Court Opinion

ID: 8041050
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:32:43.810511+00
Date Added: 2024-06-11T16:37:18.969247
License: Public Domain

Hastings, Shanahan,
and Grant, JJ., and Moran, D.J.,
dissenting.
For the reasons hereinafter stated we dissent from the acquittal on specification No. 1 — duty not to misrepresent.
Paul L. Douglas, before being elected Attorney General of the State of Nebraska, invested in the commodities market with a friend, Paul E. Gaiter, a Lincoln attorney. That venture into commodities *250was unsuccessful, for Douglas and Gaiter lost $40,000 —a $20,000 loss sustained by each in the market endeavors.
After Douglas’ election as Attorney General, Gaiter told Douglas about a real estate investment, namely, real estate development projects by Marvin Copple, a friend and client of Gaiter’s. Regarding the prospective developments and the roles of each participant, initial capital or financing was supplied by Copple; Gaiter provided any “purely legal services”; and “many other services” would be provided by the three — Copple, Gaiter, and Douglas. Douglas, who had no experience in land development, acted as a consultant to Copple in the projects.
The real estate projects involving Douglas centered around developments known as Fox Hollow and Timber Ridge. From January 1, 1977, to June 1, 1979, Gaiter and Douglas bought 78 Fox Hollow lots from Copple at an aggregate price of $668,129. Throughout this time, Copple was a director of Commonwealth Savings Company, a fact known to Douglas. Copple sold Gaiter and Douglas lots at a “discount” or reduced purchase price. When Gaiter and Douglas resold the lots, profit on the resale would constitute their compensation for services rendered to Copple for the real estate projects. It was contemplated that the entire “transaction would take about two years.” Copple told Gaiter and Douglas that their “financial worries were over.”
Among his consulting services to Copple, Douglas visited members of Lincoln’s city council about zoning Timber Ridge, conferred with the Lincoln city attorney and with the U.S. Corps of Engineers about a water easement in Fox Hollow, met with paving contractors concerning Fox Hollow, and studied methods of installing utilities in Fox Hollow. The bulk of Douglas’ time in consulting was directed to Fox Hollow.
Apart from any profit realized on resale of lots *251acquired from Copple, Douglas also received payments from Copple, namely, $5,000 on December 20, 1978; $5,000 on April 13, 1979; $7,500 on September 6, 1979; and $15,000 on December 5, 1980. Those payments by personal check of Copple had a total of $32,500. Gaiter did not share any part of the $32,500 paid by Copple.
On March 14, 1983, Paul Amen, director of the Department of Banking and Finance of the State of Nebraska, received a letter from the Federal Bureau of Investigation implying that there might be irregularities in loans at Commonwealth. Copple’s name was not mentioned in the FBI letter to Amen. Douglas received a copy of the FBI letter.
On May 4, 1983, Barry Lake, assistant director of the Department of Banking and Finance, personally met with Douglas at the Attorney General’s office to inform Douglas of “evidence of possible crimes that were not mentioned” in the FBI letter. Lake told Douglas about an examination report reflecting Copple’s receipt of $500,000 in what appeared to Lake to be an “insider-type transaction” which Lake characterized as “theft.”
Lake later pointed out to Ruth Anne Gaiter, an assistant attorney general assigned by the Attorney General to the Department of Banking and Finance, the two Copple transactions reflected in an examination report on Commonwealth. Ms. Gaiter “could not characterize them as insider loans,” but in July 1983 reported to Douglas the $500,000 Copple “commissions.”
On November 1, 1983, Commonwealth was declared insolvent and its doors closed by receivership. Around November 12, 1983, Amen resigned as director of the Department of Banking and Finance, and on November 16, 1983, John P. Miller was appointed interim director of the department.
In his letter of November 18, 1983, Douglas designated David A. Domina as “special counsel to handle *252all legal matters relating to Commonwealth Savings Company.”
Domina, by his letter of November 25, 1983, to Douglas, requested information regarding “any payment received by you as compensation for any service(s) from [Marvin Copple].” There was no reply to Domina’s letter before Domina personally interviewed Douglas.
Within a few days after Douglas’ receipt of Domina’s letter, Douglas, Domina, and Miller met at Douglas’ office to “set the ground rules for the taking of Paul’s testimony.” At that time Douglas stated “he wanted the opportunity of making full disclosure of all his involvement in the matters relating to Commonwealth.”
In a transcribed interview with Douglas on November 30, 1983, Domina asked about compensation which Douglas had received from Copple.
Q. ... Were there other developments, then, besides Fox Hollow and Timber Ridge for which you were paid for services as counsel?
A. There was always something coming up, and as it was requiring my time and my counsel
— and I would remind him of it and periodically
— he would pay me for it. . . .
Q. Did you ever specifically bill Mr. Copple for your counsel on these other projects other than Fox Hollow and Timber Ridge?
A. No.
Q. Did you ever give him orally, you know, a figure or ask for a specific amount of compensation on those other projects?
A. No.
Q. How did he pay you for your services on the projects other than Fox Hollow and Timber Ridge or did he?
A. He never did pay me.
During a second transcribed interview by Domina on December 12, 1983, Douglas again discussed his *253compensation for services to Copple, and informed Domina and Miller that Copple was going to convey a 10-percent interest in Timber Ridge to Gaiter and Douglas. Such acquisition of the 10-percent interest was not part of the lot-resale plan involving Fox Hollow. In this second interview there was no specific inquiry by Domina regarding compensation other than compensation resulting from the acquisition of real estate interests — Fox Hollow and Timber Ridge — and there was no mention of Copple’s payment of $32,500 to Douglas.
Upon completion of his investigation Domina, with Miller, prepared a report, the “Miller-Domina report,” which was submitted to the Legislature.
After the Miller-Domina report and in his letter of February 6, 1984, to Richard G. Kopf, special counsel for the Special Commonwealth Committee of the Legislature, Douglas stated that Copple was “willing to compensate us for our services by allowing us to participate in the profits of future lot sales.” Later, in this letter to Kopf, Douglas stated:
For all those services, I received compensation in the form of reduced price purchases of Fox Hollow lots, money, and a, to date unconveyed, 10% interest in Timber Ridge. . . . That compensation was paid to me in accordance with the general agreement and understanding between Paul Gaiter, myself and Marvin Copple. ... As indicated, the transaction [resale of lots] was designed to provide compensation to us for our services.
(Emphasis supplied.) Douglas then disputed a profit of $118,288.67 on resale of the lots as alleged by the State, that is, the allegation that Gaiter and Douglas each received a profit of $59,144.34. Douglas indicated the net profit on resale of the lots was $89,544.22, or a profit of $44,772.11 each for Gaiter and Douglas. Douglas’ letter to Kopf continued:
Although I advised Mr. Domina that Marvin Copple made payments to me from time to time, *254no one has ever asked me whether or not the only payments I received for my services in connection with all the real estate developments . . . were received as profits from the lot sales. Because of the extensive additional work which I did ... I was paid a total of $32,500 during 1978, 1979 and 1980. For more than 1,500 hours of work over a period of five years, I received a total of $77,272.11.
Douglas’ letter of February 6 was the first public disclosure of the $32,500 paid by Copple.
At the hearing before the Special Commonwealth Committee of the Legislature on February 24 or 25, 1984, Douglas commented upon the Copple payments of $32,500:
I wish I would have told them about the extra 32 five. I didn’t, but that hardly puts me in the role that he [Domina] says that I belong in, but interestingly enough, on his examination of me, he asked me this question: “All right. Were there other developments, then, besides Fox Hollow and Timber Ridge for which you were paid for services as counsel”? That was the question. “Were there other developments besides Fox Hollow and Timber Ridge for which you were paid for services as counsel”, and I responded, “There was always something coming up, and it required my time and counsel. I would remind him of it periodically; he would pay me for it’ ’. Now, he didn’t pursue that. It is quite obvious that I didn’t volunteer it, and I should have.
On the next — Later on on that page, he asks the question slightly different, and I played the part of the lawyer and answered his question. Again, I say, I should have told him. “Did you especially bill Mr. Copple for your counsel on these other projects other than Fox Hollow and Timber Ridge”? And the answer was, “No”, and that is a correct answer, but I knew what he wanted. “Did you ever give him orally, you *255know, a figure or ask for a specific amount for compensation on these other projects”? The answer was, “No”. “How did he pay you for your services on the project other than Fox Hollow? How did he pay you for your services on the projects other than Fox Hollow and Timber Ridge, or did he” ? I answered the first part of the question by saying, “He never did pay me”, meaning he never did pay me for projects other than Fox Hollow and Timber Ridge, and I realize that when I got my statement, and one of the first things we talked about, and one of the things that I did in the two-week period of time was to put it in the report, not only put it in that I had gotten paid, but tell you the exact amount of money that I made.
The profit from the resale of lots was produced over a period of almost 3% years. Gaiter knew Douglas “had received money from Marvin Copple in connection with other transactions,” namely, Timber Ridge. However, Douglas’ letter to Kopf was Domina’s first knowledge about Copple’s payment of $32,500 to Douglas.
“Misrepresentation. Any manifestation by words or other conduct by one person to another that, under the circumstances, amounts to an assertion not in accordance with the facts. . . . That which, if accepted, leads the mind to an apprehension of a condition other and different from that which exists.” Black’s Law Dictionary 903 (5th ed. 1979).
Misrepresentation is any manifestation by words or other conduct by one person to another that, under the circumstances, amounts to an assertion not in accordance with the facts. See, Pasko v. Trela, 153 Neb. 759, 46 N.W.2d 139 (1951); Caruso v. Moy, 164 Neb. 68, 81 N.W.2d 826 (1957).
Before we determine whether Douglas had a duty to refrain from misrepresentation during Domina’s investigation concerning Commonwealth, we must first examine Douglas’ status during that investiga*256tion. Douglas was the elected Attorney General of the State of Nebraska during the interviews. As Attorney General, Douglas was a public officer holding a position of public trust. Throughout the United States, public officers have been characterized as fiduciaries and trustees charged with honesty and fidelity in administration of their office and execution of their duties. See, Driscoll v. Burlington-Bristol Bridge Co., 8 N.J. 433, 86 A.2d 201 (1952); Marshall Impeachment Case, 363 Pa. 326, 69 A.2d 619 (1949); Fuchs v. Bidwill, 31 Ill. App. 3d 567, 334 N.E.2d 117 (1975); Williams v. State, 83 Ariz. 34, 315 P.2d 981 (1957); Jersey City v. Hague, 18 N.J. 584, 115 A.2d 8 (1955); In re Removal of Mesenbrink as Sheriff, 211 Minn. 114, 300 N.W. 398 (1941); Matter of Parsons v. Steingut, 185 Misc. 323, 57 N.Y.S.2d 663 (1945); 67 C.J.S. Officers §§ 11, 201 (1978); 63 Am. Jur. 2d Public Officers and Employees § 7 (1972).
“Although the general rule is that ‘one party to a transaction has no duty to disclose material facts to the other,’ an exception to this rule is made when the parties are in a fiduciary relationship with each other.” Midland Nat. Bank, etc. v. Perranoski, 299 N.W.2d 404, 413 (Minn. 1980). When a relationship of trust and confidence exists, the fiduciary has the duty to disclose to the beneficiary of that trust all material facts, and failure to do so constitutes fraud. See 37 C.J.S. Fraud § 16 d. (1943).
“ ‘It is the duty of a trustee to fully inform the cestui que trust [beneficiary] of all facts relating to the subject matter of the trust which come to the knowledge of the trustee and which are material to the cestui que trust to know for the protection of his interests.’ ” Johnson v. Richards, 155 Neb. 552, 566-67, 52 N.W.2d 737, 746 (1952). See, also, First Trust Co. v. Carlsen, 129 Neb. 118, 261 N.W. 333 (1935); Rettinger v. Pierpont, 145 Neb. 161, 15 N.W.2d 393 (1944).
Where one has a duty to speak but deliberately remains silent, his silence is equivalent to a false rep*257resentation. See Anderson v. Anderson, 620 S.W.2d 815 (Tex. Civ. App. 1981). One standing in the relationship of a trustee to another owes to that other the duty of making a full disclosure of all matters appertaining to the trust, and neglect to do so, when the trustee knows or has good reason to believe that silence will result, is a “fraudulent act.” Kauffman v. McLaughlin, 189 Okla. 194, 114 P.2d 929 (1941).
“The failure on the part of one occupying a fiduciary relation to disclose fully and fairly all of the facts to those to whom such duty of disclosure is owed may be regarded as evidence of fraud.” Grigg v. Hanna, 283 Mich. 443, 459, 278 N.W. 125, 131 (1938).
Fraud can exist in the absence of a positive false statement. See Krueger v. St. Joseph’s Hospital, 305 N.W.2d 18 (N.D. 1981).
[Suppression of a material fact, which a party is bound in good faith to disclose, is equivalent to a false representation. . . . Fraud may arise not only from misrepresentation but from concealment as well. For concealment to constitute fraud, there must be suppression of facts which one party has a legal or equitable obligation to communicate to another. One who stands in a confidential or fiduciary relationship to another party must disclose material facts and must reveal enough information to prevent misleading the other party.
Id. at 25. In reference to misrepresentation and fraud, concealment means nondisclosure when a party has a duty to disclose. See Reed v. King, 145 Cal. App. 3d 261, 193 Cal. Rptr. 130 (1983). “ ‘Where persons sustain toward [another] a relation of trust and confidence, their silence when they ought to speak ... is as much a fraud in law as an actual affirmative false representation.’ ” Wade v. Thomasville Orthopedic Clinic, 167 Ga. App. 278, 281, 306 S.E.2d 366, 368 (1983). “The concealment of a fact which one is bound to disclose is an indirect representation that such fact does not exist, and consti*258tutes fraud.” 37 C.J.S. Fraud § 16 a. at 245 (1943).
Douglas had appointed Domina to ‘‘handle legal matters” relating to Commonwealth. Domina’s investigátion of the Commonwealth catastrophe necessarily and legitimately included inquiry about the activities of officers and directors of the insolvent company. Because Douglas had a business association with Copple, a director of Commonwealth, the line of inquiry logically led to Douglas. In order to determine and evaluate the precise relationship between Copple and Douglas, Copple’s payments to Douglas demanded explanation.
There is no room for doubt that Domina’s letter of November 25, 1983, to Douglas and the subsequent interviews of Douglas sought the nature and reason for all compensation which Copple had paid to Douglas. It is true Domina did not ask Douglas the precise question, Were the profits on resale of the lots the only compensation received from Copple regarding real estate developments? Yet, in his testimony before the legislative committee on February 24 (February 25), Douglas said, ‘‘[A]nd I played the part of the lawyer and answered his question . . . but I knew what he wanted.” What was ‘‘wanted” was the truth about compensation paid by Copple to Douglas.
As Attorney General, Douglas was responsible to the State of Nebraska and owed loyalty to the people of Nebraska as a trustee of the public interest. Cf. Gardner v. Broderick, 392 U.S. 273, 88 S. Ct. 1913, 20 L. Ed. 2d 1082 (1968) (a law enforcement officer’s relationship and loyalty to a city or state as an employer) .
Douglas’ comments before the legislative committee are a positive and unambiguous expression of his mental state during the interviews by Domina, that is, he knew the subject of the inquiry — compensation paid by Copple — and recognized that ‘‘I should have told” Domina about the $32,500. There could hardly be a more clear-cut acknowledgment of the duty to *259disclose the information and breach of that duty to speak in response to the public’s inquiry. At the time of Domina’s inquiry in December 1983, information about payments from Copple was particularly within Douglas’ knowledge. As a fiduciary and upon inquiry, Douglas was required to disclose his compensation from Copple. Public trust is not a field on which a public officer can display gamesmanship by playing “the part of the lawyer.”
Though one may be under no duty to speak, if he undertakes to do so, he must tell the truth and not suppress facts within his knowledge or materially qualify them. Fraudulent representations may consist of half-truths calculated to deceive, and a representation literally true is fraudulent if used to create an impression substantially false.
Johnson v. Richards, 155 Neb. 552, 563, 52 N.W.2d 737, 744 (1952). See, also, State ex rel. Nebraska State Bar Assn. v. Richards, 165 Neb. 80, 84 N.W.2d 136 (1957). “To reveal some information on a subject triggers the duty to reveal all known material facts.” Wirth v. Commercial Resources, Inc., 96 N.M. 340, 345, 630 P.2d 292, 297 (1981). “[W]hen a party undertakes to disclose anything, it has the duty to speak the full truth.” Issen v. GSC Enterprises, Inc., 538 F. Supp. 745, 751 (N.D. Ill. 1982). Even if a party has no duty originally, partial disclosure creates a duty for full disclosure. Ingaharro v. Blanchette, 122 N.H. 54, 440 A.2d 445 (1982). Although a party is under no duty to speak, once the party does speak, that party is required to make a full and fair disclosure concerning the matters discussed. Shaver v. N.C. Monroe Const. Co., 63 N.C. App. 605, 306 S.E.2d 519 (1983).
Thus where one person seeks information from another and expressly states that he will place reliance on the latter’s statements, or the circumstances are such that the person approached must know that what he says will be relied on, *260he may either refuse to give any information or he must make a full and truthful disclosure which shall have no tendency to deceive or mislead.
A duty to speak may arise from partial disclosure, the speaker being under a duty to tell the whole truth although he might have said nothing.
37 C.J.S. Fraud § 16 c. at 247 (1943).
“Although a party may keep absolute silence and violate no rule of law or equity, yet, if he volunteers to speak and to convey information which may influence the conduct of the other party, he is bound to discover [disclose] the whole truth. A partial statement, then, becomes a fraudulent concealment, and even amounts to a false and fraudulent misrepresentation.” Gidney v. Chapple et al., 26 Okla. 737, 753, 110 P. 1099, 1105-06 (1910).
When Douglas gave a rather lengthy, sometimes detailed, but frequently confusing account of the acquisition and disposition of Fox Hollow lots and the prospective 10 percent interest in Timber Ridge as compensation for services to Copple, Douglas was required to reveal all information about his compensation and to make a truthful disclosure regarding his compensation from Copple. During the November 30 interview by Domina, Douglas was questioned: “Q. ... Were there other developments, then, besides Fox Hollow and Timber Ridge for which you were paid for services as counsel? A. There was always something coming up ... he would pay me for it. . . .” And several questions later: “Q. How did he pay you for your services on the projects other than Fox Hollow and Timber Ridge or did he? A. He never did pay me.” Douglas’ answers about his compensation from Copple were inconsistent and created a substantially false impression during the interviews. Douglas’ office as a public trust required correction and elimination of the false impression resulting from the inconsist*261ent answers. We note that the provisions of the Model Penal Code §241.1(5) at 93 (1980) provide:
Where the defendant made inconsistent statements under oath or equivalent affirmation, both having been made within the period of the statute of limitations, the prosecution may proceed by setting forth the inconsistent statements in a single count alleging in the alternative that one or the other was false and not believed by the defendant. In such case it shall not be necessary for the prosecution to prove which statement was false but only that one or the other was false and not believed by the defendant to be true.
From his comments before the legislative committee, Douglas knew that he had created a false impression during his interviews by Domina. Such conduct by Douglas was a misrepresentation under the circumstances.
Pecuniary loss by the State of Nebraska is not a necessary element of misrepresentation in this case. Cf. Chicago ex rel. Cohen v. Keane, 64 Ill. 2d 559, 357 N.E.2d 452 (1976) (monetary damage to a governmental entity to which an officer has been elected or appointed is not necessary for a violation of a rule forbidding conflict of interest). Direct financial gain does not have to result from misrepresentation by a public officer. Cf. Miller v. City of Martinez, 28 Cal. App. 2d 364, 82 P.2d 519 (1938) (in a conflict of interest, the interest does not have to involve a direct financial gain on the part of a public official; the interest can be anything which would prevent the public official from exercising absolute loyalty and undivided allegiance to the best interest of the government he serves, that is, absolute freedom from any influence other than that which may grow out of the obligation he owes to the public).
We will not speculate on the investigative avenues which might have opened, had the payments of $32,500 been disclosed during the Domina interviews *262of Douglas. The benefit to Douglas by his misrepresentation was the advantage of time gained outside the focus of public inquiry.
If there is no misrepresentation in the case before us, references to public trust are reduced to political platitudes or rhetoric.
The circumstances in this case raise many unanswered questions about the entire situation involving Copple and Douglas. Nevertheless, based on the evidence before us, we find beyond a reasonable doubt that the misrepresentation by Douglas was willfully done with a corrupt intention. Specifically, we find that Douglas is guilty of specification No. 1 of the articles of impeachment and resolution submitted by the Eighty-eighth Legislature, Second Session, of the State of Nebraska. Therefore, we would find that Paul L. Douglas has committed a misdemeanor in his office as Attorney General of the State of Nebraska.