Source: https://scocal.stanford.edu/opinion/weiner-v-fleischman-31361
Timestamp: 2020-06-05 03:06:15
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Weiner v. Fleischman - 54 Cal.3d 476 S017856 - Mon, 10/07/1991 | California Supreme Court Resources
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Citation 54 Cal.3d 476
Weiner v. Fleischman (1991) 54 Cal.3d 476 , 286 Cal.Rptr. 40; 816 P.2d 892
The underlying dispute in this case centers on the sale of stock in Pioneer Theatres. Beryl Weiner (Weiner), an attorney, represented a group of Pioneer [54 Cal.3d 480] Theatres (Pioneer) shareholders who wished to sell their stock. Weiner also owned 100 shares of Pioneer stock. In December 1979, Weiner informed William O. Fleischman (Fleischman), also an attorney, of the group of Pioneer shareholders' interest in selling their stock. Weiner and Fleischman entered into an oral agreement whereby they would find a third party buyer of the stock and equally share the finder's fee. The parties gave conflicting testimony, however, concerning the extent of that oral agreement. Contrary to Fleischman, Weiner claimed that they had further agreed to purchase the stock together if they were unable to find a third party buyer.
In October 1982, Weiner read a newspaper article that named Fleischman as one of the owners of Pioneer Theatres. Weiner then filed this action in July 1983, alleging that Fleischman fraudulently concealed his participation in the Pioneer stock sale as a buyer and hence violated their alleged oral agreement. [54 Cal.3d 481]
At Fleischman's request, and over Weiner's objections, the jury was given "jury instruction No. 2.60" (Burden of Proof and Preponderance of Evidence) and a modified version of BAJI No. 12.35 (Fraud and Deceit-Concealment). The modified version of BAJI No. 12.35 presented the five elements necessary for a fraudulent concealment cause of action. Instruction No. 2.60 stated in part: "In this case, the plaintiff claims that he had an oral joint venture with the defendant to accomplish certain purposes. As a threshold matter, you must find by clear and convincing evidence, first, that the plaintiff and the defendant did enter into an oral joint venture and, second, the essential terms of that joint venture." (Italics added.) Instruction No. 2.60 also repeated the second element of BAJI No. 12.35, that "[t]he defendant must have been under a duty to disclose the [allegedly concealed] fact to the plaintiff," with the following addition, "[a]s noted previously, the existence of the oral joint venture and its scope must be proved by clear and convincing evidence." (Italics added.)fn. 1 [54 Cal.3d 482]
[1] A joint venture is "an undertaking by two or more persons jointly to carry out a single business enterprise for profit. [Citations.]" (Nelson v. Abraham (1947) 29 Cal.2d 745, 749 [177 P.2d 931].) "Like partners, joint venturers are fiduciaries with a duty of disclosure and liability to account for profits." (9 Witkin, Summary of Cal. Law (9th ed. 1989) Partnership, § 19, p. 418.)
The distinction between joint ventures and partnerships is not sharply drawn. A joint venture usually involves a single business transaction, whereas a partnership may involve "a continuing business for an indefinite or fixed period of time." (9 Witkin, Summary of Cal. Law, Partnership, supra, § 17, at p. 416, italics deleted.) Yet a joint venture may be of longer duration and greater complexity than a partnership. From a legal standpoint, both relationships are virtually the same. Accordingly, the courts freely apply partnership law to joint ventures when appropriate. (Orlopp v. Willardson Co. (1965) 232 Cal.App.2d 750, 754 [43 Cal.Rptr. 125].) A joint venture or partnership may be formed orally (Nelson v. Abraham, supra, 29 Cal.2d at p. 749; Sly v. Abbott (1928) 89 Cal.App. 209, 216 [264 P. 507]), or "assumed [54 Cal.3d 483] to have been organized from a reasonable deduction from the acts and declarations of the parties." (Swanson v. Siem (1932) 124 Cal.App. 519, 524 [12 P.2d 1053].)
[3a] The general rule in this state is that "[i]ssues of fact in civil cases are determined by a preponderance of testimony." (Liodas v. Sahadi (1977) 19 Cal.3d 278, 288 [137 Cal.Rptr. 635, 562 P.2d 316], citing Ford v. Chambers (1861) 19 Cal. 143, 144.) Evidence Code section 115 (section 115) provides in pertinent part: "The burden of proof may require a party to raise a reasonable doubt concerning the existence or nonexistence of a fact or that he establish the existence or nonexistence of a fact by a preponderance of the evidence, by clear and convincing proof, or by proof beyond a reasonable doubt. [¶] Except as otherwise provided by law, the burden of proof requires proof by a preponderance of the evidence." (Italics added.) "Law," as referenced in section 115, includes "constitutional, statutory, and decisional law." (Evid. Code, § 160.) [4a] In light of section 115, we must determine whether constitutional, statutory or decisional law (i.e., case law) requires a burden of proof higher than preponderance of the evidence to establish an oral joint venture or partnership.
None of the parties asserts, and we find no evidence, that constitutional law dictates a higher standard of proof on the issue of the existence of an oral joint venture or partnership agreement. Hence, we turn our attention first to statutory law. As Fleischman correctly notes, sections of many of our [54 Cal.3d 484] codes require that proof of an issue of fact must be by a higher degree of proof than preponderance of the evidence. For example, in 1987 the Legislature amended Civil Code section 3294 to provide that punitive damages could be assessed only "where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud or malice. ..." (Stats. 1987, ch. 1498, § 5, p. 5780.) Similarly, the Probate Code requires that agreements to make a trust must be established by clear and convincing evidence. (Prob. Code, § 15207.)
Fleischman contends that Cameron v. Crocker-Citizens Nat. Bank (1971) 19 Cal.App.3d 940 [97 Cal.Rptr. 269], and Liodas v. Sahadi, supra, 19 Cal.3d 278, state that "clear proof" is merely a variant of the "clear and convincing" standard of proof. However, Cameron, which involved an oral contract to make a will, did not hold that "clear proof" and "clear and convincing proof" were equivalent standards. Rather, the court simply noted that English precedents permitted the enforcement of oral contracts to make a will "upon clear proof" of their execution. (Cameron v. Crocker- Citizens Nat. Bank, supra, 19 Cal.App.3d at p. 943.) Similarly, Liodas noted that some Court of Appeal cases in civil fraud actions had required proof of fraud [54 Cal.3d 485] by " 'clear and convincing evidence,' or a variant of that standard." (Liodas v. Sahadi, supra, 19 Cal.3d at p. 287 & fn. 4.) Liodas itself held that the proper standard of proof in civil fraud actions is preponderance of the evidence. (Id. at p. 286.) Neither Cameron nor Liodas, therefore, supports the proposition that "clear proof" is necessarily equivalent to "clear and convincing evidence."
Concededly, certain appellate decisions have stated that proof of an oral joint venture or partnership agreement must be by clear and convincing evidence. (See Sullivan v. Schellinger (1959) 170 Cal.App.2d 111, 113 [338 P.2d 462] ["where, as here, there is no written agreement, proof of the partnership must be clear and convincing"]; accord, Smalley v. Baker (1968) 262 Cal.App.2d 824, 839 [69 Cal.Rptr. 521]; Lyon v. MacQuarrie (1941) 46 Cal.App.2d 119, 124 [115 P.2d 594].) The Smalley court cited Sullivan, supra, as authority regarding the requisite burden of proof, and the Sullivan court cited to Lyon, supra. Lyon, in turn, cited to Welch v. Alcott, supra, 185 Cal. 731, Swanson v. Siem, supra, 124 Cal.App. 519, and Blinn v. Ritchie (1929) 101 Cal.App. 691 [282 P. 390].
We recognize that other Court of Appeal cases have also indicated that an oral joint venture or partnership should be established by clear and convincing evidence. But these cases either cite to the cases discussed above (i.e., Sullivan, Smalley and Lyon) (see ABC Egg Ranch v. Abdelnour (1963) 223 Cal.App.2d 12, 15-16 [35 Cal.Rptr. 487] [citing Lyon v. MacQuarrie, supra, 46 Cal.App.2d 119]), or are based, like Sullivan, Smalley and Lyon, on cases that do not stand for the proposition for which they are cited. (See Coronet Constr. Co., Inc. v. Palmer (1961) 194 Cal.App.2d 603, 611 [15 Cal.Rptr. [54 Cal.3d 486] 601] [citing to Milstein v. Sartain (1943) 56 Cal.App.2d 924, 932 [133 P.2d 836], which states that the burden is upon the one asserting the existence of a copartnership to prove it by "competent evidence"].)
Fleischman also relies on Tannehill v. Finch (1986) 188 Cal.App.3d 224 [232 Cal.Rptr. 749] and Toney v. Nolder (1985) 173 Cal.App.3d 791 [219 Cal.Rptr. 497] to support a higher burden of proof. These cases, however, are inapposite because they involved attempts to rebut the legal and beneficial title to real property and were expressly decided under the authority of Evidence Code section 662. Evidence Code section 662 provides: "The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof." Although Weiner's original complaint stated other causes of action, the case proceeded to trial solely as an action for damages for fraudulent concealment. Consequently, the trial did not involve an effort to rebut the legal or beneficial title to property.
We note that our determination that preponderance of the evidence is the correct standard for establishing an oral joint venture or partnership agreement appears to be consistent with the decisions of a majority of other states that have considered this question.fn. 3 Several other large jurisdictions have [54 Cal.3d 487] come to the same ultimate conclusion, including New York (Kahn v. Kahn, supra, 3 A.D.2d 820 [160 N.Y.S.2d 972, 973] ["The burden of establishing the existence of this oral partnership by a fair preponderance of the credible evidence rests upon the [party asserting its existence]."]); Pennsylvania (Huron v. Schomaker, supra, 123 Pa.Super. 82 [185 A. 859] ["The burden of proving, by a fair preponderance of the evidence, a partnership and the liability of the defendant rested upon the [party asserting this oral agreement]."]); and Florida (Trickey v. Stone, supra, 152 So.2d 748, 750 ["We, therefore, hold that the chancellor should, in determining the quantum of proof necessary for the plaintiff to sustain his complaint [based on an oral partnership agreement] adhere to the preponderance of the evidence rule."]).
Fleischman contends that the gravity of the consequences flowing from a finding that an oral joint venture or partnership agreement exists compels a conclusion that such an agreement must be established by clear and convincing evidence. We disagree. [5] In Addington v. Texas (1979) 441 U.S. 418, 423 [60 L.Ed.2d 323, 329, 99 S.Ct. 1804], the United States Supreme Court stated: "The function of a standard of proof ... is to 'instruct the factfinder concerning the degree of confidence our society thinks [the fact-finder] should have in the correctness of factual conclusions for a particular type of adjudication.' [Citation.] The standard serves to allocate the risk of error between the litigants and to indicate the relative importance attached to the ultimate decision." We have noted that the standard of proof may depend upon the "gravity of the consequences that would result from an erroneous determination of the issue involved." (People v. Jimenez (1978) 21 Cal.3d 595, 604 [147 Cal.Rptr. 172, 580 P.2d 672].)
[6] Proof by clear and convincing evidence is required "where particularly important individual interests or rights are at stake," such as the termination of parental rights, involuntary commitment, and deportation. (Herman & MacLean v. Huddleston (1983) 459 U.S. 375, 389 [74 L.Ed.2d 548, 560, 103 S.Ct. 683].) However, "imposition of even severe civil sanctions that do not implicate such interests has been permitted after proof by a preponderance of the evidence." (Id. at pp. 389- 390 [74 L.Ed.2d at p. 560], citing cases involving proof in civil suits of acts that expose a party to [54 Cal.3d 488] criminal prosecution or disbarment.) As the United States Supreme Court stated: "A preponderance- of-the-evidence standard allows both parties to 'share the risk of error in roughly equal fashion.' [Citation.] Any other standard expresses a preference for one side's interests." (Id. at p. 390 [74 L.Ed.2d at p. 561].)
Furthermore, all of the grave consequences listed by Fleischman can result as well from a finding of an oral contract or an oral authorization of agency, both of which can be proved by a preponderance of the evidence. For instance, an agency can be established based on oral communications (Magnecomp Corp. v. Athene Co. (1989) 209 Cal.App.3d 526, 536 [257 Cal.Rptr. 278]), and the agent can subject the principal to individual liability and indemnity claims based upon the agent's conduct or omissions (Warshauer v. Bauer Construction Co. (1960) 179 Cal.App.2d 44, 48 [3 Cal.Rptr. 570]; Civ. Code, § 2338). Indeed, even where a contract has been solemnized by a writing, an oral modification of that written contract may be proved by a preponderance of the evidence. (Barrett v. Bank of America (1986) 183 Cal.App.3d 1362, 1370-1371 [229 Cal.Rptr. 16].)
Fleischman seeks to draw an analogy between oral joint venture or partnership agreements and other areas of the law where courts have traditionally required clear and convincing evidence. As examples, Fleischman cites oral agreements to make wills, allegations that deeds absolute are actually mortgages, that conveyances are subject to a trust, or that property whose title was held by one person was owned in full or in part by another, [54 Cal.3d 489] and oral agreements to create a trust of personalty. We believe that each of these areas of the law is distinguishable from oral joint venture or partnership agreements.
Oral agreements to make wills are disfavored because such claims arise after the testator, one of the parties to the oral agreement, is deceased or incapacitated. (Crail v. Blakely (1973) 8 Cal.3d 744, 750 [106 Cal.Rptr. 187, 505 P.2d 1027].) Such concerns generally do not apply to oral partnership agreements, since the person to be bound by the alleged agreement will generally be present to rebut the plaintiff's testimony.
Finally, the higher burden of proof required to prove oral trusts of personal property is derived from the special care that courts have historically shown in recognizing the creation of trusts. The law has shown such care because of special concerns that the terms of the trust specify the information needed for courts to deal with the trust, such as the identification of the trust property and purpose, the beneficiaries and trustees, and any special administrative provisions. (Recommendation Proposing Trust Law (Dec. 1985) 18 Cal. Law Revision Com. Rep. (1986) p. 525.) In addition, the creation of trusts, unlike the creation of oral partnerships, has long been governed by highly specific case law and statutes, reflecting trusts' closely regulated character. (See, e.g., Prob. Code, §§ 15200-15210.) Thus, oral partnership agreements are distinguishable from other areas of the law in which courts, because of historical and pervasive legal protection or skepticism, have traditionally required the "clear and convincing evidence" burden of proof.fn. 4 [54 Cal.3d 490]
[7] Article VI, section 13 of the California Constitution provides that error in instructing the jury shall be grounds for reversal only when the reviewing court, "after an examination of the entire cause, including the evidence," concludes that the error "has resulted in a miscarriage of justice." The test of reversible error has been stated in terms of the likelihood that the improper instruction misled the jury. (See Henderson v. Harnischfeger Corp. (1974) 12 Cal.3d 663, 670 [117 Cal.Rptr. 1, 527 P.2d 353].) Hence, we must determine whether it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of error. (People v. Watson (1956) 46 Cal.2d 818, 836 [299 P.2d 243].) While there is no precise formula for determining the prejudicial effect of instructional error, we are guided by the five factors enumerated in LeMons v. Regents of University of California (1978) 21 Cal.3d 869, 876 [148 Cal.Rptr. 355, 582 P.2d 946].
Second, we consider whether the jury asked for a rereading of the erroneous instruction or of related evidence. During the deliberations, the [54 Cal.3d 491] jury requested three readbacks regarding Fleischman's testimony of Weiner's possible participation in Donnelley's Pioneer offer, Weiner and Fleischman's testimony of the alleged Pioneer oral agreement, and Weiner and Fleischman's testimony on a prior oral agreement between the parties on a separate business venture. The court denied the requests because the portions of testimony might have fostered a different meaning when taken out of context. A fourth readback request concerning Fleischman's testimony as to his desire or intention to buy Pioneer stock was granted.
­FN 1. The full texts of modified BAJI No. 12.35 and jury instruction No. 2.60 given by the court are as follows:
­FN 2. Because the trial court has not yet reached the issue, we do not address Fleischman's claim that Weiner's relationship with his clients rendered any agreement between Weiner and Fleischman unenforceable on grounds of illegality.
­FN 3. A search indicates that of the 24 states other than California that have indicated their choice of standard of proof for an oral partnership or oral joint ventures, 19 expressly or apparently use the "preponderance" standard. This group of states includes: Alabama (McCrary v. Butler (Ala. 1989) 540 So.2d 736, 739); Arizona (Tripp v. Chubb (1949) 69 Ariz. 31 [208 P.2d 312, 314]); Arkansas (Carroll v. Kessinger (1957) 228 Ark. 450 [307 S.W.2d 880, 882]); Delaware (Thomas v. King (1953) 34 Del.Ch. 160 [99 A.2d 778, 779]); Florida (Trickey v. Stone (Fla.Dist.Ct.App. 1963) 152 So.2d 748, 750); Illinois (Cline v. Cline (1956) 12 Ill.App.2d 231 [139 N.E.2d 828, 831]); Iowa (Fowler v. Berry Seed Co. (1957) 248 Iowa 1158 [84 N.W.2d 412, 415-416]); Kansas (Liberty Glass Co. v. Bath (1960) 187 Kan. 54 [353 P.2d 786, 788]; Grannell v. Wakefield (1952) 172 Kan. 685 [242 P.2d 1075, 1079]); Louisiana (Knighton v. Beckham (La.Ct.App. 1963) 154 So.2d 232, 235); Michigan (Lobato v. Paulino (1943) 304 Mich. 668 [8 N.W.2d 873, 874]); Montana (Antonick v. Jones (1989) 236 Mont. 279 [769 P.2d 1240, 1244-1245]); New York (Kahn v. Kahn (1957) 3 A.D.2d 820 [160 N.Y.S.2d 972, 973]; Hanlon v. Melfi (1979) 102 Misc.2d 170 [423 N.Y.S.2d 132, 134]); Ohio (Tanski v. White (1952) 92 Ohio App. 411 [109 N.E.2d 319, 325]); Oklahoma (Katnig v. Johnson (Okla. 1963) 383 P.2d 195, 201-202); Oregon (Bernard v. Vatheuer (1987) 303 Ore. 410 [737 P.2d 128, 131]); Pennsylvania (Barbet v. Ostovar (1979) 273 Pa.Super. 256 [417 A.2d 636, 638, 641]; Huron v. Schomaker (1936) 123 Pa.Super. 82 [185 A. 859]); South Dakota (Insurance Agents, Inc. v. Zimmerman (S.D. 1986) 381 N.W.2d 218, 222 [dis. opn. of Hertz, Acting J.]); Texas (Visage v. Marshall (Tex.Ct.App. 1982) 632 S.W.2d 667, 672; First Nat. Bank of Amarillo v. Bauert (Tex.Ct.App. 1981) 622 S.W.2d 464, 467-468); and Washington (Ocean View Land, Inc. v. Wineberg (1965) 65 Wn.2d 952 [400 P.2d 319]; Eder v. Reddick (1955) 46 Wn.2d 41 [278 P.2d 361, 365]).
­FN 4. In holding that an oral joint venture or partnership agreement may be established by a preponderance of the evidence, it is important to note what this opinion does not hold. Contrary to the suggestion of Weiner, our decision is not compelled by our holding in Liodas v. Sahadi, supra, 19 Cal.3d 278. Liodas, in holding that the proper standard of proof in civil fraud actions is preponderance of the evidence, did not disapprove of the clear and convincing standard of proof in all civil cases. In fact, Liodas noted that under section 115, the clear and convincing evidence standard is "an alternative" standard of proof that "is required on certain issues" by statute or by case law. (19 Cal.3d at p. 291.) (Italics omitted.) The trial court in this case determined that before the issue of fraud could be considered by the jury, the jury had to determine if there was a "relationship" between Weiner and Fleischman. Liodas did not address the question of the proper standard of proof on predicate issues that must be determined in a civil fraud action.
Petition for review after the Court of Appeal reversed a judgment in a civil action. The case concerns the standard for proving an oral joint venture or partnership agreement.
Mon, 10/07/1991 54 Cal.3d 476 S017856 Review - Civil Appeal closed; remittitur issued
1 Fleischman, William O. (Respondent)
Represented by Scott J. Tepper
Garfield, Tepper, Ashworth & Epstein
2 Pioneer Theatres, Inc. (Respondent)
3 Weiner, Beryl (Appellant)
Represented by Beryl Weiner
Selvin, Weiner & Ruben
Oct 7 1991 Opinion: Affirmed
Oct 10 1990 Petition for review filed
Respondents Fleischman & Pioneer Theatres, Inc.
Oct 16 1990 Received:
Oct 29 1990 Answer to petition for review filed
Resps'. Votes: Lucas,CJ;Panelli,Eagleson,Kennard,J
By Counsel for Resps (Recd in La)
By Applt to file brief on the merits
Jan 18 1991 Extension of time granted
To Appellant To file answer brief on merits To 1-23-91
Jan 23 1991 Answer brief on the merits filed
Feb 8 1991 Association of attorneys filed for:
Feb 13 1991 Reply brief filed (case fully briefed)
Mar 29 1991 Received application to file Amicus Curiae Brief
Pacific Indemnity Co. in support of Resps. (brief Included)
Pacific Indemnity Co in support of Resps. Ans Due: 4/22/91
Pacific Indemnity Co in support of Respondents. Ans Due: 4-22-91
Apr 18 1991 Order filed:
Issue to be Argued Befr this Ct Shall be Limited to whether Preponderance of Evidence Is the Proper Standard of Proof to Establish Evidence of an Oral Partnership or joint Venture Agreement. Ct Finds Current briefing Sufficient to Address this Ques- Tion w/O Requiring Supplemental briefing.
Apr 22 1991 Response to Amicus Curiae Brief filed by:
By App to AC brief of Pacific Indemnity Co
Wednesday, Sept. 11, 1991, 9 A.M., S.F. **Changed from Tuesday, Sept 10, 9 A.M.** (Amended Calendar filed 8/21/91)
Sep 9 1991 Received letter from:
Counsel for Resp., Fleischman, Citing Additional Authorities.
Oct 7 1991 Opinion filed: Judgment affirmed in full
Nov 1 1991 Received letter from:
Atty Arthur Schwimmer requesting Court Award costs on Appeal
Nov 4 1991 Time extended to consider modification or rehearing
On the Court's own Motion, Jurisdiction...Is Here- by extended to and Incuding 12/6/91, or Until Fur- Ther Order of this Court, Whichever Occurs First
Nov 6 1991 Received letter from:
Respondent Wm. O. Fleischman Re: response to Reqt for costs on Appeal [Faxed]
Nov 14 1991 Order filed:
Applt's request that this Court's Remittitur Provide Recovery of costs on Appeal Is denied.
Nov 14 1991 Remittitur Issued
Jul 13 1995 Note:
Loaned Record to Div 7 (John Lepo, Deputy)
May 24 1996 Note:
Record returned from Division 7 - Record returned to State Archives.
Scott J. Tepper (Garfield, Tepper, Ashworth & Epstein)
Beryl Weiner (Selvin, Weiner & Ruben)
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