Appletree Square I Ltd. Partnership v. Investmark, Inc.

Minnesota Court of Appeals · 1993 · Corporations

494 N.W.2d 889 (1993)

Updated August 22, 2026

CorporationsLimited partnershipsFiduciary dutiesDisclosureFraudulent concealmentlimited partnershipfiduciary dutyduty to disclose

Facts

Appletree Square I Limited Partnership was formed to purchase and operate an office building, and the sellers held interests in the partnership when the 1981 building sale and 1985 partnership-interest transaction occurred. During the 1981 negotiations, the purchasers requested material information, and the sellers responded by directing them to inspect the building and records rather than identifying what might be material. In 1986, the purchasers learned that deteriorating asbestos-based fireproofing in the building was releasing fibers and that abatement would cost about ten million dollars. The purchasers sued, alleging that the sellers failed to disclose the presence and danger of the asbestos.

Issue

Whether partners' common law fiduciary duty to disclose material information is limited by Minn. Stat. § 322A.28(2) or by a partnership agreement requiring information to be provided only upon request, and whether the purchasers produced enough evidence of breach, reliance, and tolling to avoid summary judgment.

Rule

In a fiduciary partnership relationship, partners must disclose material facts to one another, and silence may constitute fraud. A limited partnership statute giving partners a right to obtain information upon reasonable demand addresses only the duty to respond to requests and does not eliminate the broader common law duty to disclose material information. Likewise, a partnership agreement cannot replace that broad disclosure duty with a mere duty to answer requests where doing so would destroy the fiduciary character of the relationship or invite fraud.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Phoenix, a limited partnership owns a shopping center. Nolan Pierce, a general partner, knows that a buried drainage line under the property has collapsed and will require a multimillion-dollar repair, but when incoming limited partner Maya Rios asks for anything material to her investment, Nolan replies only that she should review the files and inspect the property herself.

If Maya later sues for fraud by silence, which is the strongest argument against summary judgment for Nolan?

Explanation. The majority held that partners stand in a fiduciary relationship and therefore must disclose material facts to one another. That duty is broader than merely answering specific questions, and silence can constitute fraud where the partner knows material information. A direction to inspect does not automatically eliminate the duty or defeat reliance as a matter of law.