Opinion ID: 1376005
Heading Depth: 3
Heading Rank: 1

Heading: The Hogan Property

Text: For the fourteen years that Foley was employed at Morse-Foley, the firm provided legal services at no cost to James A. Hogan. In February, 1981, many years after the law firm had been established, Hogan formally deeded a one-half interest in Lee Canyon acreage (the Hogan property) to Foley. Foley and Hogan claimed that this interest was given to Foley as compensation for work Foley did prior to entering the firm of Morse-Foley. Not until 1986, after Foley had left the firm, did Morse & Mowbray learn of this transaction. The court found that Foley had a contract of employment under which he was obliged to account for all compensation, and that he failed to make full and frank disclosure of compensation he had received for his legal work. Foley recorded his ownership while he was a shareholder in Morse-Foley, but he did not disclose this recorded deed to the law firm. However, the court never specifically found that the interest Foley received was earned during the existence of Morse-Foley, although such can be inferred from the other findings. While a shareholder in Morse-Foley, Foley defended a partition suit involving the Hogan property and did not disclose to the court or the parties his claimed interest or ownership in the property. Apparently, no fee was charged for this representation. The court further found that Foley had failed to meet his burden of proving that he did not breach his fiduciary duty to the firm and that he provided no evidence that he had made full disclosure to Morse. Instead, Foley testified that he had been given a deed to one-half of the Hogan property prior to association with his former firm and that this deed had been lost. The court found that there was no substantial evidence of that deed. Furthermore, the court found that Foley had not paid property taxes before recording the deed in 1981, nor had he declared the property as personal income. However, the court declined to impose a constructive trust or award seventy-seven percent of one-half of the present value because of frequent contact between Hogan, Foley, and the firm. In view of the findings and the record before us, we conclude that Foley's non-disclosure of his one-half interest in the Hogan property was a breach of his fiduciary duty. In Golden Nugget v. Ham, 95 Nev. 45, 48, 589 P.2d 173, 175 (1979), this court stated that when a party who is relied upon in a fiduciary capacity fails to fulfill his obligations thereunder, and does not tell the other party of his failure, his omission constitutes constructive fraud. In such circumstances, the statute of limitations may be tolled. Id. Also, during the suit for partition, Foley was required to set forth the nature and extent of his one-half interest in the Hogan property to the court. See NRS 39.070 (defendants to a suit for partition are required to set forth the nature and extent of their interest in the property); SCR 158(10) ([a] lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client); SCR 172(1)(a) ([a] lawyer shall not knowingly ... [m]ake a false statement of material fact or law to a tribunal). Thus, Foley wrongfully failed to disclose his property interest to the court during the partition suit and he breached his fiduciary duty of full disclosure to his law firm with respect to the Hogan property. Furthermore, while he provided only vague and conflicting evidence about the lost deed, he recorded the deed and started paying taxes on the property in 1981, from which we infer that he acquired title to one-half of the Hogan property while he was subject to the terms of his employment contract with Morse-Foley. In Namow Corp. v. Egger, 99 Nev. 590, 592, 668 P.2d 265, 267 (1983), this court stated, A constructive trust is a remedial device by which the holder of legal title to property is deemed to be a trustee of that property for the benefit of another who in good conscience is entitled to it. We conclude that Foley, who was entitled to twenty-three percent of the firm assets at the time of his departure, would be unjustly enriched at the expense of Morse & Mowbray if he were allowed to retain one hundred percent ownership of one-half of the Hogan property, and that this warrants the imposition of a constructive trust on the Hogan property for the benefit of Morse & Mowbray. Accordingly, we reverse and order the district court to conduct an evidentiary hearing to award Morse & Mowbray seventy-seven percent of one-half of the present value of the Hogan property, and to impose a constructive trust on the Hogan property to secure that award.