## Facts

- Tom Robinson was a Nashville businessman with interests in multiple ventures, including real-estate partnerships and operating companies.
- Mickey J. Ridings was an accountant, former IRS auditor, and licensed attorney whose practice focused on financial planning.
- Over a number of years, Ridings provided Robinson and Robinson’s businesses with professional services, including advising on pensions and employee benefits, preparing corporate documents, and serving as an agent for one of Robinson’s companies.
- Ridings also worked on Robinson’s personal financial and tax matters: he reviewed the Robinsons’ personal returns and represented them in dealings with the IRS.
- The Robinsons signed a written authorization designating “Mickey J. Ridings, Attorney” as their attorney-in-fact to deal with the IRS for multiple tax years, and Ridings performed that work.
- Ridings was also a partner in Riviera, Ltd., a Tennessee limited partnership that owned an apartment complex that Riviera was selling.
- In discussions about the purchase, Ridings told Robinson that the apartment complex was worth more than $2.5 million and that the buyer could obtain certain tax benefits associated with the property.
- The record did not contain proof substantiating Ridings’s statements about value. After the purchase, Robinson learned that Ridings’s statements were false.
- Although Ridings asserted he did not profit from the sale, the transaction discharged a debt Ridings owed to Riviera and increased the value of his ownership interest in Riviera.
- Security Federal Savings & Loan Association of Nashville, the lender connected to the transaction, brought suit against Riviera, Ltd. and related parties. In the trial court, the chancellor enforced the purchase agreement and granted seller-side parties (including Ridings and others) judgments over against the purchasers (Robinson-related parties) for amounts owed to Security Federal, and also enforced a $75,000 note executed at closing.
- The purchasers sought to avoid the agreement based on fraud and breach of fiduciary duty, but the trial court found no fiduciary relationship connected to the transaction.

## Issues

1. Whether Ridings’s long-standing attorney/financial-adviser relationship with Robinson created a fiduciary relationship that applied to the apartment-complex transaction, even if Ridings claimed he was not acting as Robinson’s attorney in that deal.
2. Whether, given Ridings’s personal interest on the seller side, the purchasers could defeat enforcement of obligations arising out of the purchase agreement based on fraud and/or breach of fiduciary duty.
3. Whether the chancellor erred by enforcing the purchase agreement and granting seller-side parties relief against the purchasers (including judgments over and enforcement of the closing note).

## Decision

- The Tennessee Court of Appeals held that the evidence preponderated against the chancellor’s findings regarding the fiduciary-relationship issues.
- The court reversed the trial court’s enforcement of seller-side claims against the purchasers that arose out of the purchase agreement.
- The court dismissed all claims of the sellers against the purchasers arising out of the agreement.

## Legal Principles

- A fiduciary relationship may arise from an attorney-client relationship or another confidential relationship marked by trust and reliance; fiduciary duties can reach a business transaction connected to that relationship.
- When a fiduciary has a personal financial interest in a transaction with the beneficiary, the fiduciary must act in the utmost good faith and make full and frank disclosure of material facts, including any conflict and personal benefit.
- In a confidential or fiduciary setting, reliance on the fiduciary’s statements may be reasonable even where the fiduciary later asserts he was not acting as counsel on the specific transaction.
- A court sitting in equity may refuse to enforce obligations that arise from a transaction tainted by a fiduciary’s conflicted conduct and misleading statements.
- In a non-jury case, an appellate court reviews the record with a presumption of correctness for the trial court’s factual findings but may reverse when the evidence preponderates against those findings.

## Conclusion

In *Security Federal Savings & Loan Association of Nashville v. Riviera, Ltd.*, the Tennessee Court of Appeals concluded that a long-term attorney and financial adviser stood in a fiduciary relationship with the purchaser and could not, while holding a personal stake on the seller side, induce the purchaser to buy an apartment complex through unsupported and false statements about value and tax benefits. Because the evidence preponderated against the chancellor’s finding that no fiduciary relationship affected the deal, the appellate court reversed and dismissed the sellers’ claims against the purchasers that arose out of the purchase agreement, including the seller-side recovery the trial court had granted against the purchasers.


Security Federal Savings & Loan Association of Nashville v. Riviera, Ltd., 856 S.W.2d 709 (1992)