Cude v. Couch

588 S.W.2d 554, 1979 Tenn. LEXIS 495

• Court: Tennessee Supreme Court
• Decided: October 22, 1979
• Status: Published

Opinions

OPINION

COOPER, Justice.

This case presents the single question of whether, in purchasing certain assets of a partnership upon its liquidation, Nathan Couch breached the duty that he owed to his partner, J. R. Cude. We conclude, as did both courts below, that he did not.

The partnership in question was formed by Couch and Cude in 1965 for the purpose of operating a laundromat. The partnership rented space for the business, on a month-to-month basis, from Couch, in a building that housed Couch’s car dealership. In 1973, Couch filed an action seeking to have the partnership dissolved. A receiver was appointed, and operated the laundry for several months. On court order, and after advertisement, the assets of the partnership, which consisted of the equipment of the laundry, were sold at public sale. At the time of the sale, Couch indicated that he would not lease the building to anyone who might want to continue to operate the laundry there, and thus the purchaser of the equipment would have to remove it from the premises. The equipment was ultimately purchased by one Louis Platkin for $800.00. Although it was not revealed at the time of the sale, Platkin was an agent of Couch. Couch and his son have continued to operate the laundromat at the same location.

Cude moved to set aside the sale, or in the alternative for damages, contending in essence that Couch had purchased the equipment clandestinely, at a value artificially depressed by his refusal to permit others to lease the premises, and that in doing so he had gained an unfair advantage in a transaction with the partnership, breaching his fiduciary duty to Cude. After a hearing, the trial judge denied the motion. However, he permitted Cude to file an amended counterclaim. Cude did so, and in it restated substantially the same claim for relief that had been raised in the motion. This counterclaim was heard by a second trial judge, upon both the record of the prior hearing and additional testimony. This second trial judge also denied Cude’s claim.¹ His judgment was affirmed by the Court of Appeals.

We agree with the several judges who have considered this case previously that Cude’s claim is without merit. We do not question that partners owe each other a fiduciary duty in all matters pertaining to the partnership, and that this duty continues while the partnership is being liquidated. See T.C.A. § 61-120. We simply do not believe that, on the facts shown here, Couch breached his duty to Cude. There is no doubt but that Couch had an inherent advantage throughout the dealings in question, as a result of his ownership of the property on which the laundromat operated. However, the record does not show that he used this advantage to force Cude out of the partnership. Absent such a showing, neither Couch’s refusal to permit others to lease the premises, nor the manner and price of his purchase of the equipment— which together form the basis of the petitioner’s complaint — can be termed improper. From the beginning of the partnership, Couch made it clear that he would not permit a lease of the property, in part to insure that the operation of the laundromat would not interfere with that of his car dealership, operating in the same building. The proof also shows that, at the time of the dissolution, Couch’s determination in this regard was strengthened by his belief that he might need to put the space to use for other purposes on short notice, either to expand his dealership, or to provide office space for his son’s medical practice. Under these circumstances, we cannot conceive that Couch’s admitted duty to his partner would require that he lease the premises against his own best interests, despite the fact that the laundry could not be sold as a going business without a lease. As to the manner in which Couch purchased the equipment, while we agree with the petitioner that it would have been better had Platkin disclosed his agency, there is no suggestion in the record that his failure to do so, of itself, prejudiced either the partnership or Cude. Neither can we find anything objectionable in the price that Couch paid for the equipment. It was greater than the amount that Cude, who also bid on the equipment owned by the partnership, deemed prudent to offer. There were no other bidders, which would seem to suggest that the value of the property on the open market was minimal. The price offered at a public sale is the best indication of an item’s worth. See Davis v. Davis, 149 Colo. 1, 366 P.2d 857 (1961); Bagg v. Osborn, 169 Minn. 126, 210 N.W. 862 (1926). Unquestionably, Couch had an advantage, divorced from the partnership, that made it more practicable for him to carry on the business of the partnership after dissolution than for others. However, the fact that Couch benefited from that circumstance harmed neither Cude nor the partnership, and breached his duty to neither. Cf. Davis v. Davis, 149 Colo. 1, 366 P.2d 857 (1961).

The decision of the Court of Appeals is affirmed. Costs will be taxed to the petitioner.

BROCK and HARBISON, JJ., concur. HENRY, C. J., and FONES, J., dissent.

1 . While this amended counterclaim was pending, J. R. Cude died. Since then, the action has been prosecuted by the administratrix of his estate, who is the petitioner before this court.