Court Opinion

ID: 9443233
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:15:07.563965+00
Date Added: 2024-06-11T17:29:25.123277
License: Public Domain

PHILLIPS, Chief Judge
(dissenting).
Continental Mining and Milling Company,1 a corporation, brought this action against Migliaccio to rescind a written agreement' under which certain mining claims in Emery County, Utah, were leased to Continental with an option to purchase, and to recover damages on the-ground of fraud. Migliaccio has appealed from a judgment in favor of Continental.
The following facts were established by substantial evidence:
The mineral claims involved in the controversy, known as the Vanadium King Claims Nos. 1 to 7, were located over other claims which had been filed upon theretofore by a group known as the Gibbons-Bitterbaum Group. Migliaccio’s predecessors, known as the Davis Group, filed the Vanadium King claims after the Gibbons-Bitterbaum Group failed to file a proof of labor for the year 1940, alleging that fact as evidence of abandonment of the claims by the Gibbons-Bitterbaum Group.
After the filing of the Vanadium King claims, the Gibbons-Bitterbaum Group brought a quiet title action against the Davis Group. To compromise such action, the parties signed a stipulation wherein they . agreed that Davis was entitled to a 7% per cent interest, Tomlinson, another member of the Davis Group, 7% per cent interest, and the Gibbons-Bitterbaum Group the remaining interest in the claims. The attorney for Davis was to receive a 2% per cent interest, leaving Davis with a 5 per cent interest. .The stipulation was signed and filed May 15, 1942, but judgment was not. entered thereon until April 18, .1950.
On May 27, 1942, Davis and his wife executed a deed conveying all their interest in the claims, which amounted to 5 per cent of the total, to Migliaccio. The deed did not recite the interest owned by Davis. It was left with Hammond, to 'be given to Migliaccio if an effort of the Gibbons-Bitterbaum Group to sell all of the interests in the claims failed. While the negotiations for this sale were'being conducted, Migliaccio had several discussions with Hammond, attorney for Davis, and Therald Jensen, attorney for the Gibbons-Bitterbaum Group, during which the fact that Davis had a 5 per cent interest was discussed many times.
The negotiations for the sale by the Gibbons-Bitterbaum Group did not materialize. But, in 1943, interest in the claims was renewed and Migliaccio requested Hammond to prepare a deed conveying to Migliaccio the interest Davis was to receive under the stipulation. On July 9, 1943, Hammond drew a second quitclaim deed from Davis and wife conveying áll their right, title, and interest in the claims to Migliaccio. It recited the fact -that Davis had a 5 per cent interest in the claims. It was never recorded, but it was delivered to Migliaccio on the day it was executed and remained in his possession thereafter.
About June 27, 1948, Jensen, acting as attorney for the parties to the action, leased a portion of the claims to Skidmore and Howard. Later, after a discussion with Jensen with respect to such lease, Migliaccio was able to obtain a sublease of several of the claims and entered into possession of them. When Hammond received the *405money from the Skidmore lease, which represented 5 per cent of the total, he advised Migliaccio that he had $50 for him. Thereafter, Hammond agreed with Migliaccio to pay him the $50 and deliver to him the first quitclaim deed, which did not express the respective interests of the parties, if Migliaccio would also record the second quitclaim deed from Davis, which did- express the interests of the parties in the claims. Migliaccio agreed to this and Hammond typed a letter to the clerk and recorder of Emery County, had Migliaccio sign the letter, and enclosed the letter and the two deeds in an envelope addressed to the clerk and recorder. He also gave Migliaccio his check for $50. Migliaccio then went to the clerk and recorder’s office and withdrew the second quitclaim deed, which recited the amount of the interest owned by Davis, but left for recording the first quitclaim deed, which did not recite the interest of Davis, He did not cash the $50 check.
In 1948, the Atomic Energy Commission began purchasing ore from the Vanadium King claims, which created renewed interest in those claims. A group of men known as the Hunt Group filed claims over the Vanadium King claims and then filed a quiet title action against the original parties to the suit brought by the Gibbons-Bitterbaum Group, and named Migliaccio also as a party defendant. This case is referred to in the record as the Hunt case.
In the meantime, a dispute arose between Migliaccio and Davis, which resulted in Migliaccio filing a quiet title action against Davis. In 1949, a judgment was entered in that action, which decreed that Davis was the owner of an undivided % interest and Migliaccio the owner of an undivided % interest. Migliaccio appealed from that judgment to the Utah Supreme Court and his appeal was still pending at the time the instant action was instituted.
Sometime in November or December, 1949, E. G. Frawley, President of Continental, began negotiations with Migliaccio to acquire the Vanadium King claims. At that time, Migliaccio represented to Frawley that he owned a 100 per cent interest in such claims, subject only to the result of the final judgments in the Davis and Hunt cases. Frawley testified as follows:
“He [Migliaccio] said he owned all of the Vanadium King claims, except such as might be subject to the Davis case and Hunt case.”
Elggren, Secretary-Treasurer of Continental, testified as follows:
“He [Migliaccio] said he owned the claims completely. That is, they were claims under the laws of the United States, and subject to only these two lawsuits. He owned 100%.”
On January 9, 1950, Migliaccio and his wife executed a deed to the mining claims to Continental. In consideration for the deed, Continental on the same day issued to Migliaccio 100,000 shares of Continental common stock and executed a note for the principal sum of $250,000, and a mortgage of the mining claims to Migliaccio to secure the note. The deed was placed in escrow and was to be delivered when certain stipulated payments had been paid on the note. Continental, as further consideration, agreed to carry on all the litigation pending that might affect the title of the claims, having particular reference to the Davis and Hunt cases. To effectuate the agreement to defend the lawsuits, Continental employed McBroom and Van Dam to represent Migliaccio and turned over to them the files in the Hunt and Davis cases.
Thereafter, and in the early part of February, 1950, Continental learned for the first time, through Tomilson, of the existence of the stipulation filed in the GibbonsBitterbaum case. Continental then made inquiry of Migliaccio with respect to the stipulation. Migliaccio at first denied any knowledge of the stipulation. Elggren went to the office of the clerk of the court for the purpose of examining the files in the Gibbons-Bitterbaum case. He found only the stipulation in the files. He asked the clerk for the other papers. The clerk searched the records, but could not find the files and could not find evidence of anybody having taken them out. Continental again made inquiry of Migliaccio with respect to the stipulation. Migliaccio then stated that Davis’ attorney had acted without authority in executing the stipulation, and further, that the Gibbons-Bitterbaum Group had abandoned all • their rights in the claims. Such representation as to abandonment was *406not true. Migliaccio had actual knowledge that these representations were not true, in that he knew Jensen, attorney for the Gibbons-Bitterbaum Group, had annually filed notices of intention to hold the claims for all parties affected by the stipulation from 1942 to 1948, inclusive, and further, that Jensen had told MEigliaccio that the Gibbons-Bitterbaum Group had no intention of repudiating the stipulation. Moreover, in accepting the deeds, Migliaccio had ratified the stipulation, as had Davis in executing the deeds, and particularly the deed which recited that Davis’ interest was 5 per cent.
On January 27, 1950, a prospectus was issued by Continental which discussed the litigation then pending against the Vanadium King claims. The officers of Continental testified that the information set forth in the prospectus was obtained from Migliaccio himself and not from the records in the possession of their attorneys, McBroom and Van Dam, and that they had not examined such records before they wrote the prospectus.
When this prospectus was filed with the Securities Commission of Utah, it refused to allow the stock to be sold because, in its opinion, the debt was too large in view of the doubtful outcome of the pending litigatiom To obviate this difficulty, Continental and Migliaccio entered into the lease and option.
Shortly after the lease and option agreement was entered into, Continental learned that a judgment had been entered on the stipulation. When it confronted Migliaccio with this, he denied that the stipulation affected his rights in any manner. Continental then sent him a letter -dated June 1, 1950, giving notice of its election to rescind the lease and option agreement.
At the time of the contracts between Continental and Migliaccio, Migliaccio was in possession of the claims, working them, and was receiving payments from the Atomic Energy Commission. In the negotiations between the parties, Migliaccio stated that he was in possession of the claims and Continental ascertained that he was receiving payments from the Atomic Energy Commission for ore shipped.
Shortly after the first contract was entered into, and before the lease and option was entered into, Migliaccio became a stockholder in Continental and a member of its board of directors, and thereafter and at the time the lease and option agreement was entered into, Migliaccio occupied a fiduciary relationship to Continental. That relationship also existed when Continental discovered the existence of the stipulation and at the time of Migliaccio’s representations with respect thereto and the abandonment of the claims by the Gibbons-Bitterbaum Group.
Continental, believing the representations of Migliaccio as to his ownership of the mining claims, and relying thereon, agreed to purchase such claims from Migliaccio, issued the Continental stock to Migliaccio and executed and delivered the note and mortgage to Migliaccio. Thereafter, believing Migliaccio’s representations with respect to the stipulation and the abandonment of the claims by the Gibbons-Bitterbaum Group, and relying thereon, Continental entered into the lease and option agreement.
The trial court found the facts substantially as hereinbefore stated.
It is my opinion that this court cannot, on a consideration of the entire evidence, reach a definite and firm conviction that the findings of the trial court were clearly erroneous.2
Under the great weight of authority, false and positive statements as to title constitute actionable misrepresentation of fact3 which *407may be relied upon without investigation where there exists a relation of confidence or inequality of knowledge.4
In Steele v. Banninga, 225 Mich. 547, 196 N.W. 404, 407, the court said:
“The dividing line between a false representation and a mere opinion is not well marked, and cannot be marked in the abstract, as it must necessarily depend upon the facts in a case. If defendant, for the purpose of deceiving the plaintiffs as to the title, gave them an opinion he knew to be untrue, and they relied thereon, then he cannot escape liability, for, in such event, it was not an opinion distinguishable from a false representation. The fact that plaintiffs had some information and sought more from sources other than defendant would not release defendant from false and fraudulent misrepresentations if plaintiffs relied thereon, in whole or in part, in making the purchase. It was not necessary for the jury to find that plaintiffs relied solely upon the representations of title made to them by defendant. If the representations made by defendant were the moving and procuring reason for plaintiffs’ purchase, defendant cannot be heard to say that, if they had not believed him but had used diligence to verify what he had said, they would have discovered reasons for not purchasing. If plaintiffs knew Stamp was in possession, claiming ownership, and failed to find out from Stamp the nature and extent of his claim, but instead went to defendant and relied upon what he said, and defendant was dishonest and intentionally deceived them, then defendant is liable, even if the truth lay elsewhere and plaintiffs might have found it out had they looked beyond defendant in their search for it.”
At the time the deed, note, and mortgage were executed and the stock issued, Continental was not informed of any facts casting doubt upon the truth of Migliaccio’s representations and it had a right to rely on such representations.
At the time the existence of the stipulation was discovered by Continental, the relation of the parties had changed. Migliaccio had become a director of Continental and occupied a fiduciary relationship to Continental. That relationship existed also at the times of Migliaccio’s representations with respect to the stipulation and the abandonment of the claims by the Gibbons-Bitterbaum Group.
Where a confidential relationship exists between a seller and a purchaser, no duty develops upon the purchaser to make an independent investigation and he has a right to rely upon the truth of disclosures made by the seller and it is the duty of the latter to make full and truthful disclosures of all the material facts. Where such a relationship exists, nothing short of actual knowledge will preclude recovery for a misrepresentation of a material fact.5
Because of such confidential relationship, a duty devolved upon Migliaccio to make full and truthful disclosure to Continental with respect to the stipulation and the claims of the Gibbons-Bitterbaum Group.
The confidential relationship between Migliaccio and Continental clearly distin*408guishes the instant case from O’Reilly v. McLean, 84 Utah 551, 37 P.2d 70.
The negotiations between the parties finally culminated in the lease and option to purchase agreement. It was not until the fiduciary relationship came into existence that Continental was advised of any facts casting doubt as to the truth of the representations which had been made by Migliaccio. At the time the representations were made by Migliaccio with respect to the stipulation and the abandonment of the claims by the Gibbons-Bitterbaum Group, Continental, because of the existing confidential relationship, had the right to rely upon such representations without further inquiry.6 Such misrepresentations are sufficient, standing alone, to support the conclusions of law made by the trial court and the judgment rendered against Migliaccio.
It is my conclusion that the representations made by Migliaccio were positive statements with respect to his ownership of the .claims and did not fall within the category of opinion; that Migliaccio had full knowledge with respect to his title and that-there was an inequality ' of knowledge as between him'and 'Continental; and that because of the confidential relationship existing betwe.en Migliaccio and Continental, the latter had the right to rely on Migliacció’s representations with respect to the stipulation. and the abandonment of the claims by the Gibbons-Bitterbaum Group, and that there was no duty upon the part of Continental to make a full investigation with respect thereto.
For the reasons indicated, I respectfully dissent.

. Hereinafter called Continental.

. See H. F. Wilcox Oil & Gas Co. v. Diffie, 10 Cir., 186 F.2d 683, 696; United States v. U. S. Gypsum Co., 333 U.S. 364, 365, 68 S.Ct. 525, 92 L.Ed, 746.

. Burns v. Doekray, 156 Mass. 135, 30 N.E. 551, 552; Westerman v. Corder, 86 Kan. 239, 119 P. 868, 870, 39 L.R.A.,N.S., 500; Martin v.’ Hughes, 156 Kan. 175, 131 P.2d 682, 684; Loverin v. Kuhne, 94 Conn. 219, 108 A. 554, 555, 33 A.L.R. 848; Stoltzfus v. Howey, Mo. App., 54 S.W.2d 501, 505; White v. Reitz, 129 Mo.App. 307, 108 S.W. 601, 602, 603; Reynolds v. Franklin, 39 Minn. 24, 38 N.W. 636; Patzman v. Howey, 340 Mo. 11, 100 S.W.2d 851, 856; Bu*407chanan v. Burnett, 102 Tex. 492, 119 S.W. 1141; 37 C.J.S., Fraud, § 56, pp. 330, 331; 23 Am.Jur., Fraud and Deceit, § 146, p. 949.

. Steele v. Banninga, 225 Mich. 547, 196 N.W. 404, 407; Old National Life Ins. Co. v. Bibbs, Tex.Civ.App., 184 S.W.2d 313, 316; Curtley v. Security Savings Society, 46 Wash. 50, 89 P. 180, 181, 182; Riley v. Bell, 120 Iowa 618, 95 N.W. 170, 172; Loverin v. Kuhne, 94 Conn. 219, 108 A. 554, 555; Seeger v. Odell, 18 Cal. 2d 409, 115 P.2d 977, 980, 981, 136 A.L.R. 1291; 37 C.J.S., Fraud, § 56, pp. 330, 331; 23 Am.Jur., Fraud and Deceit, § 146, p. 949.

. Butcher v. Newburger, 318 Pa. 547, 179 A. 240, 241; McDonough v. Williams, 86 Ark. 600, 112 S.W. 164, 167; Hicks v. Wallace, 190 Ky. 287, 227 S.W. 293, 296; Hulett v. Kennedy, 4 Ind.App. 33, 30 N.E. 310, 312; Davenport v. Buchanan, 6 S.D. 376, 61 N.W. 47, 49; Hawk v. Brownell, 120 Ill. 161, 11 N.E. 416; Edward Barron Estate Co. v. Woodruff Co., 163 Cal. 561, 126 P. 351, 357, 42 L.R.A.,N.S., 125; Johnson v. Savage, 50 Or. 294, 91 P. 1082, 1083; Burgess v. Charles A. Wing Agency, 139 Or. 614, 11 P.2d 811, 813, 814; 37 C.J.S., Fraud, § 27b, p. 269, § 35, p. 282; 26 C.J., Fraud, § 56, p. 1137, § 72, p. 1158.

. See cases cited in Note 5.