Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-04205/USCOURTS-ca10-90-04205-0/pdf.json

Parties Involved:
Canorex International, Inc.
Not Party
Gold Standard, Inc.
Appellant
Montagu Finance LTD.
Appellee
Samuel Montagu & Co., LTD.
Appellee
Scott L. Smith
Not Party
James D. Tocher
Not Party
John Van Der Westhuizen
Appellee

Document Text:

UNITED STATES COURT OF APPEALS APR 14 1992 

TENTH CIRCUIT 

GOLD STANDARD, INC., a Utah corporation, 

Plaintiff-counter-defendant-Appellant, 

v. 

MONTAGU FINANCE LTD., a United Kingdom 

corporation; JOHN VAN DER WESTHUIZEN, 

citizen of the United Kingdom; SAMUEL 

MONTAGU & CO., LTD., a United Kingdom 

corporation, 

) 

) 

) 

) 

) 

ROBERT L. HOECKER 

Clerk 

No. 90-4205 

) (D.C. 

) 

No. 88-C-0409S) 

(D. Utah) 

) 

) 

) 

) 

) 

Defendants-third-party-defendants-Appellees.) 

v. 

JAMES D. TOCHER; SCOTT L. SMITH; CANOREX 

INTERNATIONAL, INC., 

Third-Party Defendants. 

ORDER AND JUDGMENT* 

) 

) 

) 

) 

) 

) 

) 

Before LOGAN, and TACHA., Circuit Judges, and COOK, Senior District 

Judge.** 

Appellant, Gold Standard, Inc., appeals from a judgment 

entered following a jury trial and verdict in favor of the 

defendants, Samuel Montagu & Co., Ltd., Montagu Mining Finance, 

Ltd., and John van der Westhuizen (collectively "Montagu" ). On 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

** The Honorable H. Dale Cook, Senior District Judge for the 

United States District Court for the Northern District of 

Oklahoma, sitting by designation. 

Appellate Case: 90-4205 Document: 010110242311 Date Filed: 04/14/1992 Page: 1
appeal, Gold Standard challenges the jury instructions on the 

grounds that they misled the jury as to the legal standards 

governing a breach of fiduciary duty claim. Specifically, Gold 

Standard argues that the trial court erred in its instructions to 

the jury limiting the circumstances under which fiduciary 

obligations may arise. Gold Standard also argues that the trial 

court erroneously failed to instruct the jury to take merchant 

banking industry norms and practices into account in determining 

whether the defendants owed fiduciary obligations to Gold 

Standard. We exercise jurisdiction under 28 U.S.C. § 1291 and 

affirm. 

Gold Standard brought this diversity action seeking damages 

against Montagu on the grounds that Montagu misappropriated Gold 

Standard's confidential information and breached the fiduciary 

duty it owed to Gold Standard. One of the defendants, Samuel 

Montagu & Co., Ltd., is a merchant bank. Gold Standard allegedly 

formed a "merchant bank relationship" with the defendants in 1984 

in order to obtain advice on the acquisition of an interest in the 

Mercur Gold Mine. According to Gold Standard, Montagu gave Gold 

Standard's confidential information to a third party in order to 

help the third party acquire the Mercur Gold Mine. The jury 

returned a verdict for Montagu on the breach of fiduciary duty 

claim. The jury answered "no" to special verdict question #9, 

which asked whether a fiduciary relationship existed between Gold 

Standard and Montagu. 

Gold Standard argues that the district court's jury 

instructions improperly limited the circumstances under which a 

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Appellate Case: 90-4205 Document: 010110242311 Date Filed: 04/14/1992 Page: 2
fiduciary duty may arise. The parties agree that the issue of 

when a fiduciary duty may arise is controlled by Utah law. We 

review de novo the district court's interpretation of state law. 

Mid.America Fed. Sav . .i Loan Ass'n ~ Shearson/American Express, 

Inc., 886 F.2d 1249, 1257 (10th Cir. 1989). In exercising de novo 

review we afford no deference to the district court's 

interpretation of state law. Salve Regina College~ Russell, 111 

S • Ct. 121 7 , 12 2 4 ( 19 91) . 

Utah courts have "decline[d] to decide whether a bank can 

develop a fiduciary relationship with its borrower." Zions First 

Nat'l Bank~ Rocky Mountain Irrigation, Inc., 795 P.2d 658, 664 

(Utah 1990). Despite the "uncertain state of the law," id., the 

trial court instructed the jury that a fiduciary duty implied in 

law may exist between Gold Standard and Montagu. 

The Utah Supreme Court recently explained that to determine 

whether a fiduciary relationship should be implied in law, we must 

consider the following: 

A fiduciary relationship imparts a position of peculiar 

confidence placed by one individual in another. A fiduciary 

is a person with a duty to act primarily for the benefit of 

another. A fiduciary is in a position to have and exercise 

and does have and exercise influence over another. A 

fiduciary relationship implies a condition of superiority of 

one of the parties over the other. Generally, in a fiduciary 

relationship, the property, interest or authority of the 

other is placed in the charge of the fiduciary. 

First Sec. Bank of Utah N.A. ~ Banberry Dev. Corp., 786 P.2d 

1326, 1333 (Utah 1990) (quoting Denison State Bank~ Madeira, 640 

P.2d 1235, 1241 (Kan. 1982)). The court added that 

[t]here is no invariable rule which determines the existence 

of a fiduciary relationship, but it is manifest in all the 

decisions that there must be not only confidence of the one 

in the other, but there must exist a certain inequality, 

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Appellate Case: 90-4205 Document: 010110242311 Date Filed: 04/14/1992 Page: 3
dependence, weakness of age, of mental strength, business 

intelligence, knowledge of the facts involved, or other 

conditions, giving to one advantage over the other. 

Id. (quoting Yuster Y..!.. Keefe, 90 N.E. 920, 922 (Ind. App. 1910)). 

In another recent case, Von Hake Y..!.. Thomas, 705 P.2d 766 

(Utah 1985), the Utah Supreme Court stated similar requirements 

for establishing a fiduciary or confidential relationship: 

A confidential relationship is a prerequisite to proving 

constructive fraud. A confidential relationship arises when 

one party, having gained the trust and confidence of another, 

exercises extraordinary influence over the other party .... 

"The doctrine of confidential relationship rests upon the 

principle of inequality between the parties, and implies a 

position of superiority occupied by one of the parties over 

the other. Mere confidence in one person by another is not 

sufficient alone to constitute such a relationship. The 

confidence must be reposed by one under such circumstances as 

to create a corresponding duty, either legal or moral, upon 

the part of the other to observe the confidence, and it must 

result in a situation where as a matter of fact there is 

superior influence on one side and dependence on the other." 

Id. at 769 (quoting Bradbury Y..:.. Rasmussen, 401 P.2d 710, 713 (Utah 

1965)). 

Gold Standard contests the language of Jury Instruction No. 

38. In Instruction No. 38, the trial court instructed the jury 

that "in order to establish a fiduciary relationship implied in 

law, the following elements are essential:" 

(1) That Gold Standard and Montagu formed a relationship that 

would have caused an ordinarily prudent person in Gold 

Standard's position to place confidence and trust in Montagu 

to such a degree that it would have resulted in the 

substitution of Montagu's will for Gold Standard's will in 

the important aspects over the subject matter of the lawsuit; 

and 

(2) that Gold Standard actually placed that degree of trust 

in Montagu; and 

(3) that Gold Standard was justified in placing that degree 

of trust in Montagu; and 

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Appellate Case: 90-4205 Document: 010110242311 Date Filed: 04/14/1992 Page: 4
(4) that Montagu understood that Gold Standard was placing 

that degree of trust in Montagu and accepted that trust; and 

(5) that Gold Standard placed its interest in or authority 

over its dealing concerning the Mercur Mine in Montagu's 

charge; and 

(6) that Gold Standard and Montagu occupied unequal positions 

with respect to business intelligence, knowledge of the facts 

involved or other conditions, so that Montagu had an unfair 

advantage over Gold Standard; and 

(7) that Gold Standard was inferior to Montagu; and 

(8) that Gold Standard was dependent on Montagu; and 

(9) that Gold Standard turned its decision making over to 

Montagu; and 

(10) that Montagu had an overpowering influence on Gold 

Standard and used that influence to substitute its will for 

Gold Standard's will. 

(Instruction No. 38) . 

Gold Standard argues that the "substitution of will" language 

appearing in Instruction No. 38 and other instructions is an 

inappropriate standard for fiduciary relationship cases. The 

"substitution of will" language, however, has been employed by the 

Utah Supreme Court in fiduciary duty cases. See e.g., Von Hake, 

705 P.2d at 770; Bradbury Y.!.. Rasmussen, 401 P.2d 710, 713 (Utah 

1965). In Bradbury. the Utah Supreme Court explained that a 

fiduciary relationship 

must be such as would lead an ordinarily prudent person in 

the management of his business affairs to repose that degree 

of confidence in the other party which largely results in the 

substitution of the will of the latter for that of the former 

in the material matters involved in the transaction. 

401 P . 2d at 713. Gold Standard has failed to convince us that 

the "substitution of will" language inaccurately conveys the law 

governing fiduciary relationships in Utah. 

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Gold Standard also objects to Instruction No. 38 on the 

grounds that, regardless of the factual context, Utah courts have 

never required all ten elements as a prerequisite for finding a 

fiduciary relationship. Gold Standard maintains that Instruction 

No. 38 is merely a compilation of factors -- not "essential 

elements" -- that have been borrowed out of context from factually 

distinct cases. Furthermore, Gold Standard argues that the 

elements listed in Instruction No. 38 are imprecise and 

misleading. 

must 

We are mindful that when we examine jury instructions, we 

review the record as a whole to determine whether the 

instructions "state the law which governs and provided the 

jury with an ample understanding of the issues and the 

standards applicable." We thus "consider all that the jury 

heard and, from the standpoint of the jury, decide 'not 

whether the charge was faultless in every particular but 

whether the jury was misled in any way and whether it had 

understanding of the issues and its duty to determine the 

issues.'" 

Big Horn Coal Co.~ Commonwealth Edison Co., 852 F.2d 1259, 1271 

(10th Cir. 1988) (citations omitted). 

We conclude that Instruction No. 38 conveyed to the jury the 

issues and standards from Utah's fiduciary relationship cases. 

Although the language in Instruction No. 38 is, in places, 

somewhat more exacting than the language of some of Utah's 

fiduciary relationship cases, Gold Standard has failed to 

establish that the instruction misled the jury. 

Gold Standard also maintains that some of the "essential 

elements" of Instruction No. 38 are not appropriate for 

determining when a fiduciary relationship can arise in the 

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merchant banking industry. Gold Standard argues that a fiduciary 

relationship arises in the merchant banking context "when the bank 

invites trust and requests information with which to render 

financial advice," and when the customer justifiably "reposes 

trust in a bank and relies on the bank for financial advice." In 

short, we are not persuaded that Utah courts would measure 

fiduciary relationships in merchant banking cases by a relaxed set 

of standards which do not incorporate some of the fundamental 

principles of law governing fiduciary relationships in other 

cases. 

We have considered Gold Standard's remaining objections to 

Instructions 36, 38, 39, 40 and 41, and find them to be without 

merit. We are not convinced that the instructions, taken 

individually and as a whole, misled the jury. 

Finally, Gold Standard argues that the court should have 

specifically instructed the jury to consider the customs and 

standards of the merchant banking industry as it determined 

whether a fiduciary relationship existed between Gold Standard and 

Montagu. Gold Standard cites no support for its argument that 

industry standards should govern the formation of a fiduciary 

relationship. The jury was allowed to hear Gold Standard's 

evidence regarding customs and standards of the merchant banking 

industry. We cannot conclude that the trial court erred in 

refusing to instruct the jury on this matter. 

AFFIRMED. 

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ENTERED FOR THE COURT 

Deanell Reece Tacha 

Circuit Judge 

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