Court Holds That Purchaser Of Partnership Property Was Not Liable For Aiding And Abetting A General Partner’s Breach Of Fiduciary Duty

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In Cohen v. Newbiss Prop., a limited partner sued a transferee of real property for aiding and abetting breach of fiduciary duty and conspiracy to breach fiduciary duty. No. 01-19-00397-CV, 2020 Tex. App. LEXIS 9190 (Tex. App.—Houston [1st Dist.] November 24, 2020, no pet. history). While the limited partners were suing the general partner, the defendants/transferees bought the property. The trial court granted the transferees’ motion for summary judgment, and the limited partners appealed.

The court of appeals held that “to prevail on his claim that the purchasers aided and abetted Dilick’s breach of fiduciary duty, Cohen must show that (1) Dilick committed a breach of fiduciary duty to Cohen, (2) the purchasers knew that Dilick’s conduct constituted a breach of his fiduciary duties, (3) the purchasers intended to assist Dilick in breaching his fiduciary duty, (4) the purchasers gave Dilick assistance or encouragement in his breach, and (5) the purchasers’ assistance or encouragement was a substantial factor in causing the tort.” Id.

The court of appeals affirmed the summary judgment on the aiding and abetting claim as there was not sufficient evidence to support multiple elements:

In this case, it is undisputed that the purchasers were not involved in anything Dilick and or his related companies may have done before the sales. Cohen’s only allegation is that the purchasers were aware of his dispute (and lawsuit) with Dilick before they purchased their properties. Cohen brought forth no evidence that either Sandcastle or NewBiss were aware of what Dilick intended to do with the proceeds from the sales. While the purchasers’ knowledge of the underlying lawsuit between Cohen and Dilick might deprive them of a bona fide purchaser defense in a title dispute, such knowledge, without more, is no evidence that they intended to assist Dilick in committing a tort by diverting the proceeds from the sales for his personal use, assisted and encouraged Dilick in doing so, or that their actions were a substantial factor in Dilick’s breach of his fiduciary duty. Because Cohen failed to come forth with evidence raising a genuine issue of material fact as to these three elements of his claim that the purchasers aided and abetted Dilick’s breach of fiduciary duty, the trial court properly granted the purchasers’ no-evidence summary judgment on this claim.

Id. The court also affirmed the dismissal of the conspiracy claim as there was no evidence of a meeting of the minds:

We agree with the purchasers’ argument that knowledge of the lawsuit between Cohen and Dilick is no evidence that there was any “meeting of the mind” between the purchasers and Dilick regarding Dilick’s intention to breach his fiduciary duty to Cohen. … [w]hile the purchasers may have known about Dilick’s breach of fiduciary duty to Cohen via the lawsuit, their only involvement was to pay fair market value for the properties. In this case, the underlying tort of breach of fiduciary duty was that Dilick sold the properties to pay off his own personal loan. However, there is simply no evidence that the purchasers had any knowledge about what Dilick intended to do with the proceeds once he sold the properties. In a civil conspiracy case, “the parties must be aware of the harm or wrong at the inception of the combination or agreement,” or there is no meeting of the minds. “One ‘cannot agree, either expressly or tacitly, to the commission of a wrong which he knows not of.'” Absent evidence that the purchasers knew that Dilick intended to misappropriate the proceeds of the sale for his own personal use, they cannot have, as a matter of law, intended to facilitate that wrong.

Id.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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