Court Opinion

ID: 3990437
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:48:15.721941+00
Date Added: 2024-06-11T12:17:24.396657
License: Public Domain

I concur in the result of the above opinion to reverse the case, but not in so much of it as rests such reversal on the ground that there is a distinction between the duty of disclosure owing by one living partner to another from such duty of a surviving partner to the representative of a deceased partner. I regard the duty as the same in both cases. Where a selling partner in active charge of the business possesses information not in the possession of his living partner materially affecting the value of the purchase he seeks to make, and the latter relies upon, or the former sees or has reason to believe that the purchasing partner is relying on him for such information, and such selling partner does not make full disclosure of such information to the purchasing partner, and the purchasing partner is thereby misled to his injury, the principle of the doctrine referred to in Sexton v.Sexton, 9 Gratt. (50 Va.) 204, and Tennant v. Dunlop, 97 Va. 234,33 S.E. 620, will apply, and the sale will be set aside. This on the ground that the selling partner in such a situation owes to the other the utmost good faith, because they are not dealing on equal terms, and because a quasi trust or fiduciary relationship exists.
The following authorities, among others, sustain the *Page 400 
view that this doctrine is applicable between living partners. There would seem to be no sound distinction in principle between cases where the inactive partner is dead from those where he is living, and none seems to be made in these authorities. See Sexton v. Sexton, supra;Dixon v. Paddock, 104 Va. 387, 51 S. E. 841; Yost v. Critcher,112 Va. 870, 72 S. E. 594; McKinley v. Lynch, 58 W. Va. 44, 51 S. E. 4;Krebbs v. Blankenship, 73 W. Va. 539, 80 S. E. 948; Gilbert v.Anderson, 73 N. J. Eq. 243, 66 Atl. 926; Brooks v. Martin, 69 U. S. (2 Wall.) 70, 17 L. Ed. 732; Parsons on Partnership (2nd ed.) p. 236; 1 Story's Eq. (12th ed.) sec. 220; Shumaker on Partnership, p. 235.
Therefore, in cases where the doctrine under consideration applies, the burden is upon the active and selling partner to show that he has discharged the duty incumbent upon him under this doctrine, Otherwise, the sale is set aside, not on the general ground of fraud, but upon that of a breach of trust — a distinct equitable ground of jurisdiction. It is true the breach of trust may amount to a fraud, but it is none the less a breach of trust. The breach of trust being proved by the plaintiff, his case is made out, as he thereby brings it within the application of the doctrine under consideration, without further proof.
But where the record, as in the case at bar, shows that the purchasing partner expressly declined to consider purchasing on the basis of an inventory value of the business, or to rely upon any information which the selling partner could give, and chose to act and rely upon his individual knowledge of the business and upon his independent valuation thereof, I am of opinion that the principle above referred to does not apply. Hence, the burden of proof was upon the plaintiff in the court *Page 401 
below, not only to allege but to prove fraud on the part of the defendant in the court below, in withholding information affecting the sale. The former having failed to sustain such burden, it is on this ground that I think the decree complained of should be reversed.
 Reversed.
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