978-1285770178 Case Printout Case CPC-02-04 Part 2

184I Deception Constituting Fraud, and Liability Therefor

184k15 Fraudulent Concealment

184k17 k. Duty to Disclose Facts. Most Cited Cases

289k70 k. Nature of Obligation Between Partners. Most Cited Cases

Under Texas law, a duty to disclose information arises in a fiduciary relationship, such as a partnership, for purposes

of claim that failure to disclose information constituted fraud.

*174 Geoffrey Robert Unger, Juan M. Alcala (argued), Courtney Thornton Stewart, DLA Piper US, LLP, Austin,

TX, for McBeth and Reynolds.

Before KING, BENAVIDES and CLEMENT, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge.

ment for Defendants on that issue and setting aside the lost–profit award. All parties appeal. For the reasons set forth

below, we affirm.

FACTS AND PROCEEDINGS

In 2004, Carpenter entered into a contract with Austin Estates, L.P. (“Austin Estates”) for the purchase of property

Nevertheless, Carpenter assured the Plaintiffs that *175 these water service conflicts would not be a significant ob-

stacle to the purchase. Carpenter also set forth his interest in entering into a partnership agreement to purchase, de–

velop, and sell the Travis County property, and the investment opportunities involved in the transaction. Based on

these representations, on May 3, 2004, McBeth, Reynolds, and Carpenter executed a written agreement (“May

agreement”). The May agreement provided that McBeth and Reynolds would supply the earnest money to hold open

Management, as limited partners of the StoneLake partnership, assert similar arguments, stating that, as limited part-

ners they owed no fiduciary duty to either McBeth or Reynolds and did not breach this duty even if owed. After

careful review of the record and Texas law, we decline to disturb the jury’s verdict and affirm the district court’s

judgment.

[13] Under Texas law, managing partners owe trust obligations to the partnership, having a duty of loyalty and due

care as well as being under an obligation to discharge their duties in good faith and in reasonable belief that they are

acting in the best interest of the partnership. TEX.REV.CIV. STAT. Art. 6132b-4.04(b)-(d). Texas courts have long

held that “[i]t is axiomatic that a managing partner in a general partnership, owes his co-partners the highest fiduci-

ary duty recognized in the law.” Crenshaw v. Swenson, 611 S.W.2d 886, 890 (Tex.Civ.App.1980). “In a limited

partnership, the general partner acting in complete control stands in the same fiduciary capacity to the limited part-

partners-to the Plaintiffs, Texas law recognizes such obligations between limited partners, applying the same part-

nership principles that govern the relationship between a general partner and limited partners. Making no distinction

between the fiduciary duties of general and limited partners, the Texas Supreme Court has stated that “[f]iduciary

duties arise as a matter of law in certain formal relationships, including attorney-client, partnership, and trustee rela-

tionships.” Ins. Co. of No. Am. v. Morris, 981 S.W.2d 667, 674 (Tex.1998) (emphasis added) (evaluating claims

46-47 (Tex.App.2006) (affirming judgment awarding damages to limited partnership based on limited partner’s

breach of fiduciary duty).FN1

FN1. Texas Water Solutions and Texas Water Management maintain that limited partners owe no fiduciary

duties to one another, citing two unpublished Texas cases. Crawford v. Ancira, 1997 WL 214835

(Tex.App.1997) (unpublished); AON Props., Inc. v. Riveraine Corp., 1999 WL 12739 (Tex.App.1999) (un-

lutions and Texas Water Management and the evidence at trial showed that it was often unclear on whose

behalf Carpenter was acting in exercising control over StoneLake. Therefore, even accepting the argument

that fiduciary duties would not normally arise between limited partners, even AON Properties militates the

opposite conclusion due to the relationship between these parties.

mation does not constitute fraud unless there is a duty to disclose the information.” Bradford v. Vento, 48 S.W.3d

749, 755 (Tex.2001). A duty to disclose arises in a fiduciary relationship, such as a partnership. Morris, 981 S.W.2d

at 674.

Carpenter, Texas Water Solutions, and Texas Water Management renew their argument that they had no duty to

disclose information to Plaintiffs and therefore, as a matter of law, could not commit fraud. This assertion fails. As

discussed above, a fiduciary relationship existed between the parties. Thus, Defendants had an affirmative*180 duty

to fully disclose material information. We now review the record to determine whether Defendants breached this

duty or otherwise committed fraud.

tinued to assert no disclosure obligations, a reasonable jury could determine that Carpenter purposefully withheld or

mischaracterized the information regarding the property’s water rights based on his testimony that none was re-

quired. Evidence that these representations were material was presented to the jury when McBeth and Reynolds tes-

tified that they would not have entered the StoneLake partnership agreement if they had known the full extent of the

property’s water rights issues. McBeth and Reynolds indicated that they relied on Carpenter’s representations that the

ment and Texas Water Solutions.

CONCLUSION

The judgment of the district court is AFFIRMED.