Court Opinion

ID: 3988268
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:44:20.796935+00
Date Added: 2024-06-11T13:53:30.914279
License: Public Domain

On Petition for Rehearing.
The appellants have petitioned for a rehearing. Their complaint is that the court has erred in finding that a fiduciary relation existed between appellant Ernest R. Woolley and respondent Nathaniel Baldwin and in placing the burden of proof upon the appellants to show that the transaction was fair and equitable, and that the price paid for the transfer of the stock was adequate.
In February, 1924, Woolley was employed to settle the Baldwin-Radio suit, and effected an agreement of settlement over the heads of, and without the knowledge of, the regular and able counsel in the case September 16, 1924. The action *Page 530 
was finally dismissed just prior to the stock transfer which is the subject of this action.
The instrument known as the "infringement contract" was executed September 24, 1924. This instrument designated Woolley agent of Baldwin and the Baldwin Incorporated, with power to make demands, adjustments, and settlements, and to prosecute suits upon and in respect to claims for damages arising out of all past, present, and future infringements of patents, with full and complete control, management, and discretion as to such demands, adjustments, settlements, and prosecution of suits. The relation of agency created by this instrument continued up to and including the time the stock transaction was accomplished.
The following uncontradicted excerpts from the record show Baldwin's complete confidence in, and his reliance and dependence upon, Mr. Woolley; that Mr. Woolley understood and appreciated the confidence and trust so reposed in him; and that he assumed the resulting position of superiority cannot be doubted:
"I saw him once or twice in the meantime, then about August 1 I commenced to see him very frequently, more so than ever. I saw him in his offices in the Judge building usually pursuant to invitation. I used to see him almost every day until the settlement of the matter. Our troubles were becoming more difficult all the time and I looked to him to help us out of our difficulties, particularly in the way of raising finances for us.
"He used to inquire of some things but usually he would tell me things about the condition of the business; would tell me the affairs of the company, about how many phones they were selling and what the demand for them. He knew more about it than I did and he used to tell me rather than for me to tell him. From time to time he gave me advice, he was always giving me advice and instructions, but I am puzzled about the details. I relied upon Ernest Woolley as an adviser and an adjuster of our business difficulties. He seemed to know more about the business than I did if what he told me was true. He seemed to know how many had been sold and who were the purchasers. He knew the infringers that were infringing our business. I used to listen with great interest to hear him tell about the things *Page 531 
he knew. He seemed to have connections or sources of information at home and abroad where he could find out the details of the business. I learned to look upon him as a master mind that could comprehend great things easily, take them all in and understand them. A master mind in matters of business and law. My confidence in Ernest Woolley as master in these matters and also as a good man continued until some time in the spring of 1925 and then doubts began to creep in because of things that happened and my confidence in him as an honest man failed. * * *"
"In reference to the assistance in the matter of detail and matters of business Ernest Woolley was my chief adviser. I think it was in August when John T. Clark became the adviser pertaining to Ernest Woolley. Before that it was Lorin Woolley wanting me to see Ernest Woolley and engage his attention in the settling of this suit, but as to the contracts with Ernest Woolley those contracts were entered into particularly upon the advice of John T. Clark and others, but he was the principal adviser. The frequent meetings with Ernest Woolley and advice relative to the infringements and pending litigation continued from August through the rest of the year 1924, and I relied upon it."
"* * * He (Mr. Tanner) was our legal adviser but on account of the confidence that was inspired in me by Ernest Woolley, John T. Clark and Lorin Woolley, I regarded Ernest as our guide in preference to Mr. Tanner in cases where there was a difference. Where Mr. Tanner advised one thing and Mr. Woolley advised another the advice of Mr. Woolley was taken instead of Mr. Tanner."
"When this transaction was made I was amidst the influences of men whom I trusted, whom I thought were honorable, whom I thought were my friends, whom I thought were protecting the business, whom I thought were interested in the business along with me and in the same manner that I was and I regarded their opinion and feeling in regard to these matters as of equal value with mine. And I have expressed myself as if I were in a whirlwind at the time, carried along by the influence of others and I was also in a state of much anxiety, fear and confusion because of the many reports which they made from time to time regarding the actions of people of Salt Lake City."
Lorin C. Woolley, in speaking of his and Ernest Woolley's trip to Chicago in November, 1924, testified as follows:
"Ernest and Mr. Tanner were trying to advise us with reference to the company's difficulties, both of them. We were all working together, *Page 532 
Ernest included, trying to lift the company out of its difficulties. He was giving us advice on the matter and continued to do so up until the time I left for Chicago. I went on election day and before I went I made complaint that on my previous trip my hands were tied. That statement was made in Ernest Woolley's office. I don't think Ernest advised Baldwin to let me have freedom in going back there. I think Tanner was the man to recommend him to do it. I think he said I should go back there with a free hand. I think Ernest Woolley was present. I don't think Ernest objected to it. Ernest Woolley was not a director, if I remember aright he was an adviser. While I was in Chicago I communicated with Baldwin quite frequently. The correspondence was directed to the company at Ernest Woolley's office. That is where I was told to send it, by Baldwin I think. I saw Ernest back in Chicago. I think it was along in December. The first place I saw him was at the Congress Hotel. He notified me after he got there and I went over to see him. I think I likely advised with Ernest about the Incorporated business and told him what the conditions were. I think likely he gave me his idea of what to do. We were not working to antagonistic purposes at that time, both working for the interests of the Incorporated. We would co-operate together and give each other our ideas as to what ought to be done for the future. I saw him nearly every day for a week or ten days. He left Chicago so as to be back here a day or two before Christmas."
"I knew that Ernest Woolley was conferring with Baldwin from day to day. He came in quite often. Possibly I came sometimes with him. I think Woolley and Baldwin conferred with reference to the difficulities of the Incorporated. That was generally talked over with a director. That was the foremost matter, the difficulty he was in and how to get out of it. I don't know how much Ernest Woolley was trying to help. I thought he was there to help. Of course, I did not know what they were doing. I saw him there. He was apparently trying to help Baldwin. Generally seemed to be so far as I could see about it. All working to that end so far as I observed."
The foregoing quotations from the abstract of the testimony are suggestive, but by no means exhaustive, of the mass of evidence offered tending to show the close and confidential relation existing between these parties at and prior to the date of the stock transfer. The same evidence also makes it clear that Baldwin, having exhausted his own resources, was entirely in the hands of, and dependent upon, *Page 533 
Woolley; that he was in a state of mind which made it impossible for him to exercise an intelligent judgment; and that he was as clay in the potter's hands.
The record clearly establishes, as is pointed out in the prevailing opinion, that, from the time these men became acquainted, Woolley manifested an unusual interest in the manufacturing enterprise Baldwin had established. Woolley's office became, and continued to be, the center in which all discussions relative to the Baldwin interests were carried on, and from which all the business relative to the solution of the difficulties of the Incorporated was conducted. Woolley became and continued as Baldwin's agent to settle important litigation then pending, to protect the patent rights upon which the entire enterprise depended from infringements, and to bring suits, make demands, adjustments, and settlements upon all infringement claims past, present, or future. He entered into contracts with Baldwin intended to make him the exclusive selling agency of all the products of the entire manufacturing plant. Baldwin looked to him for, and he gave, advice relative to all matters of detail. Baldwin accepted his judgment upon legal and business matters in preference to the regular counsel. Woolley, after the receiver had taken charge of the plant and its products because of a failure to live up to his agreements, then proffered to aid in securing funds to take the business out of the hands of the receiver. After unsuccessful efforts at home, he went for that purpose to Chicago. While there, he and Lorin C. Woolley, who was also there on Baldwin's business, consulted constantly with reference to the Incorporated's business, both co-operating and giving each other ideas as to what ought to be done. Woolley returned home just prior to Christmas, and reported to the directors that he had raised $250,000 to take up the warehouse receipts. He immediately thereafter told Baldwin that he was not able to have the proper influence with people he had to deal with, regretted that he was unable to speak with authority, and said that, if he could have an equal interest and be vice president, he could *Page 534 
speak with authority, accomplish things, say "yes" or "no" instead of having to be a go-between as he had been before. Woolley took an active part in all negotiations and transactions pertaining to the Baldwin business from the time of his acquaintance with Baldwin. He cultivated Baldwin's confidence, and knew that Baldwin relied upon him, trusted to his judgment, and believed in his integrity. Knowing these things, he assumed to act as Baldwin's adviser in legal and business matters and as his agent in the efforts that were being made to get the property out of the hands of the receiver.
These facts, together with numerous other conditions referred to in the prevailing opinion, certainly establish a most trusting confidence and reliance reposed in Woolley by Baldwin, Woolley's knowledge of such confidence and reliance, and a resulting superiority and influence acquired by Woolley over Baldwin that are characteristic of and created a fiduciary relationship.
Appellants insist that a fiduciary relation is not shown by proof of mere confidence, but it must be shown that the one person occupied a position of commanding superiority over the other. The rule so stated is fully satisfied by the facts in this case. Confidence was reposed, and should have been preserved from imposition. Influence was acquired, and should have been kept free from the taint of selfish interests and overreaching bargains.
Appellants also rely on the rule that, if a transaction concerns a subject-matter which is outside of, and unconnected with, the agency, no presumption of undue influence arises. The rule can have no application in this case. As already explained, the stock transfer was the culmination of a series of transactions between these parties. They are not separate or distinct. Each link in the chain of circumstances is suggestive of a plan to overreach Baldwin through a confidence carefully nurtured and preserved. The underlying purpose of all the transactions between Baldwin and Woolley, *Page 535 
the subject of all their discussions, was to save the Baldwin enterprise and get it out of the hands of the receiver. For this purpose Woolley finally went to Chicago to raise the quarter of a million he reported to the directors to be in the bank. For the same apparent purpose Woolley, upon his return, stated to Baldwin that he was not able to have the proper influence with people he had to deal with, that he was unable to speak with authority, that, if he could have an equal interest and be vice president, he could speak with authority, say "yes" or "no" instead of being a go-between, and accomplish things. And it was for the same underlying purpose that the stock was transferred by Baldwin to Woolley. It will not do, under such conditions, to say that the stock transfer was not connected with, and aided by, the confidence and resulting superiority between these parties.
Other points are argued in support of appellants' motion for a rehearing, but they are all dependent upon the existence of a fiduciary relation. We are fully convinced, after a careful reading of appellants' argument, that a fiduciary relation existed between these parties, and that the burden of showing good faith, full disclosure, and adequacy of consideration was properly cast upon appellants; that appellants signally failed to sustain that burden; that the conclusion of the prevailing opinion that the judgment should be affirmed is right; and that the petition for a rehearing should be denied.
It is so ordered.
THURMAN, C.J., and CHERRY and GIDEON, JJ., concur.