ECONOMIC LOSS RULE BARS RECOVERY FOR BREACH OF FIDUCIARY DUTY THAT DUPLICATES BREACH OF AN EXPRESS CONTRACTUAL DUTY UNDER A PARTNERSHIP AGREEMENT

Victory Park Mobile Home Park v. Booher
Dallas Court of Appeals, No. 05-12-01057-CV (February 26, 2014)
Justices Francis, Lang-Miers, and Lewis (Opinion)
Booher and her two sisters had an oral partnership agreement for the operation of a mobile home park. Each partner was granted a monthly draw on partnership profits and, in addition, was entitled to use or collect rent on ten mobile home lots in the park. Booher began collecting rent on more than her ten allocated lots. The partners agreed Booher would pay the partnership additional compensation for these additional lots. And she did so for a time, but then stopped. So, the partnership quit paying Booher her monthly draw. A lawsuit followed, with Booher seeking her unpaid monthly draws and the partnership counterclaiming for breach of the partnership agreement and for breach of fiduciary duty based on Booher’s failure to remit payment for the additional lots on which she had been collecting rent. The trial court granted a direct verdict against the partnership’s breach of fiduciary duty claim for Booher’s failure to remit rent payments on the additional lots, and the Court of Appeals affirmed. Although it acknowledged that a general partnership agreement gives rise to fiduciary duties among the partners, the Court held the economic loss rule precluded the partnership’s claim for breach on these facts. The breach of fiduciary duty alleged by the partnership was simply Booher’s failure to pay amounts expressly required by the partnership agreement. Where the alleged fiduciary duty merely tracks such an express contractual obligation, the Court explained, the economic loss rule bars recovery in tort. In so ruling, the Court distinguished cases allowing recovery for breach of fiduciary duty where the breach went beyond the defendant’s failure simply to perform an express contractual duty.

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