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Guerrero-McDonald v. Nassour

Court of Appeals of Texas, Eleventh District

March 16, 2017


         On Appeal from the 201st District Court Travis County, Texas Trial Court Cause No. D-1-GN-10-003822

          Panel consists of: Wright, C.J., Willson, J., and Bailey, J.



         This appeal concerns the standing of a limited partner to sue both the general partner and another limited partner after a failed real estate project. It also involves an application of the economic loss doctrine to preclude a recovery for negligent misrepresentation. We affirm in part and reverse and remand in part.

         Background Facts

         This limited partnership dispute arises out of an unsuccessful effort to revive a failed real estate development project. Mary Guerrero-McDonald initially partnered with the now-deceased Gene Fondren to develop a condominium project at 1701 Lavaca in downtown Austin. This initial project was called "1701 Lavaca LP." The initial project stalled due to monetary issues and Fondren's declining health.

         Guerrero-McDonald subsequently sought additional investors for the project. Guerrero-McDonald, Jimmy Nassour, Jim Mattox, and Pike Family Partnership, LP formed LaVista Partners LP for the purpose of acquiring and developing the project. Guerrero-McDonald converted her prior interests in the project into a thirty-five percent limited partnership interest in the newly formed limited partnership. The limited partners selected LaVista Partners - GP, LLC as the general partner of the limited partnership. H.M. Pike Jr. executed the partnership agreement on behalf of LaVista Partners - GP, LLC in his capacity as its manager.[1] Nassour also served as one of the initial managers of the general partner.

         The limited partnership failed after being unable to procure financing to complete the project. Guerrero-McDonald subsequently sued Appellees, LaVista Partners - GP, LLC (the general partner), and Nassour (another limited partner) for breach of contract, breach of fiduciary duty, fraud, and negligent misrepresentation.[2]The trial court granted Appellees' motion for summary judgment with respect to Guerrero-McDonald's claims for breach of contract, breach of fiduciary duty, and negligent misrepresentation.

         The case subsequently went to trial on Guerrero-McDonald's remaining claim for fraud. The trial court imposed a discovery sanction against Guerrero-McDonald by deeming a request for admission to be "admitted." The jury returned a verdict in favor of Appellees on the fraud claim. The trial court entered judgment that Guerrero-McDonald take nothing from Appellees. Guerrero-McDonald appeals the trial court's judgment in five issues.


         Guerrero-McDonald's first three issues concern the claims resolved by summary judgment. Additionally, Appellees present a cross-point raising six alternative grounds why the summary judgment should be upheld. Guerrero-McDonald's final two issues involve claims resolved at trial.

         We will address the summary judgment issues first. We review a summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). When the trial court's summary judgment order specifies the ground or grounds upon which it was granted, we generally limit our consideration to the ground or grounds upon which it was granted. See Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625-26 (Tex. 1996).


         The trial court's summary judgment order specified that it granted Appellees' motion for summary judgment on Guerrero-McDonald's claims for breach of contract and breach of fiduciary duty based upon its determination that she lacked standing to bring the claims. Guerrero-McDonald challenges these determinations by the trial court in her first (standing for breach of fiduciary duty claim) and second (standing for breach of contract claim) issues. Because Guerrero-McDonald's arguments are the same for her first two issues, we will address them together.

         Appellees asserted the issue of standing as a traditional summary judgment ground. A party seeking a traditional summary judgment bears the burden of showing that no genuine issue of material fact exists and that he is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005). Appellees asserted that they were entitled to summary judgment on Guerrero-McDonald's "breach of contract claims and breach of fiduciary duty claims because she lacks standing; the claims she asserts are for alleged injuries primarily suffered by the Limited Partnership."

         The Texas Supreme Court recently addressed standing in Linegar v. DLA Piper LLP (US), 495 S.W.3d 276 (Tex. 2016). "A party's standing to sue is implicit in the concept of subject-matter jurisdiction and is not presumed; rather, it must be proved." Id. at 279 (citing Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 445-46 (Tex. 1993)). "Standing is a question of law for the court to determine, although facts necessary to the determination may need to be determined by the factfinder." Id. Standing is a matter that concerns the jurisdiction of a court to afford the relief requested, rather than the right of a plaintiff to maintain a suit for the relief requested. Sneed v. Webre, 465 S.W.3d 169, 186 (Tex. 2015) (citing Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71, 76-77 (Tex. 2000)). As noted by the court in Linegar:

In Texas, the standing doctrine requires a concrete injury to the plaintiff and a real controversy between the parties that will be resolved by the court . . . . The plaintiff must be personally injured-he must plead facts demonstrating that he, himself (rather than a third party or the public at large) suffered the injury . . . . [The injury] must be concrete and particularized, actual or imminent, not hypothetical . . . . [T]he plaintiff's alleged injury must be fairly traceable to the defendant's conduct.... [And] the plaintiff's alleged injury [must] be likely to be redressed by the requested relief.

Linegar, 495 S.W.3d at 279 (quoting Heckman v. Williamson Cty., 369 S.W.3d 137, 154-55 (Tex. 2012)). The standing analysis begins with determining the nature of the wrong being alleged and whether there was a causal connection between a defendant's conduct and the injury caused by the alleged wrong. Id. Standing is assessed on a claim-by-claim basis. Id.

         The court in Linegar relied on its earlier decision in Wingate v. Hajdik, 795 S.W.2d 717 (Tex. 1990), and its progeny dealing with stockholder standing. 495 S.W.3d at 279. In Wingate, the court stated the general rule that "[a] corporate stockholder cannot recover damages personally for a wrong done solely to the corporation, even though he may be injured by that wrong." 795 S.W.2d at 719. The general rule does not preclude a stockholder from recovering damages for wrongs done to the stockholder individually, provided the wrongdoer violated a duty owed directly by the wrongdoer to the stockholder. Id. "However, to recover individually, a stockholder must prove a personal cause of action and personal injury." Id.

         Wingate addressed stockholder standing in a corporate context. However, its holding has been relied upon in other contexts when an individual stakeholder in another form of a legal entity seeks to recover personally, including situations where a limited partner attempts to bring a claim individually. See, e.g., Nauslar v. Coors Brewing Co., 170 S.W.3d 242, 250 (Tex. App.-Dallas 2005, no pet.) (citing Wingate for the proposition that "[a]n individual stakeholder in a legal entity does not have a right to recover personally for harms done to the legal entity"). Appellees rely upon a line of these cases from the Dallas Court of Appeals addressing the standing of a limited partner to assert a claim individually. See Hall v. Douglas, 380 S.W.3d 860, 873-74 (Tex. App.-Dallas 2012, no pet.); Nauslar, 170 S.W.3d at 249-50.

         Hall involved a limited partner who sued the limited partnership and other limited partners for breach of the partnership agreement and breach of fiduciary duty. 380 S.W.3d at 872. The limited partner sought "disgorgement" of partnership funds that he alleged were improperly transferred to a third party to pay non-partnership debts. Id. at 873. The court in Hall began its analysis of standing by noting that "[a] person has standing to sue when he is personally aggrieved by the alleged wrong." Id. at 872 (citing Nootsie Ltd. v. Williamson Cty. Appraisal Dist., 925 S.W.2d 659, 661 (Tex. 1996)). "Without a breach of a legal right belonging to a plaintiff, that plaintiff has no standing to litigate." Id. at 873. "Only the person whose primary legal right has been breached may seek redress for an injury." Id.

         The court held in Hall that "[a] limited partner does not have standing to sue for injuries to the partnership that merely diminish the value of that partner's interest." Id. (citing Swank v. Cunningham, 258 S.W.3d 647, 661 (Tex. App.- Eastland 2008, pet. denied); Nauslar, 170 S.W.3d at 250-51). The court held: "To distinguish between injuries suffered by a partnership, for which [the limited partner] lacks standing, and those suffered directly by [the limited partner], we must focus on the nature of the alleged injury." Id. at 874. The limited partner must be personally aggrieved in order to have standing to bring a claim individually. Id. (citing Nauslar, 170 S.W.3d at 249-51). The court concluded that, because the limited partner asserted that the defendants misappropriated the limited partnership's funds, the alleged harm was to the limited partnership alone, even though the economic impact of the alleged wrongdoing may have brought about reduced earnings, salary, or bonus to the limited partner. Id. at 873.

         The Texas Supreme Court subsequently addressed Hall's analysis in In re Fisher, 433 S.W.3d 523, 527 (Tex. 2014). Fisher also involved a limited partner seeking to recover damages individually in connection with a failed business venture. 433 S.W.3d at 525-27. The defendants in Fisher relied upon Hall to assert that the plaintiff did not have standing to assert his claims. Id. at 527. The court acknowledged Hall's holding that "[a] limited partner does not have standing to sue for injuries to the partnership that merely diminish the value of that partner's interest." Id. (quoting Hall, 380 S.W.3d at 873). However, the court also noted that Hall ...

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