Opinion ID: 1739967
Heading Depth: 1
Heading Rank: 3

Heading: Breach of Fiduciary Duty and Abuse of Right

Text: Defendants contend that Joseph should be denied the right to partition the property because he breached his fiduciary duty as trustee by dealing with trust property for his own interest while delaying rejection of his appointment as trustee. Defendants argue that Joseph violated his obligation to the trust by purchasing Lot C-9 for himself individually, from himself as trustee for one of the owners, in an obvious conflict of interest between his position as buyer and his fiduciary position for one of the sellers. [7] Even if we accept for purpose of argument defendants' assertion that we should disregard the corporate entity and treat the shareholders as owners of the property, that piercing of the corporate veil would be significant primarily in a suit to set aside Joseph's purchase of Lot C-9. Defendants' argument that Joseph purchased Lot C-9 from himself as trustee appears to have only marginal relevance as a defense in an action for partition by licitation of Lot C-7. The crucial problem which prompted our granting certiorari was the possibility that Joseph bought Lot C-9 (no matter whether that lot was owned by the trust or by a third party) while he deliberately delayed renouncing his appointment as trustee and prevented anyone from acting on behalf of the trust to compete for the property or to seek joint acquisition. Such a breach of fiduciary duty, if proved, could perhaps give rise to a claim for damages, or to an action to set aside the sale of Lot C-9, or to construing the purchase of Lot C-9 as an acquisition for the joint benefit of the minor. However, defendants did not seek any such relief in this action. [8] Any breach of fiduciary duty which may have been suggested in this record did not constitute a defense in this action for partition by licitation of Lot C-7. Defendants also contend that Joseph's right to partition should be denied because his severance of Lot C-9 from its former owners and from its relationship with Lot C-7, combined with the recorded lease and its purchase option, constituted an abuse of right. One may not exercise rights for the exclusive purpose of harming another or without serious and legitimate interest. See generally Cueto-Rua, Abuse of Rights, 35 La.L.Rev. 965 (1975). However, Joseph's exercise of his right to partition in this case is far different from a landowner's building an extraordinarily high spiked fence adjacent to a narrow landing strip for dirigibles for the purpose of forcing the strip owner to buy the adjacent land at an unreasonable price. Judgment of August 3, 1915, Cass. req., Fr., 1917 Recueil Periodique et Critique I 79. Here, defendants are in the situation of being an owner in indivision of property, which the co-owner seeks to have partitioned by licitation at a judicial sale at which no third party is likely to bid an amount near the appraised value of the property (when considered with a parking lot). This situation was created, however, when Joseph and Vincent spent substantial sums purchasing land and constructing a building without securing the use of Lot C-9 by purchase or long-term lease for use as a parking lot. If either co-owner immediately after the construction had sued for partition, the other co-owner would have found himself in exactly the same position, facing a judicial sale at which no third party would be likely to bid an amount approaching the value to the owners. The basic problem is that Lot C-7, then and now, is not nearly as valuable without the parking lot. [9] That difference in value was created by the action of Joseph and Vincent in 1975, not by Joseph's purchase of Lot C-9 in 1979. Defendants' situation did not change when Joseph acquired Lot C-9, because defendants never had any right of control as to the use of Lot C-9 (although the trust held ten per cent of the stock in the corporation which owned the property). Partition by licitation often results in harsh consequences to the co-owner in the less favorable economic position. Any possible abuse in this case, however, appears to be in relation to the circumstances surrounding the acquisition of Lot C-9, as discussed above, rather than to Joseph's exercise of his long-standing right to partition Lot C-7. Loss from that abuse may perhaps be the proper subject of a damage action, but does not constitute a ground for denial of the right to partition. For these reasons, the judgment of the court of appeal is affirmed. DENNIS, J., dissents with reasons.