Court Opinion

ID: 5007452
Source: CourtListenerOpinion
Date Created: 2021-10-01 02:17:31.196891+00
Date Added: 2024-06-11T08:17:18.711151
License: Public Domain

On Motion for Rehearing.
The appellee has filed a motion for rehearing in this case in which he earnestly insists that we reached an erroneous, conclusion as expressed in our original opinion.
We are much impressed with the thoroughness and frankness exhibited by counsel in this motion, and have again studied the record most carefully with the matters in mind, as raised therein; but we cannot agree with his contentions.
The effect of his argument is that, since it is conceded the parties were partners and that a copartnership existed between them, it must follow as a matter of law that a fiduciary relation .existed between them; that this relation produced the legal presumption that all dealings between them brought them under the rule announced in Dawson v. National Life Insurance Co., 176 Iowa, 362, 157 N.W. 929, 937, L.R.A.1916E, 878, Ann.Cas,1918B, 230, in which it was said: “We are of opinion that a fiduciary relation should be held to exist 'between a managing officer and stockholder, with relation to the latter’s shares, and that any contract between them by which such officer acquires profit out of the same to the detriment of the shareholder should be held presumptively fraudulent and voidable.” This same principle is announced by Judge Simpkins in his work on Equity, at page 566.
In support of his contention he lays much stress on the case of Morton Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 62 A.L.R. 1. In that case the parties entered into a joint adventure to lease certain property for a period of years; one of the parties was, by mutual consent, to manage and control the property for the joint use of both, while the other was to contribute his share of expenses, and together they were to share the profits and losses in a manner agreed upon. Certain valuable rights were contained in the lease contracts relating to options between themselves and 'the lessor to be determined at the end of the lease. Shortly before the expiration of the lease contract, the one to whom had been intrusted the management made a contract with the lessor, beneficial to himself but detrimental to his partner. The latter attacked the contract, invoking the rule contended for by appellee in this case. The court held the relations existing between the parties were similar to those between partners, and that the same' strict rule of good faith and scrupulously fair dealing were required; that a fiduciary relation existed between them; that the one was under every obligation to disclose to the other everything he knew and did, that would in any way affect the interests of the latter. The language used is indeed very strong, and we indorse it all. There is nothing in that case to indicate *416a lack of confidence and reliance in each other throughout every detail of the transaction. In this lies the distinction between that and the case before us.
We do not hold differently to the principles announced in the New York case. We do not have the same facts to deal with; some are similar but others are materially different, and our conclusions are based on those facts which did not appear in the case referred to above.
As we construe appellee’s contention, it is that since the parties were admittedly partners, a fiduciary relation existed between them by which Peckham was required to make known to Johnson all matters within his knowledge which would affect Johnson’s interest, regardless of whether or not Johnson relied upon him to dp so. This, as an abstract proposition of law, standing alone is sound. The relation between partners is so well recognized by law that it is summarized as a fiducial one. This carries with it the idea that they must of necessity rely upon the integrity and good faith of each other and requires no proof that they have done 'so. The law presumes that it was done. This presumption of law is grounded in one sense upon an equitable rule that each has done what he should do.
We recognize the rule and believe in its rigid enforcement; but we hold that this presumption may be successfully attacked and even overcome by proper evidence. Equity is reason. It will not intrude where the law dwells. It will not enforce as true that which is false. It regards the substance and not the form; it looks through superficial fictions and acts upon the facts. Chambers & Co. v. Little (Tex.Civ.App.) 21 S.W.(2d) 17 (writ refused); Simpkins, Equity, 96.
There is a technical distinction between what is commonly known as a “confidential relation” and strictly a “fiduciary relation,” although the terms are frequently used interchangeably. We construe the former as covering every form of relation between parties wherein confidence is reposed by one in another, and he relies and acts upon the representations of the other and is guilty of no derelictions on his own part; while the latter is made to apply more especially to the legal relations between parties created by law or by the nature of the contract between them where equity implies confidence and reliance in the consummation of the purposes for which the relation was created. See Roberts v. Parsons, 195 Ky. 274, 242 S.W. 594; In re Cover’s Estate, 188 Cal. 133, 204 P. 583.
The Supreme Court of Oklahoma said in case of Reeves v. Crum, 97 Okl. 293, 225 P. 177, 179: “The expression ‘fiduciary relation’ is one of broad meaning, including both technical fiduciary relations and those informal relations which exist whenever one man trusts and relies upon another.” To the same effect is the case of Wells v. Shriver, 81 Okl. 100, 197 P. 460.
In Higgins v. Chicago Title & Trust Co., 312 Ill. 11, 143 N.E. 482, it was held: “A fiduciary relation is not limited to cases of trustee and cestui que trust, guardian and ward, attorney and client, nor other recognized legal relations, but it exists in all cases in which influence has been acquired and abused, in which confidence has been reposed and betrayed, and the origin of the confidence is immaterial, and may be moral, social, or domestic, or merely personal.” See, also, Mors v. Peterson, 261 Ill. 532, 104 N.E. 216.
In Wyoming the court held in case of Hoge v. George, 27 Wyo. 423, 200 P. 96, 18 A.L.R. 469: “ ‘Fiduciary relationship,’ within the rule that a contract is illegal if its object or tendency is to cause unfaithful conduct by a fiduciary, must be a relationship from which the law infers or presumes the exercise of undue influence; the test being whether there was confidence reposed on one side and accepted on the other, with a resulting dependence by the one party and influence by the other.” See, also, Rowe v. Freeman, 89 Or. 428, 172 P. 508, 174 P. 727.
In Studybaker v. Cofield, 159 Mo. 596, 61 S.W. 246, 250, the Supreme Court of Missouri held: “It is not every guardian, attorney, or priest, quia eo nomine, who is to be adjudged to hold a fiduciary relation with the party in regard to a particular subject. It is in each case a question of fact. The law regards the real, rather than the nominal, condition.”
We are not called upon in this case to either condemn or condone the acts of the parties, and it would be improper for us to express our views with reference to the good or bad morals involved. Nor do we think the often discussed prin*417ciple of unconscionable contracts is involved under the facts before us.
There appears in the record before us ample testimony to raise the question of whether or not the presumption indulged by law, that a partner may rely upon his associate in buáiness to make full disclosures of all matters pertaining to the joint property, was in fact relied upon by Johnson; the law will presume that he did so rely, but under proper testimony we think the. presumption can be overcome and resolve itself into a question for jury determination. The precise question of whether or not this presumption may be overcome by evidence, it seems, has never been decided by any court. The diligence disclosed by counsel’s exhaustive brief leads us to believe if such was available it would have been found; we ourselves have carefully searched for such authority and have found none. The principle seems right and proper to us, and we are therefore venturing to assert it.
Appellee also complains that we erred in our holdings as to the burden of proof upon the issues submitted. Our opinion in this respect was based upon the conclusion reached regarding the matters hereinabove discussed. If we are correct in our holding that the presumption indulged by law, that one partner is in duty bound to disclose all material facts about their common property to the other, may be overcome, or at least attacked in a way as to make it an issuable fact, then it follows that the rule must be applied that one attacking the validity of a transaction has the burden of proving its invalidity. While upon the other hand if we are wrong in that holding, we are equally wrong in our rulings on the burden of proof; for if the duty imposed by law upon a partner to make such disclosures is inflexible enough that he cannot be discharged from the obligation under any circumstances, then it would be proper to place the burden of proof upon him to show he had discharged his obligation. See Baugh v. Houston (Tex.Civ.App.) 193 S.W. 242 (writ refused).
In the case of Moor v. Moor, 24 Tex.Civ.App. 150, 255 S.W. 231, 234, the court had under consideration a suit by the wife against her former husband to rescind a division of the community. property made between them upon the grounds that the husband at the time of the division had concealed from her certain properties and she was not in a position to know about them at the time of the division. (This case is applicable in some respects to the first question discussed by us in this motion.) With reference to the burden of proof in that case it was said: “Nor do we think that an agreement between husband and wife, who havd actually separated, intending that the separation shall be permanent, to divide their community estate, is, from the nature of their marital relation, prima facie void as to the wife, and throws upon the husband the burden of proving that the agreement is fair and equitable. In our opinion, the validity of such an agreement should be determined by all the facts, circumstances, and conditions surrounding the transactions and affecting the parties. If their relation is such as would probably enable the husband, from his knowledge and the condition of the property, to deceive his wife as to its value, or take advantage of her condition, and he induces her to enter into an agreement to divide the estate, which she seeks to avoid on the ground of fraud, then his relation to her as husband should be considered, as any other fact in connection with the circumstances surrounding the transaction, in determining its character. But there is no presumption in law that the' agreement is fraudulent, from the bare fact that the parties are husband and wife.”
In the view we take of the case as a whole, we think our original holding on this point is correct.
We do not think appellee was entitled to a peremptory instruction, and this is the effect of the judgment rendered.
In our former opinion we sustained appellant’s first and second assignments of error, which challenged the action of the court in rendering judgment for appellee for $3,750 without submitting to the jury the issue of the amount of damages sustained by appellee.
The pleadings of appellant raised the issue of the amount of interest appellee had in the property because of previous transactions, as well also what interest was actually conveyed by the assignments. The evidence was undisputed that appellee had previously conveyed Godwin and Taylor certain interests and the part retained by him was charged with $500 to be paid in oil runs; true the outstanding interests were purchased out of the $1,500 con*418tracted by appellant to be paid to ap-pellee, but whether these purchases were actually made by appellant or appellee is not clear; then, too, appellee settled the $500 oil run debt for $400, saving to himself $100. This was an action for damages for the alleged fraud, and if recovery can be had -it must be for the proportion' appellee’s interest in the property bears to the profit' made by appellant on the sale if that is to be taken as the measure of his damages. If the evidence upon another trial is the same as upon the former in this respect, the amount of his damages should be determined as a matter of fact by the jury.
„We believe we reached a proper solution of the matters presented on this appeal, and the motion for rehearing is overruled.