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Fritchel v. White

Supreme Court of Wyoming

November 19, 2019

SUZAN D. FRITCHEL; ALEXANDRA J. WHITE, DREW ANN WHITE; GAVIN M. TERRY; ISAAC T. WHITE; JACOB A. TERRY; and KERRY P. WHITE, Appellants (Plaintiffs),
v.
MARCUS WHITE, in his capacity as the Personal Representative of the Estate of John E. White, and THE ESTATE OF JOHN E. WHITE, a/k/a JOHN EDWARD WHITE, Appellees (Defendants).

          Appeal from the District Court of Laramie County The Honorable Steven K. Sharpe, Judge.

          Representing Appellant: Robert J. Walker of Hickey & Evans, LLP, Cheyenne, Wyoming. Argument by Mr. Walker.

          Representing Appellee: Justin Newell Hesser of Hesser Law, LLC, Cheyenne, Wyoming. Argument by Mr. Hesser.

          Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

          BOOMGAARDEN, JUSTICE.

         [¶1] Appellants, a sub-group of limited partners in the John E. White Family Limited Partnership (the Limited Partnership), [1] filed a direct action against the Appellees[2] to remedy losses incurred when John E. White (the Decedent) disposed of the Limited Partnership's real property.[3] The Appellees moved to dismiss the complaint, arguing that the limited partners alleged derivative harms that had to be filed as a derivative action. The district court agreed and dismissed the complaint. Because the Decedent's property transaction injured the Limited Partnership, not the limited partners directly, Appellants must seek their remedy through a derivative action on behalf of the Limited Partnership. Consequently, we affirm.

         ISSUE

         [¶2] The Appellants raise two issues on appeal:

1. Did the [d]istrict [c]ourt err by failing to recognize an independent right of a limited partner of a partnership in dissolution, without a general partner, to bring a direct action against the former general partner; and
2. Did the [d]istrict [c]ourt err by failing to recognize that the Appellants pled separate and distinct injuries from those suffered by the partnership as a whole.

         [¶3] The dispositive issue is whether the Appellants' complaint asserts any facts which would entitle them to relief in the form of a direct action.

         FACTS

         [¶4] The Decedent created the Limited Partnership for estate planning purposes, gifting small ownership interests to his four children, their spouses, and his grandchildren (the Limited Partners). He was the sole general partner. The Limited Partnership held in its name real property in Pueblo, Colorado (the Pueblo Property), which it acquired in 1999. In February 2006, the Decedent, acting alone as the sole general partner, sold the Pueblo Property to Robert D. Kennedy for $600, 000 in a seller-financed transaction. The Limited Partnership retained a promissory note in its name for $545, 000, with a deed of trust over the property as security. More than two years later, in June 2008, the Decedent, again acting alone as the sole general partner, consented to Mr. Kennedy's sale of the Pueblo Property directly to William B. Gradishar and Tiffany Moruzzi. Mr. Gradishar and Ms. Moruzzi assumed the promissory note with the Decedent's consent.

         [¶5] The critical event for this appeal occurred in November 2012, when the Decedent, acting in his individual capacity, released Mr. Gradishar and Ms. Moruzzi from the "contract for deed purchase" and from "all real estate taxes, back payments, late payments charges, interest, etc." Instead of transferring the Pueblo Property to the Limited Partnership, however, Mr. Gradishar and Ms. Moruzzi deeded the Pueblo Property by quitclaim deed to Decedent in return for $30, 000.[4] At no point during this transaction did the Decedent reimburse or consult the Limited Partnership or its limited partners.

         [¶6] The Decedent died in November 2017 with the Pueblo Property in his estate. His estate plan-a combination of a pour-over will and a revocable trust-required distribution in equal shares to his four children. Per the terms of the Partnership Agreement, the Decedent's death constituted an event of withdrawal of the sole general partner- dissolving the Limited Partnership, and requiring it to wind up and terminate.

         [¶7] After discovering the transaction, all of the limited partners except the Decedent's children and two granddaughters, Sara L. White and Miranda J. White, filed a complaint, which focuses on the Decedent's transaction concerning the Pueblo Property and sets forth the same facts outlined above. In the complaint, Appellants allege they were injured because the Decedent never "reimbursed the [Limited Partnership], and by extension the [Appellants], for the [Limited Partnership's] lost income resulting from [the Decedent's] forgiving of the Promissory Note and taking back of the [Property] in his individual name." They allege four causes of action: Breach of Partnership Agreement; Breach of Fiduciary Duty; Constructive Fraud; and Conversion. Appellants also sought a Declaratory Judgment.

         [¶8] Appellees moved to dismiss the complaint because the Appellants failed "to allege any direct injury" to themselves and, instead, claimed a derivative injury to the Limited Partnership which must be brought in a derivative action. The district court granted Appellees' motion, and the Appellants timely appealed.

         [¶9] Additional facts are set forth below as necessary.

         STANDARD ...


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