SCHAFER et al., Appellees and Cross-Appellants, v. RMS REALTY et al., Appellants and Cross-Appellees, 138 Ohio App. 3d 244

Brogan, Judge. In this case, defendants, RMS Realty (“RMS”), seven partners in RMS, and the managing agent of RMS, appeal from a jury verdict in favor of a minority partner, Everett Schafer. Additionally, Schafer cross-appeals from certain decisions in the trial court. Schafer’s action against the defendants is based on an alleged wrongful capital call by the majority partners of RMS. The capital call was issued to reimburse Sun T.V. (Sun) in the amount of $2,000,000 for a building constructed by Sun on land owned by RMS.

At the time of the capital call, Schafer owned a twenty-five percent interest in RMS, and was, therefore, required to contribute $500,000. However, Schafer could not raise that amount of money and the other partners contributed his share. This, in turn, activated a provision in the partnership agreement that diluted the interest of any partner who did not meet a capital call. As a result, Schafer’s interest in RMS was reduced by about nineteen percent. The dilution occurred on May 3, 1995.

Subsequently, on September 19, 1995, Schafer and his wife filed a complaint against RMS, the seven other partners in RMS, and the agent/trustee of RMS. In the complaint, Schafer included claims for dissolution and an accounting, breach of contract, promissory estoppel, quantum meruit, conversion, breach of fiduciary duty, fraud, negligence and intentional infliction of emotional distress, and a real estate commission. Before trial, the court granted

summary judgment against the Schafers on all claims except conversion, breach of fiduciary duty, and the real estate commission. The case was then tried before a jury for two weeks, beginning on July 14, 1997. At the end of the trial, the court let the jury consider the conversion claim, including damages, with regard to the individual defendants. The court also allowed the jury to consider breach of fiduciary duty claims against the individual defendants and RMS, but did not let the jury decide the damages, if any, resulting from the breach.

Additionally, the jury was allowed to decide the issue of the real estate commission. The jury found in Schafer’s favor on the conversion claim and awarded $695,400 in damages. Likewise, the jury found for Schafer on the breach of fiduciary duty claim against both RMS and the individual defendants. Interrogatories were given to the jury concerning these claims, and the jury made several findings.

Specifically, the jury found that the individual defendants converted nineteen percent of Schafer’s partnership property interest, that the conversion was the proximate cause of damage to Schafer, and that the amount of damages was $695,400. The jury further found that both the individual defendants and RMS breached their fiduciary duty to Schafer and that Schafer was entitled to an accounting. In this regard, the jury said the breach of fiduciary duty occurred due to the wrongful capital call and to a failure to disclose information.

The jury did find against Schafer on his claim for a $50,000 real estate commission in connection with the Sun transaction. In the complaint, Schafer had asked for punitive damages and attorney fees both on the conversion claim and on the breach of fiduciary duty (accounting) claim. At trial, the court rejected punitive damages as a remedy for breach of fiduciary duty but did agree that punitive damages could be recovered on the conversion claim. However, the jury chose not to award punitive damages, and the issue of attorney fees was, therefore, not considered.

After the trial, Schafer filed a motion under R.C. 1775.36 for authority to wind up the partnership. Additionally, Schafer filed a motion for prejudgment interest and a motion for dissolution pursuant to R.C. 1775.31. At that point, the court referred the case to a magistrate. Following the referral, the defendants filed motions for judgment notwithstanding the verdict and for new trial. The magistrate then scheduled hearings on prejudgment interest and accounting/dissolution. Before the hearings took place, the trial judge overruled the defendants’ motions for judgment notwithstanding the verdict and new trial.

Subsequently, the magistrate held hearings on prejudgment interest and aceounting/dissolution on May 26 and 27, 1998, and on June 3, 1998. Ultimately, in a decision filed on November 20, 1998, the magistrate rejected prejudgment interest because “both parties lacked the compromising spirit necessary for effective negotiations.” Concerning dissolution, the magistrate found that Schafer had presented evidence in support of three separate statutory grounds for dissolution: R.C. 1775.31(A)(3), (4), and (6).

However, the magistrate also concluded that the evidence on the three factors was not sufficient to justify dissolution. In particular, the magistrate focused on the fact that the defendants’ breaches of fiduciary duty did not prejudicially affect the partnership business. Instead, the business itself enjoyed continued success. As a final matter, the magistrate rejected the plaintiffs “motion for an accounting.” In this regard, the magistrate relied on the fact that the jury award had already compensated Schafer for the value of the nineteen percent interest he had lost.

Furthermore, no real dispute existed about the fact that Schafer had received and had continued to receive the appropriate profits from his remaining six percent partnership interest. Accordingly, the magistrate decided that an accounting to see if Schafer was entitled to additional damages was unnecessary. After Schafer objected to the magistrate’s decision, the trial court adopted the decision on February 5, 1999. This appeal and cross-appeal then followed.

On appeal, RMS presents three assignments of error, the individual defendants assert ten assignments of error, and the cross appeal contains six assignments of error. Some assignments of error address pretrial rulings, some cover the trial proceedings, and some relate to post-trial decisions. In addition, some assignments of error overlap. As a result, we will consider assignments of error together, where appropriate. We will also include factual discussion relevant to the particular error being discussed. I.

Effect of the Partnership Agreement In the first assignment of error, RMS contends that the trial court erred in refusing to direct a verdict in its favor. Primarily, RMS argues that partners cannot breach a fiduciary duty by voting in favor of action specifically authorized by the partnership agreement. The action in question was a capital call in the amount of $2,000,000, which RMS used to reimburse Sun under a “build-to-suit” agreement.

RMS also focuses on this point (among others) in the second assignment of error, which raises trial court error in failing to grant the RMS motion for judgment notwithstanding the verdict. Essentially, RMS contends in these assignments of error that a partner is precluded as a matter of law from maintaining an action for breach of fiduciary duty if the conduct in question, no matter how wrongful, is authorized by a partnership agreement. Finally, RMS argues in its third assignment of error that the jury verdict on breach of fiduciary duty was against the manifest weight of the evidence.

In this regard, RMS claims that even if Schafer could maintain an action for breach of fiduciary duty, no evidence was presented which would allow a jury to rationally find that the capital call was wrongful. The eight individual defendants rely on a similar legal argument to support their first assignment of error (labeled “A”), which attacks the trial court’s failure to grant them a directed verdict and judgment notwithstanding the verdict.

The controlling effect of the partnership agreement is also a predicate for the individual defendants’ argument in their second assignment of error (“B”) that the jury verdict for breach of fiduciary duty is against the manifest weight of the evidence. Alternatively, the individual defendants claim in this assignment of error that the evidence at trial overwhelmingly shows their actions were taken for legitimate reasons. Due to the overlap of these issues, our discussion here will resolve the first and third assignments of error of RMS and will impact its second assignment of error as well.

Likewise, our analysis will resolve assignments of error “A” and “B” of the individual defendants. We begin by noting the standards for directed verdicts and judgment notwithstanding the verdict. Motions for directed verdict test the legal sufficiency of evidence, not its weight or the credibility of witnesses. As a result, our review of the lower court judgment is de novo. Nichols v. Hanzel (1996), 110 Ohio App.3d 591, 599, 674 N.E.2d 1237, 1242.

Further, in evaluating whether directed verdicts are merited, courts decide if “ ‘there exists any evidence of substantial probative value in support of [the claims of the party against whom the motion is directed]. * * * A motion for a directed verdict raises a question of law because it examines the materiality of the evidence, as opposed to the conclusions to be drawn from the evidence.’ ” Wagner v. Roche Laboratories (1996), 77 Ohio St.3d 116, 119-120, 671 N.E.2d 252, 255-256. The same tests are applied in reviewing decisions on motions for judgment notwithstanding the verdict. Posin v. A.B.C.

Motor Court Hotel, Inc. (1976), 45 Ohio St.2d 271, 275, 74 O.O.2d 427, 427-428, 344 N.E.2d 334, 339. Therefore, our first task is to decide if Schafer is barred as a matter of law from bringing a claim for breach of fiduciary duty. If we decide in Schafer’s favor on the legal issue, we must then consider if Schafer’s claim for breach of fiduciary duty is supported by substantial, probative evidence, upon which reasonable minds can differ. Wells v. Miami Valley Hosp. (1993), 90 Ohio App.3d 840, 848, 631 N.E.2d 642, 646-647. Before we discuss the legal issues, some factual background would be helpful.

At trial, the following evidence was presented. In 1986, Everett Schafer, Allan Rinzler, and Jerald Mayerson formed RMS for the purpose of buying a 5.22 acre commercial property known as Mailbu Grand Prix (“Malibu”). At the time, Schafer shared office space with Mayerson, who was a real estate broker. Schafer sold commercial real estate and was mainly involved in land development, while Mayerson focused on his own real estate investments. Rinzler also shared space in the same office suite, and operated Rinzler & Associates, which was an investment company.

Rinzler and Mayerson had been partners for many years in a number of other ventures, including the purchase of the building in which their offices were located. Both Rinzler and Mayerson had financial assets substantially exceeding those of Schafer. Schafer is the one who located the Malibu property. Because Schafer did not have financing available, he approached Mayerson, who then suggested that they talk to Rinzler. As a result of these conversations, RMS was formed. Rinzler drafted the partnership agreement, which was signed on December 19, 1986.

Under the agreement, Rinzler and Mayerson were each 37.5 percent partners, and Schafer had a twenty-five percent interest. Since the original purchase price of the Malibu property was $800,000, Schafer was, therefore, responsible for $200,000. To finance the transaction, the partners signed a note individually and as partners to National City Bank (“NCB”) in the amount of $800,000. Rinzler also signed as trustee for RMS. Under the note, the partners and partnership were jointly and severally liable for the full amount of the debt. The note itself was an open-end mortgage and rents were assigned as security.

As additional security, the bank obtained personal guarantees from the partners. Of the $800,000 that was available, RMS borrowed $600,000 to fund the purchase. Schafer’s twenty-five percent share of this was $150,000. To fund the remaining amount of his obligation, Schafer signed a separate, unsecured note for $50,000, assigning his rights in the partnership as security. At the time the partnership was formed, tbe Malibu property generated about $89,000 annual income in rent. Schafer received enough cash from partnership distributions to service his debt on the property.

In 1987, Rinzler transferred all of his partnership interest to his wife, Brenda. Subsequently, in December 1993 and January 1994, Brenda conveyed part of her interest to the couple’s sons, Barrett and Harley. At all relevant times, however, Allan Rinzler remained as trustee and continued to manage the property. The testimony at trial clearly indicated that the transfer was in name only and that Allan continued to make all decisions about RMS and to treat the partnership interest as if he were still a partner.

In 1993 and 1994, Mayerson also transferred a small part of his interest to his sons, Mark, Michael, and Richard. These eight people were the individual defendants sued by Schafer. The note for the original loan matured in one year, but was extended. In January 1989, Rinzler wanted to pay off the loan. At that time, Schafer and Mayerson did not have cash available and individually borrowed their shares from NCB. Again, the loans were secured by the partnership property, and both Schafer and Mayerson pledged their interest in RMS as security. The partnership then continued without incident for several years.

From 1989 through 1992, the tenant leasing Malibu was occasionally delinquent in rent. Because the partners felt the tenant would probably not renew its lease option in 1994, they began looking for other users for the property. Schafer was the primary partner involved in exposing the property to potential users. In late summer or early fall 1993, several prospective tenants looked at the property. In November 1993, the tenant on Malibu was again late with rent and did not cure. As a result, an eviction process was begun.

During the same month, Schafer received a letter of intent from Sun, proposing a “build-to-suit” arrangement. Essentially, Sun proposed that it would construct a 50,000 square foot building. In turn, RMS would reimburse Sun a maximum of $2,000,000 for the construction. RMS would then lease the building back to Sun for $500,000 per year for twenty years, with two five-year options. Schafer’s testimony was that financing of partnership matters was discussed both before and after the execution of the partnership agreement.

Specifically, the partners discussed further development of the Malibu property, and agreed that they would finance one hundred percent of any transaction. With particular reference to the Sun deal, the partners agreed that the transaction would be financed one hundred percent. According to Schafer, Rinzler ran various “proformas” or financial scenarios before RMS received the letter of intent from Sun. These proformas calculated the mortgage payments, cash flow, taxable income, amount of distributions, and so on, depending on the amount of money borrowed, for loan amounts between $2,000,000 and $2,500,000.

The additional amounts were included because Sun only needed the front four acres of the property and more money would be needed to develop the remaining 1.3 acres. According to Schafer, the partners agreed that if he located a building or tenant, they would finance the transaction. Absent this agreement, he would not have looked for a tenant because he could not afford to pay cash. By contrast, Rinzler’s testimony was that he never agreed to finance all partnership transactions and did not agree to finance the Sun deal in particular.

The partnership agreement itself does not prevent partners from agreeing to finance projects nor does it restrict their ability to use any particular method of financing, so long as the partnership agrees. The agreement does say in Paragraph 4 (Capital Contribution): “The Partners shall make capital contributions from time to time in such amounts as may be required to carry out the purposes of the Partnership.

Each Partner shall contribute in cash a percentage of the total contribution required, equivalent to his percentage interest in the Partnership profits and losses. “In the event that any Partner is unable to make his required contribution, the necessary funds may be raised by the Partnership from one or more of the remaining Partners. In that event, the capital accounts, as adjusted, shall then be the basis for adjusting the profit and loss percentages in Paragraph 5.” Paragraph 9 of the agreement further states: “Each Partner shall have a voice in management of the Partnership business.

Except as otherwise provided in this Agreement, all decisions relating to the Partnership business shall be made by the affirmative vote of Partners whose share of net profits and net losses totals more than 50%.” Paragraph 11 additionally restricted partners from assigning, mortgaging, pledging, or otherwise encumbering their partnership interests, or from entering into agreements as a result of which any other person or entity might become interested in the partnership or «its assets (other than transfers of partnership interests), without the partnership’s prior written consent.

On November 29, 1993, RMS sent a letter to Sun, indicating basic acceptance of Sun’s proposed terms, with some exceptions. The letter also specifically qualified any obligation upon negotiation of a mutually satisfactory lease agreement. Following this letter, RMS attorneys prepared a number of drafts of a proposed lease agreement between Sun and RMS. Eventually, a contract to lease was used instead and was signed on behalf of RMS on May 20, 1994, by Allan Rinzler (as trustee) and by Brenda Rinzler and Jerald Mayerson (as general partners).

During the time the Sun lease was being negotiated, Rinzler and Schafer had a disagreement about the payment to Schafer of a real estate commission. A draft of the lease agreement generated around December 27, 1993, provided for payment of a $50,000 commission to Mayerson & Associates, ie, the broker through whom Schafer received commissions. The agreement also provided for a comparable commission to Espey and Strauss Realty Co. (Sun’s broker). Rinzler’s account is that Schafer asked for the commission language to be inserted, essentially behind Rinzler’s back.

When Rinzler received the December 27, 1993 draft, he called the RMS attorney and told him to remove the Mayerson commission language from the lease agreement. This attorney was unable to say definitively if he prepared another draft, and no such draft was produced by the defense at trial. According to the attorney, a number of changes were taking place at that time and it did not look like the lease would be finalized as soon as they had hoped. As a result, the parties started to move toward an agreement to lease, which was what was eventually used.

Schafer’s account is that he was not aware until May 10, 1994, that the commission provision had been removed. On that date, Rinzler called Schafer into his office to discuss how commissions would be paid. Rinzler proposed paying Espey and Strauss over a period of several months rather than in a lump sum. When Schafer asked how his own commission would be paid, Rinzler told him that he would not be paid anything. At that point, Schafer learned that the commission provision had been removed from the lease.

According to Schafer, the two men argued about the commission and Rinzler threatened to remove his guarantee for Schafer’s current partnership loan. Rinzler also said, “Get your (expletive deleted) mortgage off my property.” As Schafer left the office, Rinzler asked Schafer how he was “gonna finance it.” Schafer interpreted this as a threat but did not know if Rinzler meant the $100,000 Schafer still owed on the original Malibu purchase or if he was referring to the Sun transaction. Rinzler’s testimony was that he did not threaten Schafer during this meeting.

Instead, he merely reminded Schafer that a condition of the Sun lease was that the RMS property be clear of mortgages. In any event, Schafer removed his mortgage from the RMS property on May 20, 1994, by mortgaging another property he owned. According to Schafer, the agreement up to the May 10, 1994 meeting was that the Sun transaction would be financed. In this regard, Fred Schantz, the NCB president, had written to Sun on May 4, 1994, at Rinzler’s request. Rinzler had done business with NCB for many years and was a significant customer.

In the letter, Schantz assured Sun that NCB would provide the $2,000,000 for reimbursement to Sun, if the owners of the property required it. Schantz also stated in the letter that “[o]ur loan commitment is subject to normal terms and conditions.” Rinzler testified that this was merely a “comfort letter” to Sun to assure Sun that the partnership was financially sound. Sun signed the contract to lease on May 9, 1994. As was indicated, the disagreement between Rinzler and Schafer took place on May 10, 1994.

Subsequently, on May 23, 1994, Jonas Gruenberg, the partnership attorney, sent a letter to the partners informing them that RMS had received an offer to lease the partnership property and that the proposal required the partnership to reimburse $2,000,000 for construction costs. Gruenberg then stated that “[t]his may require each partner to contribute his or her proportionate share of that amount to the capital of the partnership.” According to Schafer, this was the first time a capital call had been mentioned and was also the first “legal document” between the partners.

Schafer testified this was the first sign that the other partners were going to try to squeeze him out, as they knew he did not have the cash to contribute for his share ($500,000). Gruenberg enclosed a ballot with the letter, and said: “To vote on whether the partnership should approve or reject this offer, please sign and return the enclosed ballot by overnight mail or fax. Pursuant to

Section 9 of the Partnership Agreement, when ballots representing more than 50% of the interests in profits and losses have been received voting to accept the proposal, the Partnership will accept and sign the Contract to Lease.” However, at the time this letter was sent, the lease had already been signed. Specifically, the contract to lease was signed on May 20, 1994, by Brenda Rinzler and Jerald Mayerson, as RMS general partners, and by Allan Rinzler, as trustee for RMS. Gruenberg testified the May 23, 1994 letter was his idea. However, Rinzler admitted recommending the cash call.

Gruenberg was a personal friend of Rinzler and had represented Rinzler and Mayerson for fifteen years. Additionally, Gruenberg was a partner with Rinzler and Mayerson in two partnerships: Talbott Tower and Dayton Securities Group. The testimony at trial indicated that the Sun transaction was a very lucrative deal. It was a “gold-plated opportunity” and would have been very easy to finance. Specifically, the lease was long-term and would generate $500,000 of net income per year. Likewise, Sun’s credit was good and the property was located in a desirable area.

According to Schafer’s expert, the normal course of procedure for a partnership would have been to finance the transaction. The expert also said that while capital call contribution provisions are common, this particular capital call was not customary. Typically, capital calls are used for items like operating expenses, not to finance this type of construction. For example, if finding tenants for a building takes longer than expected, a capital call could be issued for operating expenses. Schafer also testified that the capital call was not required.

On June 13, 1994, Schafer sent a letter to Rinzler and Mayerson, stating that he did not have the funds to meet a potential capital call. Schafer asked for copies of the signed contract to lease (which he did not have), and also requested a meeting to discuss the departure from their agreement that the Sun project would be financed. The three men then met on June 23, 1994. Schafer testified that he secretly tape-recorded this meeting because Rinzler had lied to him and threatened him, and because he knew the other partners were going to squeeze him out.

During the June meeting, Rinzler said that financing the Sun transaction did not make sense because interest rates were going up and the bank wanted the partners to personally sign for more than their shares. In fact (according to Rinzler), the bank wanted a personal guarantee for the entire amount. Rinzler and Mayerson also both stressed that they had the cash for their shares. In the meeting, Rinzler stated that he had talked to NCB and to Star Bank. At first, Rinzler said he had nothing in writing from Star Bank. Later, he pulled a letter from Star Bank from his files.

Referring to the letter, Rinzler said there was nothing in the letter that he was interested in. The letter from Star Bank was dated May 17, 1994, and was addressed to RMS, as well as Mayerson and Rinzler. This letter followed a meeting in Rinzler’s office on May 16, 1994. In the letter, Star Bank proposed a secured real estate mortgage for the Sun project, in an amount up to $2,500,000. Guarantors were to be Allan and Brenda Rinzler, and'Jerald and Gail Mayerson, with the guarantee limited to the top twenty five percent of the outstanding balance.

Both the interest rate and loan term (up to a twenty-year option) were specified. The letter listed certain conditions precedent to the commitment or lending, such as completion of a credit investigation, execution of a lease between RMS and Sun, etc. Schafer was not told about, nor was he included in, the meeting with Star Bank. Further, although Schafer asked for a copy of the Star Bank letter on June 21, 1994, and on several subsequent occasions, he was not given a copy of the letter for more than fourteen months. On September 26, 1994, Rinzler notified the partners of a meeting on October 7, 1994.

The purpose of this meeting was to discuss how to fund the $2,000,000 obligation and to discuss what distributions, if any, would be made from the $500,000 rent. Present at this meeting were Allan Rinzler, Jerald Mayerson, Schafer, and Bob Gabringer. Gabringer worked for Rinzler and took notes. Schafer again tape-recorded the meeting. At the meeting, Mayerson (on behalf of himself and his sons) and Rinzler (on behalf of his family) voted to fund the $2,000,000 through a cash call, which was then expected to be due on November 18,1994.

Mayerson voted for the cash call because of his age and health, ie., he did not want to incur long-term debt or debt of that magnitude. (Mayerson had been diagnosed with Parkinson’s disease in April 1993.) Rinzler voted for the cash call for a number of reasons, ie., he was recovering from cancer, did not know if he would have a recurrence, and did not want to incur additional debt that could possibly be left to his wife and children. Both Rinzler and Mayerson again stressed that they had the cash for the deal.

Rinzler additionally commented that he did not want to personally guarantee other peoples’ debts and that it was not normal to do so. He also said his own sons would be responsible for their share if they wanted to come up with it. If they did not, their interest would be diluted, just like Schafer’s interest would if he did not have the money. During the meeting, Schafer argued that the cash call was not required because the deal could easily be financed. Among other things, Rinzler said that die had not explored any type of loan because he was not interested in loans.

At the meeting, Schafer also mentioned another option, ie., the partnership could agree that Schafer could borrow the $500,000 and finance the loan through a bank, by assigning rents and his partnership interest as had been done in the past. (As was mentioned earlier, the partnership had to consent before a partner could pledge his partnership interest or assign rents.) However, Rinzler refused to agree, even though Schafer made it clear that normal banking criteria required a mortgage and assignment of rents for loan approval After the capital call was approved, Rinzler proposed holding all distributions from the Sun lease, which was expected at that time to begin paying rent in December 1994.

Rinzler’s stated reason was that money might be needed for development of the remaining 1.3 acres. Schafer strongly disagreed, pointing out that the ground would be debt-free and that withholding distributions would create further hardship for him in terms of trying to get a loan. Nonetheless, Rinzler and Mayerson voted to withhold distributions and to revisit the issue on April 11, 1995. Rinzler did indicate that if Schafer obtained a loan, Schafer could call another meeting to discuss the distribution issue.

When the meeting ended, Schafer told his partners that he intended to sue for breach of the partnership agreement. Following the October 7, 1994 meeting, Schafer consulted an attorney and also tried to get loans for his share. First, Schafer made a formal loan request to NCB. However, on October 17, 1994, NCB rejected an unsecured loan, due to Schafer’s lack of liquidity, lack of cash flow from other investments, and lack of cash flow from the partnership to service the debt payments. NCB did say it would consider a loan using a mortgage on the Sun ground and an assignment of rents and leases.

Schafer also tried to get loans from Star Bank and Bank One, which also would not give a loan without a mortgage and pledging of rent. Schafer was never able to get the other RMS partners to agree to a mortgage and assignment of rents. Finally, Schafer contacted a loan broker about a loan to the partnership for the entire amount of the reimbursement. The broker said that the loan would be very easy to obtain and Schafer conveyed this to the partnership. Due to delays, Sun did not take possession of the building as soon as expected, and the capital call deadline eventually occurred on May 3,1995.

The evidence at trial indicated that Mayerson did not have the cash for the capital call. For example, while Mayerson had substantial investment property, his available cash, savings, and securities on October 7, 1994, were about $195,000. Similarly, Mayerson’s financial statement in August 1995 showed cash, savings, and securities of only $115,000. By contrast, Mayerson’s share of the capital contribution was $450,000. Likewise, the Mayerson and Rinzler sons did not have sufficient capital to meet their share of the capital call, i.e., $100,000 each.

For example, Barrett Rinzler had only $19,000 in cash and securities as of April 1, 1995, and Mark Mayerson had about $26,000 in cash and money market funds as of March 30, 1995. Brenda Rinzler’s financial statements of September 1, 1994, and August 15, 1995, showed that she had cash available of $257,000 and $275,000, respectively, to meet her capital contribution of $550,000. However, unlike the other parties, Brenda did have other substantial assets that could be easily liquidated. Ultimately, the individual defendants satisfied their capital call contributions by borrowing money from NCB.

At trial, Rinzler was unable to recall when he first went to the bank to borrow the money for the capital call. However, on December 16, 1994, the senior loan committee of NCB reviewed and approved a $2,000,000 secured loan. The guarantors on the loan were Allan Rinzler and Jerald Mayerson. According to the project analysis in the credit department report, the loan was to be used to finance the purchase of a building that Sun T.V. currently had under construction. However, the collateral for the loan was not the Sun building; instead, the loan was to be secured by commercial property in Cincinnati, Ohio.

This commercial property belonged to 800 Broadway, which was a general partnership owned by the Mayerson and Rinzler families. Subsequently, Allan and Brenda Rinzler, and Jerald and Gail Mayerson signed a six-month promissory note to NCB in the amount of $1,500,000. Payments were to begin on May 3, 1995, and were to continue until October 3, 1995. Under the note, the borrowers were jointly and severally liable. An open-end real estate mortgage, including rents, on the 800 Broadway property was also granted to NCB on May 3, 1995, to secure the $1,500,000 loan.

The Mayerson and Rinzler sons also signed a note dated April 3, 1995, making them jointly and severally liable to NCB in the amount of $500,000. That note was unsecured and was payable by October 3, 1995. However, on September 3, 1995, this latter note was modified and extended for a five-year term. On May 5, 1995, the NCB senior loan committee reviewed and ratified the $1,500,000 and $500,000 loans made to the Mayersons and Rinzlers.

Regarding these loans, the credit department report stated: “This presentation represents a ratification of a $1,500,000 secured time note issued to provide funding of a capital call by R.M.S. Realty, Partnership. Allan and Brenda Rinzler and Jerald and Gail Mayerson will fund 75% of the needed funds with the remaining 25% (Credit 2) to come from Harley and Barrett Rinzler and Michael, Mark, and Richard Mayerson. The $500,000 term loan (Credit # 2) is to replace Everett Schafer’s position in the partnership. To this point, Mr.

Schafer has been unable to fund his portion of the capital call. “Credit # 1 [the $1,500,000 loan] is secured by a 45,000 sq. ft. office building located at 1501 Madison Rd. in Cincinnati, Ohio owned by 800 Broadway, Limited Partnership. Since the borrowers are also partners in 800 Broadway, they agreed to allow the building to be used as collateral.

Both Credits # 1 and # 2 are expected to be short term and will most likely be paid from a future permanent market financing on the Sun building.” The report went on to discuss the Sun lease, stating, among other things: “Since the lease is a triple net, the first year after tax cash flow to the partners is expected to be $378,000 based on a 40% tax rate. This cash flow could support a $2,000,000 loan at 9.5% amortized over 15 years at a 1.5x debt service coverage.” Further, the report said that “Sun has tremendous liquidity and working capital making it a very reliable payment source for the lease.

Sun is the repayment source for both Credits # 1 and # 2.” And finally, the credit department report stated: “In 1994 RMS Realty negotiated a lease with Sun T.V. and Appliance Stores that called for Sun to construct a free-standing retail building * * *. The agreement stated that RMS would reimburse Sun T.V. $2,000,000 from partnership capital calls and not finance the expenses within the partnership.” Contrary to the statements in the credit report, the contract to lease said nothing about a capital call.

Instead, the contract specifically allowed RMS to encumber the real estate with a mortgage after commencement of Sun’s lease and after payment of Sun’s construction costs. At that time, RMS was allowed a mortgage of up to seventy-five percent of the fair market value of the real estate, as improved, and debt service not greater than eighty percent of the lease payments. Likewise, the lease agreement between Sun and RMS, which was signed in August 1994, said nothing about capital calls, nor did it restrict the ability of RMS to mortgage the premises.

To the contrary, Sun specifically agreed in the lease to subordinate its interest in the premises to that of a mortgage lender of RMS. ' When the building was completed, the fair market value of the real estate, as improved, was about $5,000,000. Based on Rinzler’s own calculations, a loan of even $2,500,000 for a twenty-year term at 8.5 percent interest would have resulted in mortgage payments of $234,312 per year — or less than 47 percent of the lease payments.

Gruenberg, the partnership attorney, notified the partners on April 13, 1995, that RMS had received capital contributions from all partners except Schafer. The total amount of these contributions was $1,500,000. Between October 7, 1994, and May 3, 1995, Schafer asked a number of times, through counsel, for permission to secure a loan by placing a mortgage on the real estate and pledging his rents. However, permission was denied.

In one discussion, Rinzler told Schafer’s attorney that using the real estate as collateral was inappropriate because Schafer did not own the real estate, and placing a mortgage on the property would reduce the asset value of all the other partners’ interests. In an attempt to resolve the dispute, Schafer’s attorney (Neil Freund) negotiated between March 28, 1995, and May 2, 1995, with the partnership and with an attorney (Ira Rubin), who had previously represented the partnership in a number of legal matters. On March 28, 1995, Freund sent Gruenberg a commitment letter from Bank One for a loan to Schafer.

In the letter, Bank One approved a loan contingent on a mortgage on the property and assignment of rents. However, the majority partners would not agree to this. Subsequently, on April 3, 1995, Freund sent Gruenberg a letter from Vista Capital Group, indicating that Vista was willing to make a non-recourse loan to the partnership for $2,100,000. Again, Freund asked the partnership to either finance the transaction or to consent to Schafer’s loan and the security requested by the bank. Negotiations for the majority partners after this time were handled by Rubin.

On April 10, 1995, Mayerson and Rinzler, through Rubin, offered to lend Schafer $500,000 based on various conditions, including a loan term of five years, assignment of Schafer’s partnership interest, a loan fee of $5,000, and a guarantee that not less than eighty percent of partnership distributions would be made to Schafer (a maximum of $100,000 per year) during the loan term. In response, Freund sent a letter on April 11, 1995, stating that the terms of the proposed loan of April 10, 1995, were much less favorable than Schafer could get from a bank.

According to Freund, Schafer would be willing to discuss a loan from the majority partners if they were willing to give him a loan under terms and conditions equal to or better than the bank’s. Finally, Freund said Schafer would consider (1) that the partnership finance the $2,000,000 payment to Sun, (2) that the majority consent to Schafer’s loan and the security requested by the bank, or (3) that the majority make a loan with terms and conditions the same or better than the bank’s. At the time, Schafer was unaware that the majority had already financed the $2,000,000.

In fact, he did not become aware of the loan until after the lawsuit was filed. Similarly, the partnership attorney, Gruenberg, did not know until May 3, 1995, that the majority partners had financed their capital contributions. Rubin, the attorney negotiating for the majority partners, also did not know about the financing until after the litigation was filed. In any event, Freund pointed out to Rubin in a letter of April 26, 1995, that the five-year loan offer was unrealistic because it would cause Schafer to have a $95,000 negative cash flow on $100,000 of distributions.

In the letter, Freund indicated that Schafer had again tried to obtain his own financing. Schafer was willing to pay $100,000 immediately in cash and had also obtained approval from Amerifirst Bank for a $400,000 loan based on assignment of Schafer’s partnership interest, the partnership’s agreement to one-hundred percent disbursement of Schafer’s interest in the income ($125,000 per year); a negative pledge, ie., the partnership would not encumber the real estate with a mortgage during the twelve year loan term; and a guaranteed buy-out of the note balance by the partnership in the event of default.

According to Freund, these terms should alleviate the partnership’s objection to encumbering the property with a mortgage. This offer was also not accepted. Rubin’s testimony was that he asked Rinzler to run spread-sheets reflecting after-tax cash flows on various loan terms. At seven years, Schafer would have a small deficit, and at eight years, he would have a surplus of around sixty thousand dollars. According to Rubin, an offer of an eight-year loan was made during a phone conversation with Freund a day or two before May 2, 1995. Rinzler likewise testified that he had authorized an eight-year offer.

Rubin had no written documentation of this offer, and Schafer denied receiving an offer for eight years. The spread sheets showing these loan scenarios were also not offered at trial. A May 2, 1995 letter written by Freund is inconsistent with Rubin’s testimony that an offer had been made a few days before.

Specifically, Freund’s letter indicates that he had discussed the case in detail with Schafer and Schafer had authorized him to accept the April 10, 1995 proposal with one exception — that Schafer could not agree to a five-year loan, because it would generate a $300,000 dollar negative cash flow over the five-year period. In the letter, Freund stated that Schafer would accept a twelve-year loan. On the same day, Rubin wrote back to Freund, stating that his clients were unwilling to lend Schafer $500,000 based on a twelve-year repayment schedule.

In the letter, Rubin also said that he was “quite surprised” that Schafer continued to ask for a twelve-year loan in view of Freund’s statement that he would recommend that Schafer compromise the matter by agreeing to repay a $500,000 loan over a period of eight years. Schafer’s testimony was that he discussed this letter with his attorney after it was received. However, it was not his understanding that an offer of eight years had been made to him. He also said he did look at some information to see if he would have out-of-pocket expense over an eight-year period.

Schafer did not recall the specific net after taxes, except that he was going to be losing some money. No response was made to Rubin’s May 2, 1995 letter. On May 3, 1995, Schafer did not contribute $500,000, and the remaining partners contributed the rest of their loan proceeds. At that point, Schafer’s partnership interest was diluted by approximately nineteen percent, in accordance with paragraph 4 of the partnership agreement. Subsequently, on September 12, 1995, Schafer obtained various documents from RMS, including the Star Bank letter he had requested fourteen months earlier.

Schafer then filed suit against RMS and the individual defendants on September 19, 1995. As was indicated above, Allan Rinzler’s stated reason, among others, for the capital call, was that he and his family did not want to incur debt. Additionally, both Rinzler and Mayerson said that they did not want to incur long-term debt due to health concerns. Rinzler also stressed that he did not want to put his family at risk by guaranteeing or having them guarantee others’ obligations.

However, the evidence both before and after the capital call indicates that Rinzler and Mayerson, as well as their families, incurred substantial debt, personally guaranteed loans, guaranteed loans of others, and pledged partnership assets to secure loans. First, all the loans taken out to fund the capital call were based on joint and several liability. Second, the $1,500,000 loan was secured by a mortgage on partnership property and pledged rents. This particular note was then modified on October 3, 1995. By that time, Brenda and Allan Rinzler had repaid their portion and were released from liability.

However, the mortgage on the 800 Broadway partnership property was not released; to the contrary, Brenda Rinzler ratified the terms and conditions of the previous mortgage given to secure the loan. The maturity date on the remaining $440,000 obligation was then extended for a period of five more years on behalf of Jerald and Gail Mayerson. Furthermore, in December 1995, Allan Rinzler personally signed an eight-to-ten-year loan for $4,500,000 to purchase a Roberds’ building in Atlanta, Georgia.

The purchasers of the building were 800 North Broadway (a partnership of Brenda Rinzler and JABS, Inc., in which Jerald Mayerson was the sole general partner) and Ponce de Leon Stores, a partnership in which the Rinzler family had an interest. Allan Rinzler was one of the guarantors on the $4,500,000 loan. This loan was secured by a mortgage on the property and a pledge of rents from the tenant, Roberds, Inc.

Additionally, on December 20, 1995, Brenda Rinzler and Jerald Mayerson signed a five-year $1,350,000 promissory note on behalf of 800 Broadway for funds used in conjunction with the purchase of the Roberds’ building. The note was payable to NCB and was secured by a mortgage on 800 Broadway and an assignment of rents and leases. Although Rinzler could not recall if he guaranteed this particular note, documents submitted at trial revealed that loan approval was conditioned on guarantees from Allan Rinzler, Brenda Rinzler, and Jerald Mayerson, and that these parties all agreed to the loan conditions.

With the above factual background in mind, we will now consider the legal arguments of the defendants. As we mentioned earlier, the defendants claim that Schafer was precluded as a matter of law from bringing an action for breach of fiduciary duty because the vote for the capital call was authorized by the partnership agreement. In this regard, the defendants have cited a number of cases, including authority from this district, for the proposition that an action authorized by a partnership agreement, no matter how wrongful, cannot be a breach of fiduciary duty. We disagree with this theory conceptually.

We also disagree that it correctly reflects a prior holding of our appellate district. According to the defendants, this case is controlled by our prior decision in Weston v. Weston Paper & Mfg. Co. (May 11, 1994), Montgomery App. No. 13815, unreported, 1994 WL 179940, affirmed (1996), 74 Ohio St.3d 377, 658 N.E.2d 1058. However, we And Weston neither applicable nor controlling. In Weston, we affirmed a trial court decision granting

summary judgment to three directors of a corporation (Weston Paper) and an outside firm that valued corporations. The three directors were also the trustees of a voting trust which held about ninety-three percent of the corporation’s stock. In 1972, a stock bonus program was started at the company, and gave certain employees, including the three directors, the option to receive one-half their annual bonuses in stock. Between 1972 and 1990, the outside firm valued the stock using the same valuation method. Under that method, the value for the stock in 1990 was $75 per share.

However, in August 1990, the board of directors initiated a tender offer of $150 per share, based on the fact that some shareholders preferred owning more readily marketable investments. Ultimately, not enough shares were tendered and the offer was withdrawn. Subsequently, the outside firm valued the stock at $130 per share, based primarily on the tender offer.

The plaintiffs then sued, claiming that the directors breached a fiduciary duty to minority shareholders by causing the stock to be undervalued, by improperly diluting the plaintiffs’ proportionate interest in the corporation, and by suppressing the market for the stock. The plaintiffs were shareholders who owned about 6.5 percent of the stock, but had not participated in the stock bonus program.

In affirming the dismissal of the case, we first found that the plaintiffs could not bring a direct action against the directors because they failed to show that they had any “concrete and definite expectations which were interfered with by the alleged wrongdoing.” Id. at 5. We noted that these kinds of expectations include situations where improperly issued shares of stock make a plaintiff lose control of a majority of the voting stock. Id.

Likewise, concrete and definite expectations are involved where a plaintiff expects to get a share of a predetermined price for the corporation in a merger but is thwarted because the defendants improperly issue themselves additional shares of stock. Id. Because the Weston plaintiffs did not offer evidence of such expectations, we found that they did not state a claim for dilution of their proportionate ownership interests. Id. Instead, their claim was one for diminution in value of their stock, i.e., it was a typical derivative claim, and should have been brought in a shareholder’s derivative suit. Id. at 6.

We also held that the plaintiffs stated a claim against the directors for selling shares for less than adequate consideration. Again, however, we found this to be a derivative claim. Id. As a preliminary point, we note that these holdings, if anything, support the cause of action in the present case. In Weston, we did not say that the plaintiffs had no claim; we simply said the claim should have been brought in a derivative action, instead of directly.

In this regard, we observe that Schafer’s claim is conceptually similar to the derivative claim we discussed in Weston, ie., the situation where a party’s expectations on merger are thwarted because the defendants issue themselves additional stock. In any event, the plaintiffs in Weston alternatively argued that they could maintain a direct action because Weston Paper was a close corporation. This claim was based on prior case law, under which minority shareholders were allowed to bring direct actions against majority shareholders for breach of fiduciary duty. Id. at 7.

We rejected this argument because we found that Weston Paper had no attributes of a close corporation other than a lack of market for its stock. Id. at 7-8. We did find that the plaintiffs could bring a direct action against the directors in their capacity as trustees of the voting trust. However, we found no breach of fiduciary duty because the only relevant action the directors took as trustees was to vote for themselves for election to the Weston Paper board of directors. In this regard, we made the statements which are relied on by the defendants in the present case.

Specifically, we first mentioned that the voting trust agreement allowed trustees to act as directors and to vote for the election of a trustee as a director. Id. at 8. Second, we said, “[tjherefore, the named directors did not violate any fiduciary duty in their capacities as trustees of the Voting Trust.” Id. By making these remarks, we did not adopt the general principle of law defendants urge, i.e., that violations of fiduciary duty can never occur if an action is authorized in an applicable agreement.

To the contrary, if our comments in Weston are read in this way, they would run counter to prior published case law from our own appellate district. For example, in Leigh v. Crescent Square, Ltd. (1992), 80 Ohio App.3d 231, 608 N.E.2d 1166, we considered, among other things, whether the fiduciary duties of general partners require that a partner be notified of expulsion proceedings being brought against him.

The agreement in Leigh allowed general partners who were guilty of certain acts to be removed by written consent of a majority of the limited partners, upon written notice to the general partner being removed. Id. at 234, 608 N.E.2d at 1167-1168. Per this provision, a general partner was removed but was not notified of the expulsion until after the limited partners voted. The expelled partner then filed a lawsuit, claiming he should have received advance notice of the partnership’s intention to remove him.

The trial court found that the defendants had acted properly because (1) the language of the agreement made ouster effective upon notice to the partner being removed, and (2) the plaintiff failed to identify any due process requirements in the agreement. Id. at 235, 608 N.E.2d at 1168. On appeal, the plaintiff raised two assignments of error. The first was based on a claim that the agreement required advance notice of expulsion proceedings.

We found some ambiguity in the agreement but said that even if the trial court erred, the error was harmless because the plaintiff had not claimed any prejudice from a lack of notice, i.e., advance notice would not have changed the outcome. Id. at 236, 608 N.E.2d at 1168. The second assignment of error was based on a claim that the general partners’ fiduciary duties required them to give advance notice of expulsion proceedings. In particular, the plaintiff argued that concealing the ouster proceedings violated the fiduciary duty owed to him by another general partner.

During our discussion of these points, we focused on general principles governing the fiduciary relationship between partners. One concept we stressed is that fiduciary duty applies where partners can take advantage of their position to reap personal profit. In that context, we cited a case in which two partners had been expelled in accordance with the provisions in a partnership agreement and had then brought suit for breach of fiduciary duty.

Concerning the cited case, we commented: “The court did not accept the plaintiffs’ argument that the agreement contained implied provisions of due process, pointing out that all of the partners, including the plaintiffs, had signed the agreement without including such provisions, and that the expulsion was not initiated in order for the remaining partners to extract financial gain.” (Emphasis added.) Id. at 288, 608 N.E.2d at 1170. Therefore, whether a technical breach has occurred is not the sole consideration.

Implicit in the above quotation and our discussion in Leigh is the idea that actions taken in accordance with a partnership agreement can still be a breach of fiduciary duty if partners have improperly taken advantage of their position to obtain financial gain. We followed this rule in Leigh when we examined the circumstances in the case and concluded that the ouster (which was done in accordance with the partnership agreement) was “instituted in good faith and for legitimate business purposes.” Id.

The reverse side of this coin, obviously, is that actions allowed by an agreement can be a breach of fiduciary duty when they are not taken in good faith and for legitimate business purposes. This rule is consistent with logic. It is' also consistent with the law governing close corporations, which closely resemble partnerships. Crosby v. Beam (1989), 47 Ohio St.3d 105, 108, 548 N.E.2d 217, 220. For example, in Cruz v. S. Dayton Urological Assoc., Inc. (1997), 121 Ohio App.3d 655, 700 N.E.2d 675, we considered fiduciary duty in the context of a close corporation.

In Cruz, the physician-shareholders in a close corporation were employed under a written agreement that allowed termination of their employment contracts unilaterally and without specification of cause. Subsequently, a physician was terminated in accordance with the contract but nonetheless brought an action against the corporation, claiming that the other shareholders had breached their fiduciary duty by (1) terminating the physician without a legitimate business reason, (2) the manner of termination, and (3) reallocating overhead expenses to the physician’s detriment. Id. at 663, 700 N.E.2d at 680.

We rejected the first claim, finding that when the doctor agreed to termination without specification of cause, he waived the right to argue that he could only be terminated for good cause. Id. However, we did allow the second and third claims, stating: “Cruz [the doctor] also claimed a breach of fiduciary duty with respect to the manner of his termination. He does not claim that the defendants owed him some different form of process, but that they owed him a duty to be fair and forthright in their dealings leading to his termination. He argues that they breached that duty by acts of duplicity.

That claim, which is akin to fraud, is independent of whether the defendants were required to have good cause in order to terminate him. “Cruz also claimed a breach of fiduciary duty with respect to a reallocation of overhead expenses by the remaining shareholders. Like the manner of his termination, this claim presents issues independent of the question of cause.

Even though the other shareholders of SDUA had the power to terminate Cruz without specification of cause, their exercise of that power was governed by a fiduciary duty, to the extent that it affected the value of his accrued interests in their common venture.” (Emphasis added.) Id.

We note that the law is clear, concerning close corporations, that majority or controlling stockholders are liable, absent a legitimate business purpose, if they breach their heightened fiduciary duty to the minority by using their majority control to their own advantage and do not provide minority shareholders with an equal chance to benefit. See, e.g., Gigax v. Repka (1992), 83 Ohio App.3d 615, 615 N.E.2d 644; Crosby, 47 Ohio St.3d at 109, 548 N.E.2d at 220-221. We understand the position defendants take, i.e., that the partnership agreement controls. As a general proposition, we do not disagree.

However, as we noted in Cruz, even if the decision itself cannot be contested, the manner in which the decision is made cannot violate the majority’s fiduciary duty. Therefore, in the present case, while Schafer could not contest the capital call itself, he could bring an action for breach of fiduciary duty if the defendants acted in bad faith or in a duplicitous manner by voting for and proceeding with the capital call. We believe our decision in the present case is controlled by Leigh and Cruz, which are previous published opinions of this district.

For this reason, we will not discuss at great length the federal and out-of-state authority cited by both sides. However, referring to a sample of the cases, we note that a number of cases relied on by defendants involve situations that lack either allegations or evidence that actions taken in accordance with a partnership agreement were done for the purpose of improperly extracting personal gain though the partnership. For example, in Nelson v.

Warnke (1984), 122 Ill.App.3d 381, 77 Ill.Dec. 900, 461 N.E.2d 523, a limited partner sued the general partner, alleging that the general partner breached a fiduciary duty by failing to invest partnership distributions. Specifically, the funds were held in noninterest bearing certificates of deposit before being distributed. The court of appeals rejected the breach of fiduciary duty claims because the partnership agreement allowed the general partner to place partnership funds in noninterest bearing investments. 122 Ill.App.3d at 382-384, 77 Ill.Dec. at 900, 461 N.E.2d at 524.

Notably absent from Nelson are allegations or evidence that the general partner improperly derived personal gain from the way in which he invested the funds. Similarly, in Deauville Corp. v. Federated, Dept. Stores, Inc. (C.A.5, 1985), 756 F.2d 1183, a joint venture agreement and statutory law allowed a department store (Ward) to withdraw from the agreement. There was no evidence of bad faith or improper purpose on Ward’s part, nor did Ward gain a profit under the joint venture agreement at the expense of the plaintiff.

Instead, Ward simply withdrew per the agreement and placed its store in another mall that had been its first choice. However, there was evidence that the developer of the other mall (Federated) had acted with malicious purpose in offering Ward an anchor spot. As a result, the plaintiff was allowed to proceed against Federated on claims for tortious interference with contracts and business relationships. Id. at 1194-1197. Superficially, Diamond Parking, Inc. v. Frontier Bldg. Ltd. Partnership (1993), 72 Wash.App. 314, 864 P.2d 954, is somewhat similar to the present case.

Specifically, in Diamond Parking, the general partners proposed a restructuring of partnership interests to raise capital. Limited partners who wished to risk more capital would receive an increased interest, and those who did not would have their partnership share reduced. 72 Wash.App. at 315, 864 P.2d at 956. Under the partnership agreement, major decisions, including amendment of the partnership agreement, had to be approved by partners owning seventy percent of the total partnership interest. Four partners, with a total seventy-four percent interest, voted in favor of the restructuring.

However, the plaintiff elected not to contribute more capital and its interest was correspondingly reduced. Id. The plaintiff then brought suit against the partnership, limited partners, and general partners, alleging violation of the partnership agreement and breach of fiduciary duty. As we said, on its face, Diamond Parking appears similar. In contrast to the present case, however, the court' in Diamond Parking found “not a shred of evidence” to support the plaintiffs claim that the general partners breached their fiduciary duty. Id., 72 Wash.App. at 318-319, 864 P.2d at 958.

The particular alleged violations were that the general partners had a conflict of interest regarding the proposed amendment and had also failed to make full disclosure. Id., 72 Wash.App. at 316-320, 864 P.2d at 957-958. Contrary to these claims, one of the other limited partners, whose interest was also diluted, testified that the proposal was the best course for the partnership. Specifically, the partnership needed to raise $2,000,000 to avoid foreclosure, the mortgage holder had refused additional concessions to address the cash flow situation, and there was no evidence that any other course was feasible.

Moreover, there was no evidence that the general partners had misrepresented or failed to disclose material information. Id., 72 Wash.App. at 318-322, 864 P.2d at 958-959. Obviously, these facts differ from those of the present case. Far more pertinent than the above authority is an Illinois case, cited by plaintiffs, in which limited partners sued a general partner for breach of fiduciary duty. See’ Labovitz v. Dolan (1989), 189 Ill.App.3d 403, 136 Ill.Dec. 780, 545 N.E.2d 304.

In Labovitz, the breach of duty was based on allegations that a general partner used economic coercion to make limited partners sell their shares to him at a bargain price. As in the current case, the general partner’s actions were “authorized” by the partnership agreement. Specifically, the partnership agreement gave the general partner sole discretion to determine the availability of cash flow for distribution to the partners. 189 Ill.App.3d at 405, 136 Ill.Dec. at 782, 545 N.E.2d at 306.

It also gave him “full responsibility and exclusive and complete discretion in the management and control of the business and affairs of the partnership.” Id. Despite what appeared to be significant earnings, the general partner made only nominal cash distributions, and in 1985 and 1986, the limited partners had to pay taxes from their own funds on income retained by the partnership. Id., 189 Ill.App.3d at 404-405, 136 Ill.Dec. at 781, 545 N.E.2d at 305. For example, in 1986, the partners had to report a taxable income of $216,750 per unit but received distributions of only $12,000 per unit.

In November 1986, a company owned and controlled by the general partner offered to buy the limited partners’ shares. Without going into substantial detail about the specific facts and figures, the sale let the limited partners realize some cash and also let them convert their 1986 taxable income into a sizeable tax loss. Most of the limited partners took this option and then sued the general partner for breach of fiduciary duty. Id., 189 Ill.App.3d at 407-408, 136 Ill.Dec. at 783, 545 N.E.2d at 307.

Taking the position urged by the defendants in this case, the trial court dismissed the complaint, finding that the general partner’s “acts were within the broad discretion granted him under the partnership agreement.” Id., 189 Ill.App.3d at 405, 136 Ill.Dec. at 781, 545 N.E.2d at 305. The plaintiffs then appealed. Like the defendants in the present case, the general partner in Labovitz argued on appeal that no inquiry could be made into his motivation because he had acted in accordance with the partnership agreement. Id., 189 Ill.App.3d at 414, 136 Ill.Dec. at 788, 545 N.E.2d at 312.

However, the appellate court disagreed. As a preface to its analysis, the court quoted Judge Cardozo’s famous description of fiduciary duty, i.e., that “co-partners, owe to one another * * * the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm’s length are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place.

Not honesty alone but the punctilio of an honor the most sensitive is then the standard of behavior.” (Citation omitted.) Id., 189 Ill.App.3d at 408, 136 Ill.Dec. at 784, 545 N.E.2d at 308. After discussing the arguments of the parties, the court then went on to conclude that the general partner owed his partners “a fiduciary duty, which necessarily encompasses the duty of exercising good faith, honesty, and fairness in his dealings with them and the funds of the partnership.” Id, 189 Ill.App.3d at 413, 136 Ill.Dec. at 786, 545 N.E.2d at 310.

In particular, the court said: “It is no answer to the claims that plaintiffs make in this case that partners have the right to establish among themselves their rights, duties and obligations, as though the exercise of that right releases, waives or delimits somehow the high fiduciary duty owed to them by the general partner — a gloss we do not find anywhere in our law. On the contrary, the fiduciary duty exists concurrently with the obligations set forth in the partnership agreement whether or not expressed therein.” Id. We agree with these statements.

Based on its discussion of fiduciary duties and the partnership agreement, the appellate court in Labovitz found that the plaintiffs were entitled to a trial on their claims that “the general partner refused unreasonably to distribute cash and thereby forced plaintiffs to continually dip into their own resources in order to pay heavy taxes on large earnings in a calculated effort to force them to sell their interests to an entity which * * * [the general partner] owned and controlled at a price well below at least the book value of those interests.” Id, 189 Ill.App.3d at 417, 136 Ill.Dec. at 789-790, 545 N.E.2d at 313-314.

The court also noted that while the partnership agreement gave the general partner “sole discretion” over distributions, his discretion was “encumbered by a supreme fiduciary duty of fairness, honesty, good faith, and loyalty to his partners.” Id., 189 Ill.App.3d at 416, 136 Ill.Dec. at 789, 545 N.E.2d at 313. The approach taken in Labovitz is not unusual. See, e.g., Wartski v. Bedford (C.A.1, 1991), 926 F.2d 11, 20 (rejecting argument that action taken in accord with partnership agreement cannot be a breach of fiduciary duty.

To the contrary, a partnership agreement cannot nullify fiduciary duty because fiduciary duty of partners is integral to partnership, whether expressly set forth or not), and BT-I v. Equitable Life Assur. Soc. (1999), 75 Cal.App. 4th 1406, 1411-1413, 89 Cal.Rptr.2d 811, 816 (partnership agreement “cannot relieve the general partner of its fiduciary duties in matters fundamentally related to the partnership business”).

As an additional point, we note that other districts in Ohio have held that majority shareholders can be held liable, even where “proper procedures” are followed, if the plaintiff shows facts tending to establish bad faith. See Reynolds v. Wingers, Inc. (1993), 86 Ohio App.3d 742, 748, 621 N.E.2d 1239, 1242-1243 (in close corporation case, Third District denies recovery for termination where proper procedures were followed, since the plaintiff did not show any acts of bad faith), and Estate of Schroer v.

Stanico Supply, Inc. (1984), 19 Ohio App.3d 34, 40, 19 OBR 100, 106-107, 482 N.E.2d 975, 981-982 (First District allows recovery in “squeeze-out” situation, where close corporation acted in accord with law and charter, but nonetheless breached fiduciary duty to minority stockholders by not providing equal right to have stock purchased by corporation). Based on the preceding discussion, we reject the defendants’ argument that Schafer’s action for breach of fiduciary duty was barred as a matter of law.

Likewise, we reject the defendants’ claim that the trial court erred in overruling their motions for directed verdict and for judgment notwithstanding the verdict. Specifically, we find substantial, probative evidence in the record that the defendants violated their heightened fiduciary duty of “utmost good faith and loyalty” to Schafer when they used their majority control to their advantage. Cruz, 121 Ohio App.3d at 662, 700 N.E.2d at 679.

Although factual disputes existed, the record contains ample evidence that the Mayerson and Rinzler interests joined together and issued a capital call in order to squeeze Schafer out of a lucrative deal, dilute his partnership interest, and take the profit for themselves. Thus, while the partnership agreement allowed the partners to vote for capital calls “as required for the purposes of the partnership,” the majority’s ability in this regard was “encumbered by [the] supreme fiduciary duty of fairness, honesty, good faith, and loyalty” to their minority partner.

Labovitz, 189 Ill.App.3d at 416, 136 Ill.Dec. at 789, 545 N.E.2d at 313. For the same reasons, we also find that the jury verdict was not against the manifest weight of the evidence. “Weight of the evidence” has been defined as “ ‘the inclination of the greater amount of credible evidence, offered in a trial, to support one side of the issue rather than the other.

It indicates clearly to the jury that the party having the burden of proof will be entitled to their verdict, if, on weighing the evidence in their minds, they shall find the greater amount of credible evidence sustains the issue which is to be established before them. Weight is not a question of mathematics, but depends on its effect in inducing belief.’ ” (Emphasis deleted.) State v. Thompkins (1997), 78 Ohio St.3d 380, 387, 678 N.E.2d 541, 546.

Consequently, when deciding whether a judgment is against the manifest weight of the evidence, we consider and weigh the evidence to see if the appropriate burden of persuasion has been met. Id. at 390, 678 N.E.2d at 548-549 (Cook, J., concurring). Even so, we must still defer to the trier of fact’s greater ability to assess credibility. Id., citing State v. DeHass (1967), 10 Ohio St.2d 230, 39 O.O.2d 366, 227 N.E.2d 212. The reason for this is that “the demeanor, attitude, and credibility of each witness * * * [do] not translate well on the written page.” Davis v.

Flickinger (1997), 77 Ohio St.3d 415, 418, 674 N.E.2d 1159, 1162. As we have noted in this opinion, the evidence at trial was not without dispute. Nonetheless, based on the evidence presented at trial, we find that Schafer met the burden of persuasion on his claims for breach of fiduciary duty and that the jury verdict was sustained by the greater weight of the evidence. Consequently, RMS’s assignments of error one and three are without merit, as well as the part of assignment of error two that depends on Schafer’s alleged inability to maintain a breach of fiduciary duty action.

Similarly, assignments of error “A” and “B” of the individual defendants are without merit and are overruled. II. Failure to Disclose As was noted above, RMS claims in its second assignment of error that the trial court applied an improper standard of fiduciary duty review and, therefore, erred in refusing to grant judgment notwithstanding the verdict. We have just rejected that argument. As another reason why the trial court should have granted judgment NOV, RMS contends that the jury finding on failure to disclose information could not have amounted to a breach of fiduciary duty.

At trial, the jury answered interrogatories indicating that RMS and the individual defendants breached their fiduciary duty to Schafer through a wrongful capital call and by failing to disclose information. The jury did not specify (nor was it asked to specify) the information that was not disclosed. RMS contends that the information in question was the May 17, 1994 letter from Star Bank. According to RMS, the failure to disclose this letter was not material and could not have resulted in a breach of fiduciary duty.

The individual defendants raise the same points in their assignment of error “C.” As a result, we will again consider the assignments of error together. In this regard, the following facts are relevant. Before the jury was instructed, the parties and trial judge had a lengthy conference about jury instructions, interrogatories, and verdict forms. During the conference, the judge decided to give the jury separate verdict forms for RMS and the individual defendants on the breach-of-fiduciary-duty claim. None of the parties disagreed with this decision.

The judge then discussed interrogatories that had been submitted. At this point, counsel for RMS suggested that the jury should answer interrogatories to define the breach. Specifically, counsel for RMS said: “What we really want to know is a succinct statement of what they think the breach was. For instance, if they think the breach wasn’t giving Schafer a copy of the Sun letter as promptly as they should have, then obviously, from our view, there would be no damages or accounting to flow from that.

But if the breach was the Capital Call, which is the main issue in the case, that’s a different case.” Plaintiffs counsel did not specifically respond to this point, other than to object to special interrogatories breaking down the alleged breach. Eventually, the judge decided to give the jury three interrogatories for RMS and three for the individual defendants. First, the jury had to decide if the defendants breached their fiduciary duty toward Schafer.

If they answered yes, they were then to consider two further, interrogatories asking (1) if the breach occurred as a result of a wrongful capital call and (2) if the breach occurred due to a failure to disclose information. Subsequently, the jury found that RMS and the individual defendants had breached a fiduciary duty to Schafer. The jury then answered “yes” to the two additional interrogatories. In considering the arguments of the defendants, we reject at the outset any claim that the jury findings relate only to the Star Bank letter.

Although this was one item the jury could have focused on, the jury also heard evidence of numerous instances where information was concealed. Without repeating the entirety of our previous discussion, we note that the jury could reasonably have found that the defendants failed to disclose relevant information from nearly the beginning to the end of the Sun transaction.

This information included the fact that Rinzler and Mayerson were even talking to Star Bank; that Star Bank was willing to loan RMS the money based on only a twenty-five percent personal guarantee; that Mayerson and members of the Mayerson and Rinzler families did not have the cash for the capital call despite their representations to the contrary; that the Sun contract to lease was already signed before the partnership was notified and was asked to approve the contract; that Rinzler personally guaranteed the loans of others and incurred debt despite his statements to the contrary; that both the Rinzler and Mayerson interests mortgaged partnership property and pledged rents while denying Schafer the same option to save his partnership interest; and that the majority partners obtained loans to fund the capital call.

In fact, one can infer from the evidence that Rinzler and Mayerson also concealed their actions from the partnership attorneys and failed to disclose (or misrepresented) information to National City Bank. Consequently, we disagree that the jury’s answers to the interrogatories necessarily encompassed only the failure to disclose the Star Bank letter. Based on the evidence presented at trial, the above information was also material, i.e., under the circumstances, the facts were likely to affect a reasonable person’s conduct concerning the transaction. Davis v.

Sun Refining & Marketing Co. (1996), 109 Ohio App.3d 42, 55, 671 N.E.2d 1049, 1059. On the other hand, we do not think the information had to be material to be a breach of fiduciary duty. We have stressed on a number of occasions that “general partners are to act toward each other with the utmost good faith and integrity.” Leigh, 80 Ohio App.3d at 236, 608 N.E.2d at 1169. Further, “each partner is required to consult and inform his co-partner as to partnership matters or material questions not covered by the partnership agreement.” Id.

Notably, this rule is phrased in the alternative — “inform * * * as to partnership matters or material questions.” For the reasons previously discussed, Schafer’s claim that the defendants breached their fiduciary duty is supported by substantial, probative evidence, upon which reasonable minds could differ. Consequently, the trial court did not err in overruling the defendants’ motion for judgment notwithstanding the verdict. Posin, 45 Ohio St.2d at 275, 74 O.O.2d at 429-430, 344 N.E.2d at 338.

We also add that even if we accepted defendants’ claims about the Star Bank letter, that would still not justify setting aside the verdict. In this regard, we note that defendants asked for the interrogatories, and the jury did not find just one breach of fiduciary duty — it found two. Defendants conceded that one of the breaches encompassed the major issue they saw in the case, i.e., the capital call. Therefore, an accounting would have been triggered in any event. In light of the preceding discussion, the.second assignment of error of RMS and assignment of error “C” of the individual defendants are overruled.

III. The Conversion Claim A. Whether Conversion is Barred as a Matter of Law Our analysis so far has disposed of the appeal of RMS in its entirety. However, various assignments of error raised by the individual defendants still remain. The next (assignment of error “D”) involves whether Schafer is precluded as a matter of law from maintaining a conversion claim against the individual defendants. Assignments of error “E,” “F,” and “G” assume that a conversion claim can be brought, but question the merits and procedural posture of the claim.

The defendants’ initial point is that Ohio does not recognize claims for conversion of intangible assets. The main case defendants rely on is Zacchini v. Scripps-Howard Broadcasting Co. (1976), 47 Ohio St.2d 224, 1 O.O.3d 129, 351 N.E.2d 454, reversed on other grounds (1977), 433 U.S. 562, 97 S.Ct. 2849, 53 L.Ed.2d 965, which allegedly holds that conversion does not apply to any intangible right. According to defendants, this absolute prohibition means that Schafer cannot maintain an action for conversion as a matter of law. We believe that defendants have overstated the holding in Zacchini.

First of all, the Ohio Supreme Court began its discussion of conversion in Zacchini by noting that the common-law rule (that only tangible assets could be converted) no longer applied.

In this regard, the court said: “Conversion is a wrongful exercise of dominion over property in exclusion of the right of the owner, or withholding it from his possession under a claim inconsistent with his rights. * * * Although the original rule at common law was that only tangible chattels could be converted, it is now generally held that intangible rights which are customarily merged in or identified with some document may also be converted. Examples include drafts, * * * bank passbooks, * * * and deeds.” Id. at 226-227, 1 O.O.3d at 130, 351 N.E.2d at 456-457.

After recognizing some situations where conversion claims were generally allowed for intangible a

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