availability of equitable remedies renders it impossible to make out a prima facie case in tort. Once some injury for which the law provides a remedy has been pleaded and proven, tort damages quantify and compensate the harm suffered by the plaintiff. W. PROSSER & W. KEETON, THE LAW OF TORTS, § 1, at 5-6 (5th ed. 1984). Beckman correctly notes that a breach of fiduciary duty is not actionable unless injury accrues to the beneficiary or the fiduciary profits thereby. Day v. Avery, 179 U.S.App.D.C. 63, 74 n. 56, 548 F.2d 1018, 1029 n. 56 (1976), cert. denied, 431 U.S. 908, 97 S.Ct. 1706, 52 L.Ed.2d 394 (1977). The trial court here concluded that compensatory damages in tort were co-extensive with the amount to which it found Farmer entitled in the accounting. Injury quantified as damages flowing from a breach of a fiduciary duty to wind up and account may equal the amount determined to be due in an accounting, but it hardly follows that no injury in fact occurred just because it is redressable in equity. It is basic that the same set of facts can support claims for legal and equitable relief, and that these claims may be tried in the same action. Indeed, Boyle and Wright appear to contemplate and encourage trial of legal causes in the same action as the accounting. Boyle, supra, 64 A.2d at 430 (rule that accounting must precede trial of legal claims is no ground for dismissing suit for wrongful conversion of partnership funds and fraudulent breach of duty; separate action for accounting was not necessary; it could have been had in the same cause); Wright, supra, 107 A.2d at 704 (even if partner's suit against co-partner for contribution for payment of partnership debt did not fall within single transaction exception to exclusivity rule, claim should not have been dismissed because accounting and legal claims could be tried in same action). Moreover, it is not difficult to conceive of situations where harm flowing from a breach of a partner's duty to wind up and account results in damages that would go unredressed solely in an equitable action for an accounting. As the jury found in this case, harm may be willful or malicious enough to provide a basis for punitive damages. And while punishment and deterrence may be proper goals of civil damages in certain limited circumstances, Harris v. Wagshal, 343 A.2d 283, 288 n. 13 (D.C.1975), it is not the role of courts of equity to punish wrongful conduct. See Stern v. Lucy Webb Hayes Training School for Deaconesses & Missionaries, 381 F.Supp. 1003, 1018 (D.D.C. 1974); SCRAP v. United States, 353 F.Supp. 317, 322 (D.D.C.), vacated on other grounds, Aberdeen & Rockfish R. Co. v. SCRAP, 414 U.S. 1035, 94 S.Ct. 532, 38 L.Ed.2d 326 (1973). [43]