Oakhill Associates v. D'Amato

Supreme Court of Connecticut · 1994 · Corporations

228 Conn. 723 (1994)

Updated August 22, 2026

Corporationsfiduciary dutypartnershipfiduciary relationshippartnersburden shiftingclear and convincing evidencefair dealing

Facts

Oakhill Associates was formed by D'Amato and three others, and Oakhill orally agreed with D'Amato Construction to develop a building site without profit, charging only labor, materials, and a proportion of overhead. D'Amato was a majority shareholder, principal, officer, and director of D'Amato Construction and controlled its affairs, while also being a partner in Oakhill. Oakhill later sued, alleging that the defendants charged excessive amounts and failed to minimize costs; Oakhill's expert estimated reasonable costs at $208,000, while the defendants' expert identified omitted items that brought the figure reasonably close to the approximately $298,000 charged. The trial court found the experts equally credible and ruled that Oakhill had failed to carry its burden on all counts, including breach of fiduciary duty.

Issue

When a partner with a fiduciary relationship is accused of charging excessive amounts through a controlled corporation, is the trial court's failure to place on that fiduciary the burden of proving fair dealing by clear and convincing evidence harmless because the plaintiff failed to prove damages? More specifically, is the error harmless where the same evidence bears on both liability and damages?

Rule

Proof of a fiduciary relationship shifts to the fiduciary both the burden of proof and the obligation to establish fair dealing by clear and convincing evidence. Where, in a fiduciary-duty case, damages are measured by the amount of unjustifiable charges or profits retained and thus are intertwined with liability, misallocating that burden on liability is not harmless.

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

In Denver, Nora Patel and two others formed a general partnership to renovate small commercial buildings. Nora also controlled Summit Crest Services, a separate company that the partnership hired to perform demolition work at cost, with no profit. When the partnership later sued, claiming Summit Crest overbilled, the evidence on reasonableness of the charges was evenly balanced.

If the partnership proves Nora was its partner and controlled the hired company, which party bears the burden on the fiduciary-duty claim, and by what standard?

Explanation. Once a fiduciary relationship is established, the fiduciary bears a twofold burden: the burden shifts to the fiduciary, and the fiduciary must prove fair dealing by clear and convincing evidence. Because partners stand in a fiduciary relationship to the partnership, Nora—not the partnership—must prove that the transaction was fair.