601 S.W.3d 904
Tex. App.2019Background
- Regional Cancer Treatment Center, Ltd. (the Partnership) was a limited partnership managed by Shannon Medical Center (Shannon) and co-partner Triad Holdings III (Triad); the facility is leased from Shannon’s wholly owned subsidiary, Shannon Real Estate Services, Inc. (SRES).
- In 2012 Shannon (as managing partner) executed a lease amendment raising rent from about $16.00/sq ft to $31.04/sq ft by adding $11.79/sq ft claimed to amortize “specialized tenant improvements” (vaults) that Shannon knew were part of the building’s original 1988 construction.
- Triad sued Shannon derivatively (on behalf of the Partnership) and individually for breaches of fiduciary duties; Shannon sued for judicial dissolution of the Partnership after failing to obtain 75% voting control.
- A jury found Shannon breached duties (including statutory duty of care) and awarded the Partnership $572,725 (the amount of the alleged improper rent). The trial court also ordered Shannon to disgorge $572,725 to Triad individually and awarded attorneys’ fees and costs.
- On appeal the court affirmed denial of judicial dissolution and affirmed the Partnership’s actual damages award but reversed Triad’s disgorgement award (no evidence Shannon personally profited from rents paid to SRES) and remanded for relitigation of attorneys’ fees, costs, and expenses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of statutory duty of care to Partnership | Triad/Partnership: Shannon bound the Partnership to pay improperly charged rents and thus breached duty of care | Shannon: charge improperly mixed theories; duty disclaimed/authorized by partnership agreement; no evidence of breach | Court: charge valid; duty of care cannot be disclaimed; sufficient evidence Shannon acted without informed good-faith basis regarding rent increase; Partnership damages affirmed |
| Disgorgement to Triad (individual) | Triad: equitable disgorgement of $572,725 to Triad for Shannon’s breach | Shannon: excess rent was paid to SRES (distinct entity); no evidence Shannon personally profited; relief unpled | Court: reversed disgorgement — profit disgorgement requires proof of fiduciary’s profits and none was shown; Triad takes nothing individually |
| Judicial dissolution | Shannon: not reasonably practicable to continue under governing documents (deadlock; need judicial dissolution) | Triad: Partnership can operate and deadlock-breaking mechanisms exist; speculation is insufficient | Court: Shannon failed to conclusively prove impracticability; denial of dissolution affirmed |
| Attorneys’ fees, costs, and appellate fees | Triad/Partnership: prevailing-party fees and expenses awarded below; seek appellate fees unconditioned | Shannon: appellate fees must be conditioned on successful appeal; remand required if part of judgment reversed | Court: remanded for new trial on fees/expenses; any appellate fee award must be conditioned on successful appeal |
Key Cases Cited
- United Scaffolding, Inc. v. Levine, 537 S.W.3d 463 (Tex. 2017) (standard for reviewing jury-charge error and harmfulness)
- Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000) (error from commingling valid and invalid theories in broad-form liability questions)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standards for factual-sufficiency and legal-sufficiency review of evidence)
- Longview Energy Co. v. Huff Energy Fund LP, 533 S.W.3d 866 (Tex. 2017) (profit disgorgement limited to fiduciary’s profits from breach)
- ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010) (equitable disgorgement principles)
- Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455 (Tex. 1997) (corporate separateness — shareholder distinct from corporation)
- A.G. Edwards & Sons, Inc. v. Beyer, 235 S.W.3d 704 (Tex. 2007) (appellate-fee awards must be conditioned on successful appeal)