Court Opinion

ID: 9533099
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:28:21.269442+00
Date Added: 2024-06-11T13:28:54.770235
License: Public Domain

McGUIRE, Judge
(dissenting).
I dissent. I would reverse the case and remand for a new trial. It was not intended in the original opinion, 90 Ariz. 272, 367 P.2d 632, to modify the rule as to the discretion of the trial court in permitting the introduction of evidence out of order as laid down in a number of cases of which Podol v. Jacobs, 65 Ariz. 50, 173 P.2d 758 is the latest, nor limit the application of Rule 39(b).
There is a difference between merely receiving evidence out of order and sustaining objections to further evidence offered by the party against whom the out-of-order evidence was introduced.
Further discussion of this matter would not be of value in this case for the plaintiffs herein did in answer to a question of the trial court decline to proceed on the theory of damages on fraud and stated in their reply brief in the Supreme Court that this appeal hinges on the question of whether the plaintiffs’ conduct after October 2, 1956 resulted in a waiver of their substantive right to rescind the agreement. I therefore proceed to this question.
It -is fundamental that in passing on a motion for directed verdict all the evidence must be taken in the light most favorable to the party against whom the motion is made; and in this case since the court stopped the further introduction of evidence in support of the cause of action for rescission that such evidence when introduced would in fact support the complaint.
Plaintiffs seek to escape upon various-grounds the well-known and fundamental rule that any domination (such as a sale or assignment) exercised by a defrauded party (with knowledge of the facts) over the property received in the fraudulent *94deal amounts to a ratification and bars rescission.
Defendants did refuse or at least failed to issue the stock to the assignees or to plaintiffs for assignees and plaintiffs maintain that this action in and of itself prevents defendants relying upon the assignments. Defendants maintain and plaintiffs deny that the contract by which defendants were required to issue the stock is a valid and binding contract. If treating that contract as valid and binding circumstances exist which justified defendants in refusing to issue the stock, then such refusal is of no consequence; the action of defendants in doing only what they had a> right to do would not prevent them from relying upon a defense otherwise sound.
On the other hand defendants cannot insist the court treat the contract as valid and non-rescindable if they themselves are not living up to it. If therefore it appears that the conduct of the defendants in .refusing to issue the stock cannot be justified and was wrongful they cannot rely on the assignments unless they were prejudiced thereby.
The main problem in this case however arises upon the question of what knowledge and intent Mackey must have had at the time of the making of the assignments in order for them to bar equitable relief as a matter of positive law and beyond the discretion of the court to grant.
Pomeroy states the rule as being well settled that a simple mistake by a party as to a legal result of an act which he performs is no ground for relief. Pomeroy, Equity Jurisprudence, 5th Ed., Section 843. No man can escape the consequences which the law attaches to his acts merely by asserting that at all times he entertained a secret, subjective intent that the act was not to have that effect, nor ordinarily by saying that he had no idea it would have the effect and would not have performed it had he known. But in this case Mackey claims he was ignorant of his then existing right to rescind and not merely of the effect of the assignments.
This Court in Garrett v. Reid-Cashion Land and Cattle Co., 34 Ariz. 245, 270 P. 1044 granted relief from actions taken under a mistake of law.
On page 273 of 34 Ariz. on page 1053 of 270 P. the Court said:
"The rule that permits relief to one who enters into a transaction ignorant of his antecedent existing legal rights is well recognized. It is stated by Pomeroy on Equity Jurisprudence (3d Ed.) § 849, as follows:
“ ‘Wherever a person is ignorant or mistaken with respect to his own antecedent and existing private legal rights, interests, estates, duties, liabilities, or other relations either of property or contract, or personal status, and enters *95into some transaction the legal scope and operation of which he correctly apprehends and understands, for the purpose of affecting such assumed rights, interests, or relations, or of carrying out such assumed duties or liabilities, equity will grant its relief, defensive or affirmative, treating the mistake as analogous to, if not identical with, a mistake of fact.’
“This rule is especially applicable to all cases involving the relation of a trustee to his cestui que trust.”
In a later edition of Pomeroy it is said:
“Firmly settled as are the foregoing general rules, it is equally well settled that there are particular instances in which equity will grant defensive or affirmative relief from mistakes of law pure and simple, as well as from those accompanied by other inequitable incidents.” Pomeroy, Equity Jurisprudence, 5th Ed., Section 844.
The majority opinion holds definitely that a fiduciary relationship did not exist between the parties to this litigation and hence did not apply the rule of the Garrett case.
A fiduciary relationship exists where one party imposes confidence in another and is defined in Black’s Law Dictionary, 3rd Ed., page 775, as follows:
“A relation subsisting between two persons in regard to a business, contract, or piece of property, or in regard to the general business or estate of one of them, of such a character that each must repose trust and confidence in the other and must exercise a corresponding degree of fairness and good faith. Out of such a relation, the law raises the rule that neither party may exert influence or pressure upon the other, take selfish advantage of his trust, or deal with the subject-matter of the trust in such a way as to benefit himself or prejudice the other except in the exercise of the utmost good faith and with the full knowledge and consent of that other, business shrewdness, hard bargaining, and astuteness to take advantage of the forgetfulness or negligence of another being totally prohibited as between persons standing in such a relation to each other.”
Such a relationship exists as a matter of law between partners but it does not exist merely because the parties are stockholders in a small corporation. It has been held that the relation of promoters to each other is analogous to that of a partnership with its attendant trust relationship. 13 Am. Jur., Corporations, Sections 126-130, 18 C.J. S. Corporations, §§ 138-143. For a case in which this Court held such a relationship to exist between two men who each owned 50% of the stock of a corporation see *96Funk v. Spalding, 74 Ariz. 219, 246 P.2d 184.
In the case at bar two men, one of whom owned a business in need of financial support and the other had money to invest, formed a corporation in which they were the only natural persons interested to take •over the business; one was to manage the financial end, the other the actual running of the business.
I think that many circumstances point to the conclusion that in fact a fiduciary relationship did exist between these men, and •even if it is not taken as established,- it at least was a mixed question of fact and law to be solved after all the evidence on the complaint had been presented.
Defendants have in fact never issued, nor parted with the stock, and the assignments will not prejudice them in the least degree provided they are protected against any claims of the assignees. There are strong indications in the record that the plaintiffs were in financial difficulties at the time of the making of the assignments and would not otherwise have- made them, and it is logical to conclude that some of this difficulty was brought about by reason of the discharge of the plaintiff after he had conveyed his business to the corporation.
Hence, under all of the circumstances I would reverse and remand for a new trial.