Executive Summary: Key Legal and Evidentiary Issues

• Wazonek and his companies allegedly sold the Crane Manor Property and used the proceeds without proper authority or consultation with other partners.

• Plaintiffs lacked standing to sue in the name of Crane Manor US LP under Delaware law and partnership agreements, resulting in dismissal of those claims.

• Alberta court declined to authorize a derivative action concerning the Delaware limited partnership, emphasizing jurisdictional and comity principles.

• Canadian Crane Manor LP’s direct claims were not struck but were put on hold pending an application to pursue a derivative action under Alberta law.

• The request for an attachment order against Wazonek was denied due to insufficient evidence he was dissipating assets to frustrate judgment enforcement.

• Court ordered that C$145,000 previously paid into court by defendants be returned to their legal counsel, and dismissed the plaintiffs' application in full.

Background and parties

This dispute involves the sale and management of a multi-unit residential property in Memphis, Tennessee, known as “Crane Manor.” The property was acquired in March 2021 by Crane Manor US LP, a Delaware limited partnership. The plaintiffs—Distinct Real Estate USA 2, LP, Distinct Real Estate LP 2, 2304460 Ontario Inc., and Alberta Capital Corporation (ACC)—alleged that defendant Philip Wazonek, along with Distinctive Realty Services Ltd. and 1508632 Alberta Ltd., sold the property and used the proceeds improperly, without required authorization.

The central conflict

The plaintiffs claimed Wazonek effected the sale of the property on behalf of the partnership and misappropriated proceeds or funds for personal or unauthorized purposes. They alleged multiple causes of action, including fraud, conspiracy, misappropriation, breach of fiduciary duties, and other misconduct.

The sale occurred on or about October 31, 2023, for US$3.65 million, to Rich Investment LLC, without consultation or approval from the other co-owners, including Gordon Berger, who co-owned entities linked to the partnership. Plaintiffs argued that the sale and subsequent use of proceeds were unauthorized.

Corporate structure and standing

Crane Manor US LP's general partner was disputed—plaintiffs contended it remained Distinct Real Estate USA 2 GP, Inc., while defendants argued it was replaced by Crane GP US, Inc. Both general partners were 50/50 owned by Berger-affiliated and Wazonek-affiliated companies.

Under both the Original Limited Partnership Agreement (March 26, 2021) and the Second Amended Agreement (October 1, 2022), only the general partner had authority to commence litigation on behalf of the partnership. As the general partner had not authorized the action, Justice M.A. Marion held that the plaintiffs lacked standing to bring claims in the name of Crane Manor US LP.

Policy terms and clauses at issue

The key clauses in both partnership agreements—clauses 3.2 and 5.1—vested all management powers, including legal action, exclusively in the general partner. Limited partners, under clause 5.3(a), had no such authority. The Court emphasized that it could not override Delaware partnership governance rules, nor did the plaintiffs provide Delaware law establishing otherwise.

Outcome on claim validity

Justice Marion struck all claims purportedly brought by or on behalf of Crane Manor US LP for lack of standing, without prejudice to refiling if authorization is later obtained from a Delaware court. Claims by Canadian Crane Manor LP were not struck immediately but were conditioned on filing a derivative action application within one month of the May 6, 2025 decision. Claims brought directly by 230 Ontario and ACC were not dismissed.

Attachment order request

Plaintiffs requested an attachment order under section 17 of Alberta’s Civil Enforcement Act (CEA), arguing Wazonek was dissipating assets through a transaction involving the purchase of the “Wooddale Property” in Memphis. Between January 16 and 21, 2025, Wazonek advanced USD$403,180.97 from his home equity line of credit (HELOC) and personal account to a company he created—Wooddale Multifamily Investment Group, LLC (WMIG).

Justice Marion scrutinized this transaction, noting several suspicious elements including the $500 “Earnest Money” deposit, vague documentation, and lack of clarity around mortgage financing and investor contributions. However, he found that Wazonek maintained significant exigible assets in Alberta, including equity in a Calgary home (valued at least $574,000), over $3 million in investment and bank accounts, and no evidence of asset dissipation.

Final ruling

The Court found:

• The plaintiffs failed to prove standing to sue in the name of Crane Manor US LP.

• Claims brought in that name were struck.

• Canadian Crane Manor LP’s claims were conditionally allowed pending a derivative action application.

• Direct claims by 230 Ontario and ACC were not dismissed.

• The application for an attachment order was dismissed.

• The Clerk was directed to return the C$145,000 paid into court to the defendants’ legal counsel.

Justice Marion concluded that there were no reasonable grounds to believe that Wazonek’s asset dealings would seriously hinder enforcement of any judgment. Therefore, no attachment order was warranted.

Implications

The Court emphasized deference to foreign law in partnership governance and upheld high standards for granting pre-judgment remedies. Plaintiffs were advised to seek proper authorization from Delaware courts to pursue claims in the name of Crane Manor US LP. The judgment underscores the importance of procedural compliance and evidentiary thresholds in cross-border partnership litigation.

No monetary award was granted at this stage.