Cude v. Couch

Supreme Court of Tennessee · 1979 · Corporations

588 S.W.2d 554 (1979)

Updated August 22, 2026

CorporationsPartnershipsFiduciary dutiesDissolution and liquidationpartnershipfiduciary dutyliquidationpublic sale

Facts

Couch and Cude formed a partnership in 1965 to operate a laundromat in a building owned by Couch, with the partnership renting space from him on a month-to-month basis. After Couch sought dissolution in 1973, a receiver operated the business for several months and then sold the partnership's assets, consisting of the laundry equipment, at a public sale after advertisement. At the sale, Couch stated that he would not lease the building to anyone wishing to continue the laundromat there, so any purchaser would have to remove the equipment. The equipment was purchased for $800 by Louis Platkin, who was undisclosed at the time to be Couch's agent, and Couch and his son thereafter continued to operate the laundromat at the same location.

Issue

Did Couch breach the fiduciary duty he owed to his partner during liquidation by refusing to lease the premises to others and by purchasing the partnership equipment through an undisclosed agent at a public sale for a price allegedly depressed by that refusal?

Rule

Partners owe each other a fiduciary duty in matters pertaining to the partnership, and that duty continues during liquidation. But where one partner has an inherent advantage independent of the partnership, there is no breach absent a showing that the partner used that advantage to force the other partner out or otherwise prejudiced the partnership; refusal to lease one's own property against one's best interests and purchase of partnership assets at a public sale through an undisclosed agent are not improper on these facts without proof of resulting prejudice.

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

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

Lena Ortiz and Mark Ellison dissolved their Denver catering partnership after a court appointed a receiver to wind up the business. During the receiver's public sale of partnership kitchen equipment, Mark—who separately owned the warehouse where the business had operated—refused to rent the space to any outside bidder, and later bought the equipment through a friend who did not disclose the agency relationship.

If Lena sues Mark for breach of fiduciary duty based solely on these facts, what is the most likely result?

Explanation. The majority rule is that partners remain fiduciaries during liquidation, but no breach is shown merely because one partner uses an inherent, non-partnership advantage at a public sale. Absent proof that Mark used his ownership advantage to force Lena out or otherwise prejudice the partnership, neither the refusal to lease nor the undisclosed agency alone establishes liability.