Court Opinion

ID: 9763748
Source: CourtListenerOpinion
Date Created: 2023-08-29 02:54:49.833796+00
Date Added: 2024-06-11T07:29:49.342143
License: Public Domain

Melvin, J.,

dissenting:

Because I disagree with the result reached by the majority in this case, I respectfully dissent.
*390The graveman of the plaintiffs’ complaint against the defendant Dixon is that he breached his fiduciary duty to the limited partnership by "failing to inform Trinity [the limited partnership] that the ten acre tract was for sale and [by not] taking steps to purchase it for Trinity”, and that by purchasing the ten acre tract for his own account he wrongfully deprived Trinity of "a partnership opportunity.”
In my view, the plaintiffs failed to prove these allegations for the following reasons:
1. The purchase of the ten acre tract was beyond the scope of the purpose for which the partnership was formed. The written partnership agreement entitled "Trinity Joint Venture Limited Partnership Agreement,” clearly sets forth that the purpose of the partnership was to "hold, operate, improve and lease” only the specific 33.93 acres of real estate mentioned in the agreement. That it may have been advantageous to Trinity to own the extra ten acre tract does not enlarge that purpose. Thus, the availability of the ten acre tract was not a "partnership opportunity” within the meaning of that doctrine. It should be noted that Dixon did, acting in the best interests of the partnership, achieve the release of restrictions against the 33.93 acres of partnership property that had been imposed in favor of the ten acre tract.
2. Assuming that the availability of the ten acre tract presented a "partnership opportunity”, that availability was made known by Dixon to the only other general partner, Thomas I. Baldwin. Baldwin, who is not a named party to this action, testified in unequivocal terms that it would have been "ridiculous” for Trinity to have purchased the ten acres under the circumstances, citing the fact that the partnership was already in arrears on a $400,000 mortgage indebtedness, that the ten acre tract was not zoned for commercial development, and that to have acquired the ten acres and eliminated the road through the 33.93 acres would have required a substantial delay in the shopping center project. Dixon was of the same opinion. The partnership agreement provided that as general partners, Dixon and Baldwin, were to be "the managing partners of the Limited Partnership for the purposes of handling all transactions, directions and *391instructions in connection with the development of the property” (emphasis added), and that, "no Limited Partner shall participate in the management of the Partnership business.” There are no allegations of fraud or collusion on the part of either of the general partners. Thus, we have a situation where both managing partners, although fully aware that the ten acre tract was for sale, exercised their business judgment not to avail themselves of the opportunity to attempt to buy the property for Trinity. That the limited partners may disagree with that judgment is, in the absence of fraud or bad faith, totally irrelevant to the issues in this case.
Under these circumstances, I do not agree that Dixon’s failure to notify the limited partners that the ten acres were for sale, or that the acquisition of the ten acres by another entity in which Dixon had a controlling interest, constituted a breach of his fiduciary duty to the Trinity limited partnership or the individual limited partners thereof.
The majority’s reliance upon Meinhard v. Salmon, 164 N.E. 545 (N. Y. 1928) is misplaced. That case involved a dispute between general partners and not, as in this case, a dispute between limited partners and a general partner. I find nothing in Meinhard to support a holding that a general partner is guilty of breach of his fiduciary duty when he takes advantage of a partnership opportunity for his own account after the managing partners with knowledge of the opportunity decline for business reasons to take it for the partnership. See W. Fletcher, Cyclopedia of the Law of Private Corporations § 862.1 (rev. perm. ed. 1975).