Opinion ID: 2123601
Heading Depth: 1
Heading Rank: 4

Heading: Robert Schroer

Text: In 1970, Robert Schroer consulted the accounting firm in which Lurie was a partner for advice in connection with Green Giant Company's purchase of Schroer's garden center business. Schroer dealt with Lee Sudit, one of the partners in the firm. In August or September 1971, Schroer and Sudit discussed methods of sheltering some of Schroer's income from taxation. In September or October 1971, Sudit suggested Stone House to Schroer as a tax shelter investment. Schroer and Sudit did not discuss the subject of risks to the investment. During another meeting, Sudit pointed out to Schroer the projected tax deferments listed on the Stone House pro forma statement. At this time Schroer decided to invest in Stone House. He testified that in making that decision he relied on the statements made to him by Sudit. After Schroer received the partnership agreement, he signed it and sent it to Lurie. He did not read it before he signed it. To establish either third-party defendant's liability to him for the tort of fraudulent misrepresentation, each third-party plaintiff was required to show (1) that the third-party defendant made to him a false representation of a past or present fact which was material and susceptible of knowledge, (2) that the third-party defendant either knew the representation was false or made it without knowing whether it was true or false, (3) that the third-party plaintiff intended to induce him to act in reliance on the representation, (4) that he was justified in so acting, and (5) that he suffered resulting damage. Weise v. Red Owl Stores, Inc., 286 Minn. 199, 202-03, 175 N.W.2d 184, 187 (1970). [5] None of the representations Lurie is alleged to have made meets this test. The trial court was therefore correct in directing a verdict for Lurie with respect to third-party plaintiffs' claims against him for fraudulent misrepresentation. Initially, we can dispose of third-party plaintiffs' contention that Lurie is liable for fraudulent misrepresentation because he represented Stone House as a partnership in which a partner's personal liability for partnership debts was limited to the amount of his capital contribution  or, in other words, as a limited partnership. No third-party plaintiff claims Lurie told him Stone House was a limited partnership. Assuming that certain statements Lurie made regarding the extent of a Stone House partner's liability for partnership debts may be viewed as representations of Stone House as a limited partnership, a jury could not reasonably find that any third-party plaintiff was justified in acting in reliance on such representations. From Article XV of the partnership agreement it is clear that a partner could be called upon to provide funds in addition to his capital contribution in order to satisfy debts of the partnership. Lerner knew this and clearly did not act in reliance on any representation to the contrary. If either Palmer, Peterson, or Schroer relied on such a representation, his reliance was not justified. In Weise v. Red Owl Stores, Inc ., we held that where a party makes a representation which a signed document contradicts, the person to whom the representation was made is justified in relying upon it where the document    is couched in ambiguous legal language which a layman could reasonably believe supported the representation. 286 Minn. at 203-04, 175 N.W.2d at 187. Furthermore, [f]raud is proved with reference to the specific intelligence and experience of the aggrieved party rather than a reasonable-man standard. Murphy v. Country House, Inc., 307 Minn. 344, 351, 240 N.W.2d 507, 512 (1976). Palmer, Peterson and Schroer are educated and literate men. [6] Schroer is a successful businessman. Palmer and Peterson had had investment experience prior to their investments in Stone House. Each was mailed a copy of the partnership agreement and asked for his questions or comments concerning it. Each had ample time to read the partnership agreement before signing it. Although Peterson and Schroer did not read the partnership agreement, and Palmer merely browsed through it, they cannot now be heard to claim they had no knowledge of its contents. The partnership agreement unambiguously discloses that a partner's personal liability for debts of the partnership is not limited to his capital contribution. A jury could not reasonably find that third-party plaintiffs were justified in relying on oral representations contradicting the partnership agreement. Third-party plaintiffs also allege Lurie is liable for fraudulent misrepresentation because he represented Stone House as a more sound investment than it actually was. Lurie's statements in this regard are expressions of opinion concerning the likely effect of future events on an investment in Stone House, not representations of past or present facts. Although a statement of opinion as to future value does not generally give rise to an action for fraud, such a statement may be actionable if the one making the statement is relied upon for his expertise with respect to the subject of the statement. Kennedy v. Flo-Tronics, Inc., 274 Minn. 327, 329, 143 N.W.2d 827, 828 (1966). [7] Lurie has special expertise in accounting and tax planning; he also held himself out as an investment advisor. He was bound to exercise care in recommending a particular investment, but he cannot have been expected to guarantee its soundness. Third-party plaintiffs were aware that the success of Stone House as a business venture was dependent upon the market price of cattle. In 1971, the market price of cattle was increasing, and the evidence suggests that at that time Stone House was a sound investment. [8] Stone House failed because from early 1974 until early 1975 the market price of cattle fell catastrophically. It would be unreasonable, in our view, for a jury to find that in 1971 Lurie could have foreseen this occurrence. Moreover, even if Lurie could have done so, it is unlikely that his failure to apprise third-party plaintiffs of that risk was the proximate cause of their loss. Wert advised the partners to liquidate the partnership at a time when the loss would have been considerably less than the loss that ultimately resulted, but the partners refused to follow his advice. 2. The trial court was also correct in directing a verdict for Wert with respect to third-party plaintiffs' claims against him for fraudulent misrepresentation. Wert made no oral representation to any third-party plaintiff. He did have a part in preparing the pro forma statement, but there is no evidence that the financial projections contained in the pro forma statement inaccurately reflected past or present circumstances. Therefore, it is not actionable. Berg v. Xerxes-Southdale Office Building Co., 290 N.W.2d 612, 615 (Minn.1980). 3. Third-party plaintiffs also argue that Lurie had a duty to disclose to them the material fact that Stone House was not a limited partnership. [9] Although the general rule is that one party to a transaction has no duty to disclose material facts to the other, and exception to this rule is made when the parties are in a fiduciary relationship with each other. Klein v. First Edina National Bank, 293 Minn. 418, 421, 196 N.W.2d 619, 622 (1972). `A fiduciary relation exists when confidence is reposed on one side and there is resulting superiority on the other; and the relation and duties in it need not be legal but may be moral, social, domestic, or merely personal.' Kennedy v. Flo-Tronics, Inc., 274 Minn. at 331, 143 N.W.2d at 830 (quoting Stark v. Equitable Life Assurance Society, 205 Minn. 138, 145, 285 N.W. 466, 470 (1939)). We think it clear that a jury could not reasonably find that a fiduciary relationship existed between Lurie and either Palmer or Lerner. The evidence demonstrates that Lurie's role with respect to Lerner and Palmer was that of a salesman selling an investment interest to a willing buyer. That Palmer and Lerner did not place their trust in Lurie is indicated by the fact that each consulted his own attorney with regard to the transaction. Lerner, moreover, admitted that he understood the extent of his liability as a partner in Stone House. The question whether a jury could reasonably find a fiduciary relationship between Lurie and either Peterson or Schroer is a closer one. Assuming, for the sake of argument, that a jury could reasonably find such relationships, it nevertheless could not reasonably find that Lurie breached the duty imposed on him by either relationship. A fiduciary's duty must be defined with reference to the experience and intelligence of the person to whom the duty is owed. Peterson and Schroer are educated individuals who had had experience in business and investment matters prior to their investments in Stone House. They cannot have been unaware of the importance of reading a legally binding document before signing it. The Stone House partnership agreement disclosed the extent of a partner's liability for debts of the partnership, and Lurie was entitled to expect that Peterson and Schroer would read the partnership agreement. He therefore did not breach his duty to disclose the material fact that Stone House was not a limited partnership. [10] 4. As the managing agent of Stone House, Wert owed the partnership a fiduciary duty. Third-party plaintiffs allege that Wert breached this duty by failing to keep them informed of Stone House's deteriorating financial condition. The trial court concluded that Wert discharged his duty to the partnership by keeping Lurie informed of his activities in managing the partnership business. We agree with the trial court's conclusion. Minn.Stat. § 323.11 (1978) provides: Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter, acquired while a partner or then present to his mind, and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner. There is no evidence in the record to suggest that Lurie and Wert were attempting to defraud Stone House during the period of its existence. There is ample evidence demonstrating that Wert kept Lurie fully informed of his activities in managing Stone House. Moreover, other partners not parties to this lawsuit were present at partnership meetings at which Wert described the status of the partnership business. At least Palmer, Lerner, and Peterson periodically received letters inviting them to attend these meetings. At a meeting in 1974, Wert recommended liquidation of the partnership. If his recommendation had been followed at that time, the partnership deficit would have been substantially less than it was when liquidation finally took place. The judgment of the trial court is affirmed. TODD, J., took no part in the consideration or decision of this case. AMDAHL, J., not having been a member of this court at the time of the argument and submission, took no part in the consideration or decision of this case.