Opinion ID: 1432148
Heading Depth: 1
Heading Rank: 9

Heading: The Law of Fraud (Generally)

Text: We have said that fraudulent conduct implies an act which is obnoxious to good morals, Otte v. State, Wyo., 563 P.2d 1361, 1364 (1977), and that the basic elements of an action for fraud are false representations by the alleged defrauding party of material facts and reliance thereon to the detriment of the party asserting fraud, Davis v. Schiess, Wyo., 417 P.2d 19, 21 (1966). Fraud will never be presumed and will only be sustained upon evidence that is clear and convincing, State Farm Mutual Auto Ins. Co. v. Petsch, 261 F.2d 331, 334 (10th Cir.1958), and fraud will never be imputed to a party where the facts and circumstances out of which it is supposed to arise are equally consistent with honesty and purity of intention because fraud must be demonstrated in a clear and convincing manner. Johnson v. Soulis, Wyo., 542 P.2d 867, 874 (1975). Within the confines of our appellate authority, the only evidence concerning fraud and mismanagement which this court may consider is that which is favorable to the appellees. We summarize this evidence from the record and from the trial court's findings of fact and conclude that the trial court's decision that there was no fraud or mismanagement upon the part of Pete is amply supported by the record. Pete Zanetti, Sr. acquired the property in question and, in good faith, and mostly out of the goodness of his heart, brought his sons and friends into a joint venture which, at the time, looked as though it promised a quick profit for all involved. A joint-venture agreement was entered into, but, through no fault of Pete Senior, the sale to a committed purchaser fell through. He then settled the buy-and-sell agreement favorably to all adventurers, thus greatly enhancing the value of each partner's share in the venture without further contribution from them. Even so, once the settlement was made and most of the debt for the purchase of the property had been repaid, the raw land could not be sold, and so Pete Zanetti, Sr. undertook to develop water, roads and other facilities so that it could be disposed of. When some of the partners objected to the increased costs that would be involved in the development and thus the necessity for additional adventurer contribution, he offered to buy the interests of the remaining adventurers for what would have been a substantial profit for all of them, and he was firmly of the opinion that he had an agreement to purchase all of the adventurers' interest and therefore proceeded with the development. In the course of the development, believing he was to be the sole owner of all involved interests, Pete Senior drilled water wells with venture money. One was on Pete's property that adjoined the Purple Sage land, and the trial court found that this was not done in bad faith. Instead, it was done in an effort to establish the existence of water in the area. Roads were built and easements acquired with venture money. Some of the roadway development traversed property other than venture property, but the trial court found the road development was necessary to the development of the partnership property and no bad faith was involved in this road-building effort. Pete purchased one of the adventurers' interest with his own money, retaining it in his own name, but we surmise that the trial judge excused this for the reason that Pete believed that he had an agreement to buy out the others. Under the evidence, the trial judge was entitled to find that he had made two separate good-faith offers to purchase the interests of his coadventurers, and the evidence is to the effect that he believed he had an oral agreement with all of them that he would buy and they would sell all remaining interests. This agreement was not fulfilled because of the refusal of the brothers to carry out their end of the bargain. And, we can presume that the trial judge looked at the totality of the evidence and concluded that overall, even though there were indiscretions on the part of all parties, they did not, in this instance, amount to fraud, bad faith or mismanagement on the part of Pete Zanetti, Sr. Then there were allegations about commingling of funds and failure to report profitable offers of sale to the adventurers. In this respect, the trial court looked to the testimony of the accountant, found his testimony credible, and accepted it. The accountant stated that there was no mismanagement or misappropriation of the funds of the venture and that even though Pete Senior had commingled funds of the adventurers with his own, his accounting and bookkeeping, although far from ideally efficient, represented no intent to defraud or misappropriate the funds of the venture. As to the failure to report profitable offers of sale, the trial court did not find the offer in question to be bona fide, did not believe the witness who was supposed to have made the offer, and found that even if the alleged representation of the witness with respect to the purported offer was taken at face value, it could not be regarded as constituting a legitimate offer and thus Pete was not hiding offers of profit from the adventurers because there had been no legitimate profitable offer of purchase made to him. In any case, the trial judge found that the venture was risky from the beginning; that in good faith Pete brought his associates in with minimum investments; that he, Pete, extended his own credit, loaned some of the adventurers money to pay their share and made shrewd deals to protect the venture property and the interests of the adventurers. The trial judge found that the property had to be developed in order to dispose of it and that Pete was willing to pay all of the associates a substantial profit for their interests since some of them could not afford to contribute their share of the additional cost of development. The trial judge further found that these were good-faith efforts to bring his co-adventurers out with substantial profits while Pete undertook the entire risk of payment of old and new development obligations. At the time when the brothers refused to sell their interests to Pete and he was forced to cease development and bring suit, the trial judge found that Pete Zanetti was effectively and efficiently proceeding with the development of the property and that he would have resolved all remaining problems   . Findings of Facts and Conclusions of Law. The trial judge wisely distributed the debts and profits, if any, equitably. He held all participants to the venture agreement and disregarded all other alleged agreements as too nebulous, tentative, indefinite and thus unenforceable. The trial judge directed, in short, that the application of all funds on partition be assigned to debts attributable to the benefit of the venture; that Pete pay all other debts which he had incurred; and that profits, if any, be distributed equally among all the joint adventurers. This was what the adventurers themselves deemed to be an equitable solution because this is the way they all wrote the contract when they cared for one another and tensions were not bow-string tight. In addition, the trial judge directed Pete to return the G. Gordon James interest to the venture, there to be distributed equally among the partners, with Pete to receive credit for the amount paid James for the interest but that he would assume the expense of clearing the title to the Franks interest since the trial judge found this to be unreasonable under the circumstances. It is urged that the trial court committed error in allowing recovery without having found amount of enhanced value. In this case, it was stipulated that the property should be partitioned and sold under the provisions of the applicable Wyoming statutes since the parties could not agree among themselves. In view of the manner that the trial judge distributed the assets over liabilities, the other adventurers will receive the benefit of any enhanced value of the property if any there is. We do not find substance to the remaining contentions of the appellants. Given the foregoing review of the evidence favorable to the appellees, we find no fraud or mismanagement under the above-cited authority, and find that the evidence is sufficient to uphold the trial court's judgment in this and all other respects. Affirmed.