December 10, 2007

Partners in construction ventures must offer substantive evidence to back up allegations of fraudulent inducement, breach of fiduciary duty, duress

RICKY HOLLOWAY ET AL. v. CYRIL EVERS, ET AL. (Tenn.Ct.App. December 7, 2007).

A contractor who was a partner in a subdivision development venture sold his interest to the other partners for $175,000. He subsequently filed a complaint against them alleging that they had deliberately taken advantage of his weak financial and physical condition to force him out the partnership. His complaint included claims for violation of fiduciary duty, duress and fraud. The trial court dismissed the contractor's claim on summary judgment. We affirm.

Opinion may be found at:

"We note that the Rules of Civil Procedure require that averments of fraud be stated with particularity. Tenn. R. Civ. P. 9.02; Black v. Black, 166 S.W.3d 699, 705 (Tenn. 2005). However,Mr. Holloway does not indicate in his pleadings nor in his argument on appeal exactly what material existing fact the defendants misrepresented at the time the partnership was formed that he reasonably relied upon to his injury, and we have not found any evidence in the record of any such misrepresentation." Id.

"We note that Mr. Holloway does not allege that Mr. Evers or Mr. Golden failed to account to the partnership for any property, profit, or benefit derived from the partnership, or that they dealt with the partnership on behalf of any party having an adverse interest to it, or that they competed with the partnership in the conduct of the partnership business. He also does not allege that either defendant engaged in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of the law. He does claim that Evers and Golden acted in their own interest, but that is specifically permitted by Tenn. Code Ann. § 61-1-404(e)." Id.

"Mr. Holloway argues that the defendants took advantage of his relatively
weak financial situation and some health problems he was experiencing to coerce him into selling his partnership interest, and that this likewise constituted duress of property. His allegations, in and of themselves, do not address the required elements of duress. Further, he has presented no evidence of any wrongful or illegal act by Mr. Evers or Mr. Golden or even improper external pressure. The financial and health problems he was facing were unfortunate and undoubtedly caused him stress. However, they were not caused by the defendants, and many people are required to make business and other decisions while facing such problems. There is simply no evidence that some action by the defendants deprived Mr. Holloway of his free will to make the best decision he could in the circumstances." Id.