Opinion ID: 1830892
Heading Depth: 1
Heading Rank: 5

Heading: the setting aside of the several agreements between dtk and burgess mining and burgess brothers

Text: Central to the resolution of this appeal is a determination of the extent to which DTK could be bound under contracts found by the special master to be financially detrimental to the partnership. Burgess Mining and Burgess Brothers maintain either that Lees is estopped to contest the matters he complains of, or that he has ratified them by his acquiescence. Alternatively, they assert that one partner may not sue and recover damages from third parties based upon action taken by a majority of the partners and that the contracts entered into by W.E. Prescott as managing partner of DTK are binding and enforceable. This Court has held that [p]artners, in all the scope of the partnership business, in all dealings with others as to the partnership affairs or property, stand in a fiduciary relation, the one to the other, and are bound to the uberrima fides of such relation. Bestor v. Barker, 106 Ala. 240, 250, 17 So. 389, 392 (1894); see also § 10-8-48(a). In Goldsmith v. Eichold Bros. & Weiss, 94 Ala. 116, 10 So. 80 (1891), Justice Stone expressed the characteristics of the special relationship among and between a partnership's members, which he said renders it eminently a relation of trust: All its effects are held in trust, and each partner is, in one sense, a trustee; a trustee for the newly created entity, the partnership, and for each member of the firm, who thus becomes a beneficiary under the trust. He is more; he is a trustee, and a cestui que trust. A trustee, so far as his own duties bind him; a cestui que trust, so far as duties rest on his co-partners. And it is sometimes said that each partner is both a principal and an agent; a principal, to the extent he represents his own interest, but an agent only so far as he represents his own co-partners. 94 Ala. at 119-120, 10 So. at 81. Likewise, the fiduciary responsibility of a managing partner to the other members of a partnership is particularly stringent; he must under all circumstances conduct business in the best interest of the partnership. 68 C.J.S. Partnership § 76 (1950); see also Belcher v. Birmingham Trust National Bank, 348 F.Supp. 61, 99 (N.D.Ala.1968). Further, while it is acceptable for a partner to do business with his own firm, 68 C.J.S. Partnership, § 100 (1950), he may not act so as to derive a secret profit in the transaction even though his motives be pure, unless the other members have assented to the transaction or unless the transaction is entirely free from unfairness on his part. Id. at 539; see also Belcher, supra, 348 F.Supp. at 115. Irrespective of whether W.E. Prescott was in fact the managing partner or the arguments that ratification, estoppel, and majority rule make the various agreements binding upon Lees and DTK, the special master was authorized, by virtue of the circumstances and relationships involved, to vitiate those contractual arrangements which were consummated without the absolute good faith of A.E. Burgess and W.E. Prescott. The Court, therefore, finds no error on the part of the circuit court in accepting the special master's recommendation that all agreements between DTK and Burgess Mining or Burgess Brothers be set aside.