Bossier v. Lovell

• Decision Date: 03 February 1982
• Docket Number: No. 8565,8565
• Citation: Bossier v. Lovell, 410 So.2d 821 (La. App. 1982)
• Parties: L. H. BOSSIER, et al., Plaintiffs and Appellees, v. S. Mark LOVELL, et al., Defendants and Appellants.
• Court: Court of Appeal of Louisiana

Page 821

410 So.2d 821

L. H. BOSSIER, et al., Plaintiffs and Appellees, v. S. Mark LOVELL, et al., Defendants and Appellants.

No. 8565.

Court of Appeal of Louisiana, Third Circuit.

Feb. 3, 1982.

Rehearing Denied March 23, 1982.

Trimble & Associates, J. Michael Percy, Alexandria and Beard, Arceneaux & Sutherlan, Roy L. Beard, Shreveport, for defendants-appellants.

Gary & Field, Thomas R. Elkins and Russell L. Dornier, Baton Rouge, for plaintiffs-appellees.

Before DOMENGEAUX, DOUCET and LABORDE, JJ.

DOUCET, Judge.

This is a dispute among partners in a partnership in commendam named Quinn-L Corporation. Defendant-Appellant S. Mark Lovell, allegedly attempted to alienate partnership property without the authority of and to the detriment of the limited partners. Plaintiffs are limited partners who seek injunctive relief to block the sale of the partnership assets by the defendant general partners Lovell and Quinn-L Corporation on the basis that the latter parties' actions constitute a breach of their fiduciary and partnership agreement duties. From a judgment in favor of plaintiffs, defendants appeal. We affirm.

On February 18, 1974, a limited partnership known as "The Pines Apartments" was formed by execution of an "Agreement for Partnership in Commendam". Subsequently, plaintiffs-appellees, Mr. L. H. Bossier and his corporations L. H. Bossier, Inc. and Alexandria Construction Company, became interested in investing in the partnership as commendam or limited partners and the Articles were amended to effect certain changes including a renaming to "Quinn-L Corporation-1974". Thereafter, on June 17, 1974, the partnership agreement was amended to actually admit the appellees into the partnership and limit their liability therein.

In due course the enterprise built and operated one phase of an apartment complex known as "Tanglewood Terrace" near the City of Pineville, Louisiana. Due to poor market conditions, insufficient income was generated to meet expenses and the result thereof was a substantial tax shelter to the partners who were able to deduct their respective share of business expense, operating loss, and depreciation. Six years later the apartments were renting well, however, due to the structure's age certain improvements were required. According to defendant Lovell, the tax benefits are close to being exhausted and the partnership will begin to show an income, thereby terminating the tax shelter. The project had reached what Lovell referred to as the "cross-over point", and consequently he desired to restructure the partnership.

In September of 1980, Mr. Lovell met with Mr. Bossier concerning the restructuring of the partnership by admission of new partners and capital. The proposal was rejected. His restructuring plans having failed, Mr. Lovell felt at liberty to dispose of the partnership property. Accordingly, he entered into an agreement with a syndicate he had organized from the investors who proposed to buy into the partnership. On September 26, 1980, an "Agreement for Sale" was signed between said parties with a purchase price fixed at $1,780,000-an amount representative of the true value according to defendant Lovell. The limited partners opposed the sale, maintaining that the purchasers, Q-L Investments, Inc. and Quinn-L Investments, Inc. are wholly owned by Lovell, and that the sale was to his personal advantage and allowed him to recoup loans advanced.

In October of 1980, a meeting was held by the commendam partners, without notice to the general partners, whereat the general partners were purportedly removed and the limited partners withdrew their power of attorney to sell real estate of the partnership. Thereafter, on November 11, 1980, another meeting was held, again without notice to the general partners, and the articles were allegedly further amended to prohibit the sale of property belonging to the partnership without the approval of the commendam partners.

On December 31, 1980, the partners in commendam filed suit alleging that the general partners had arranged to sell the partnership assets in violation of both the partnership agreement as amended, and fiduciary obligations, and sought injunctive relief prohibiting the sale. A temporary restraining order was obtained. The general partners responded with an Exception of No Cause of Action and a Motion to Dissolve the Temporary Restraining Order wherein damages for wrongful issuance were sought. Said pleadings alleged insufficient facts to justify injunctive relief and lack of a showing of irreparable harm. Plaintiffs then amended their Petition, alleging fraud on the part of the general partners, to which amendment the defendants filed a Motion to Strike such allegations of fraud.

All matters were consolidated for trial upon hearing of the Rule for Preliminary Injunction. The trial court found that the general partners' decision to sell the apartment project, which was the only asset of the partnership, violated a fiduciary duty owed the commendam partners and further violated the partnership agreement. Additionally, the trial court held that no demonstration of irreparable harm was necessary for the issuance of either the Temporary Restraining Order or the Preliminary Injunction as he found the actions plaintiffs sought to enjoin were reprobated by law.

The issues presented for consideration on appeal are whether the general partners had the legal authority to sell immovable property of the partnership without the approval of all partners and whether the grant of injunctive relief was proper.

The trial judge, in his well reasoned opinion, noted that the sole purpose of the partnership was to build and operate an apartment complex in Pineville. (Article 3 of the Partnership Agreement). He further recognized that Article 29 provided that the general partners may not do any act which would make it impossible to carry on the ordinary business of the partnership without the written consent of all partners. ¹ Additionally, Article 7 commends that the partnership shall not engage in any other business without the consent of all partners. Nonetheless, S. Mark Lovell, in his capacity as general partner, entered into a purchase agreement to sell the apartments to a corporation owned by himself, apparently relying upon Article 22(a)(i) which permits general partners the authority to sell or otherwise convey all or any portion of the partnership property. The trial judge noted that the aforementioned article created an ambiguity in the agreement inasmuch as it allows the general partners absolute authority to sell all partnership property notwithstanding that such would make it impossible to carry on the business of the partnership. He resolved the conflict by construing Article 22 as tempered by Articles 3, 7, and 29; a construction which would lead to no absurd consequences. Consequently, the action of defendants was not only a breach of fiduciary but also contractual duties. We agree and incorporate herein the following portions of the trial judge's opinion:

"It goes without saying that the relation among partners is fiduciary in character and imposes on the members of the firm the obligation of upmost (sic) good faith in their dealings with one another with respect to partnership affairs, of acting for the common benefit of all partners in all transactions relating to the firm business; and of refraining from taking any advantage of one another by the slightest misrepresentation, concealment, threat, or adverse pressure of any kind. Henley v. Haynes, 376 So.2d 1030 (La.App. 1st Cir. 1979), writ denied, 377 So.2d 843; W. A. McMichael Construction Co. v. D. & W. Properties, Inc., 356 So.2d 1115 (La.App.2d Cir. 1978), writ denied, 359 So.2d 198 (La.); See also: LRS 9:3801(2); Comment, Symposium: A Survey of Louisiana Law of Partnerships ; Part III, Rights and Obligations of Partners, 45 Tul.L.Rev. 367, 378-381.

Even with the deletion of those portions of paragraph 29 giving the in commedam (sic) partners a "veto" of the sale of partnership immovables, the actions of the general partners, in attempting the sale in the manner in which they had breached the partnership agreement. Paragraph one of Article 29 states that "(t)he General Partners may not, without the written consent of all of the Partners, do any act ... which would make it impossible to carry on the ordinary business of the Partnership..."

Articles 3, 7, and 22 make it clear that the only purpose of Quinn-L-1974 was to perate (sic) the Tanglewood Apartment complex. With these restrictions, it becomes patently obvious that by selling the apartment complex, the partnership could not possibly carry out its stated purpose. Furthermore, the clear intent of the general partners was to squeeze out the plaintiff partners. While the factual situations are not exactly analagous, the reasoning behind the Noe v. Roussel decision applies here. "... (A)n agent who acquires his principal's property, or one who otherwise acts in a fiduciary capacity, bears the burden of establishing that the transaction was an arm's length affair. This means that the agent or fiduciary must handle the matter as though it were his own affair. It also means the agent or fiduciary may not take even the slightest advantage, but must zealously, diligently and honestly guard and champion the rights of his principal against all other persons whomsoever, and is bound not to act in antagonism, opposition or conflict with the interest of the principal to even the slightest extent." 310 So.2d 806, 818 (La.1975).

It appears elementary that an agent, acting in that capacity, who purports to sell his principal's property to another entity organized and controlled by himself, especially where his principals are not specifically advised of the proposed sale and/or all the pertinent details, has an extraordinary burden of proving such a transaction was done at arms length and for the benefit of his principal. D...