Harris v. Baham

417 So. 2d 1216, 1982 La. App. LEXIS 7574
CourtLouisiana Court of Appeal
DecidedJune 8, 1982
DocketNo. 5-29
StatusPublished
Cited by2 cases

This text of 417 So. 2d 1216 (Harris v. Baham) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Harris v. Baham, 417 So. 2d 1216, 1982 La. App. LEXIS 7574 (La. Ct. App. 1982).

Opinion

CHEHARDY, Judge.

This is a lawsuit by Wendell P. Harris, Jr.,1 a former partner of the defendants, to recover on a promissory note they gave him as payment for the purchase of his partnership interest. The defendants reconvened, alleging the plaintiff breached his fiduciary duty to them and that his conduct vitiated all agreements between the parties. Further, they sought to hold him liable for debts incurred by the partnership after the date his partnership interest terminated.

After trial of the matter, the district court ruled in favor of the plaintiff, granting him judgment in the amount of the promissory note, plus interest, attorney’s fees and costs. The reconventional demand was dismissed.

The defendants then filed a motion for new trial. In denying that motion, the trial judge stated, “This Court agrees that Wendell Harris owed a high duty to refrain from obtaining any personal advantage over his partners. Finding no breach of his duty, this Court must deny the Motion for New Trial.” Defendants have appealed.

The partnership, entitled “Woodland Terrace, Ltd.,” was formed in April 1972 by Albaro Martinez, Wendell Harris, Jr., Alvin Baham and W. Bruce North, Jr.2 Each partner had a 25% interest, and each was listed in the articles of partnership as both a general partner and a limited partner. The partnership agreement delineated no specific duties for the individual partners, [1218]*1218and stated the purpose of the partnership to be “acquiring, owning, improving, operating, managing or otherwise controlling real estate for the account of itself and for the beneficial interest of others.”

The underlying reason for the formation of the partnership was to obtain financing for development of an apartment complex in Baton Rouge, to be called Woodland Terrace Apartments. Partner Albaro Martinez was to be contractor on the project, through his construction company, Villa Homes. The partnership arranged interim financing for the project, and construction began in April 1972. By March 1973, the project was substantially complete and the city of Baton Rouge issued permits for partial occupancy.

During construction of the apartment complex, Wendell Harris was employed by Villa Homes for six or eight months as a $200-a-week laborer on the jobsite. In December 1972, his job was terminated by Jim Brown, Villa Homes’ job superintendent. In January 1973, Harris sold his partnership interest to the other three partners. The sale was conditioned upon the purchasers’ obtaining permanent financing for the property in the amount of $1.8 million. In exchange he received a cash payment plus two notes, for a total of $50,000 consideration. In addition, Harris received a hold-harmless and indemnification agreement from the partners.

In December 1973, Harris was contacted by one or more of the partners and was asked to renegotiate the sale of his interest, for they had been unable to obtain permanent financing in the amount planned. He agreed, and was given a new hold-harmless and indemnification agreement, $4,000 cash and an $18,000 promissory note, which is the note made the basis of this lawsuit. The note was due-on December 28, 1974; demand for payment was made in January 1975; and suit was instituted in September 1976.

The reason underlying the defendants’ refusal to pay the note is the discovery of extensive problems in the construction, requiring repairs costing approximately $102,-000.3 On appeal, the basic position of the defendants4 is that Harris, who lived in Baton Rouge and worked on the jobsite every day until his termination in December 1972, either knew or should have known of the deficiencies in the construction. They contend the sale of his partnership interest to them, without disclosure of the construction problems, was fraudulent and a breach of his fiduciary duty to the partnership. They accuse him, in effect, of profiting at their expense.

Alvin Baham was the only defendant partner available to testify at trial, since North was dead and Martinez was absent. According to Baham, Martinez had suggested in early planning for the complex that the contractor’s performance bond be waived, saying he would hire Harris to work on the job and there would not be any need for a bond. Baham testified his intention in making Harris a partner was so they could have someone in Baton Rouge to look after their interests. (Baham and North were residents of the New Orleans area.) He felt everyone’s interest would be protected by having two partners (Martinez and Harris) on the jobsite.

Baham himself was not in the construction business and had never been involved in a construction project. He admitted he never discussed details about the project regarding the specifications, although he visited the site about every six weeks and saw Martinez, Harris and Brown, the job superintendent, on those visits.

Baham testified he did not learn about the changes made in the specifications until the spring of 1974, when he began taking a [1219]*1219more active interest in the complex because of their problems in finding tenants. Oscar Kramer, a new manager of the complex, first brought the deficiencies to Baham’s attention.5

Baham said he had looked to Harris as a check and balance on Martinez, because he felt that Harris, in looking after his own interest, would be looking out for Baham’s as well. He admitted he never contracted with Harris to construct the apartments or to oversee the construction. He stated he had discussions with Harris as a partner to be sure everything was done in accord with the plans and specifications, but he could not recall the substance of those conversations. According to Baham, he understood — through Martinez — that Harris initiated the movement to buy out Harris’ interest in the partnership.

Harris testified that he was a licensed real estate broker, but had never worked on or been around construction such as this, and did not know anything about construction. He said he never read the plans and specifications for the project, and as far as he knew the construction was good. He knew there was no insulation in the walls and ceilings, but did not know it belonged there; he did not know what grades of lumber were used, or what sizes of flooring should have been used. He testified that he assumed he had been made a partner because they wanted somebody in Baton Rouge to represent them and to look after the project indirectly; however, he thought the architect was supposed to be inspecting the project. He testified it was not his job to keep an eye on anything. He denied that he ever represented to any of the other partners (meaning North and Baham) that the project was being built in accord with the plans and specifications.

Harris testified further that he sold his partnership interest, at Martinez’ request, after Martinez’ job superintendent terminated his job because, “I feel like I had been treated, you know, not consulted or anything like this, I figured, you know, just go ahead and sell it, sell my part.” He also denied that he had any authority at all to represent the partnership. He could not recall signing the building contract with Martinez, but admitted the signature on it was his. Similarly, he identified his signature on the Notice of Acceptance, but could not recall signing it.

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Related

Dunham v. Dunham
467 So. 2d 555 (Louisiana Court of Appeal, 1985)
Harris v. Baham
422 So. 2d 156 (Supreme Court of Louisiana, 1982)

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Bluebook (online)
417 So. 2d 1216, 1982 La. App. LEXIS 7574, Counsel Stack Legal Research, https://law.counselstack.com/opinion/harris-v-baham-lactapp-1982.