Nelson v. Matsch

110 P. 865, 38 Utah 122, 1910 Utah LEXIS 5

• Court: Utah Supreme Court
• Decided: August 31, 1910
• Docket: No. 2129
• Status: Published

Opinion

Mo CANTY, T.

(after stating the facts as above).

Counsel both for Nelson and Matsch have devoted much space in their briefs to the discussion of the question as to whether or not the transaction of October 5, 1907, in which Nelson signed the release and received five hundred dollars for his interest in the ores mentioned, terminated the partnership. This question, as we view the case, is unimportant. While Nelson, in the prayer of his complaint, asks “that an accounting be taken and made of all the dealings and transactions of said partnership from the beginning hereof” to the date of the filing of the complaint in this action, yet the parties in the trial of the case confined their proof to the facts and circumstances leading up to and surrounding the transaction of October 5, 1907, in which only ores mined prior to that date were involved. No claim was made by Nelson to proceeds of ores mined and shipped under leases obtained after the lease to blocks sis and seven expired. Nor did he prove, or offer to prove, the value of ores mined under leases taken by Matsch or in his name after October 5, 1907. Therefore, as stated, the question of whether the partnership was dissolved by the transaction of October 5, 1907, or was terminated by the bringing of this action, is wholly immaterial, as it in no way affects plaintiff’s right to recover for his proportion of the proceeds of ores mined by the partnership in blocks six and seven. The decisive question, and the only one we are called upon to determine on this appeal is, was Nelson induced to part with his interest in the ores mined by the partnership during the month of September, 1907, which ores, as we have observed, were of the net value of three thousand, five hundred and eighty-one dollars and twenty cents to tbe partnership for tbe sum of five hundred dollars through the fraudulent misrepresentation of Matsch respecting the value of the ores. Matsch testified that he told Nelson at the time he offered to purchase Nelson’s interest in the ores that his, Nelson’s, proportion of the proceeds of the ores would be about five hundred dollars.

We think it clearly appears from the evidence that Matsch at the time he made this statement to Nelson knew, or had good reason for believing, that Nelson’s proportion of the proceeds of the ores would be far in excess of five hundred dollars. And we are also of the opinion 1 that the evidence when considered in its entirety shows that Nelson was induced to part with his interest for less than one-third of its actual value through false representations made to him by Matsch respecting the value of the ore.

One of the fundamental principles of the law of partnership is that partners stand in a fiduciary relation to each other, and that it is the duty of each partner to observe the utmost good faith towards his copartners in all dealings and transactions that come within the scope of the 2 partnership business. (22 Am. & Eng. Ency. Law, 114, and cases cited.) And, where one partner by false representations obtains an undue advantage over a copart-ner in transactions connected with the partnership' business, equity will grant the defrauded party relief. “Partners occupy a relation of trust and confidence within the meaning of the rule, and in dealing with each other each is bound to disclose all material facts known to him and not known to the' other.” (14 Am. & Eng. Ency. Law, 70.) The rule is well stated in Story on Partnership (7th Ed.), section 172, in the following language: “Good faith not only requires that every partner should not make any false misrepresentations to his partners, but also that he should abstain from all con-cealments which may be injurious to the partnership business. If, therefore, any partner is guilty of any such concealment and derives a private benefit therefrom, he will be compelled in equity to account therefor to the partnership.” So in Parsons on Partnership (4th Ed.), section 151, it is said: “Erom the requirement of perfectly good faith, it follows that no partner must deceive his copartners, for his benefit and their injury, either by false representations or by con-cealments. Thus, if he persuades them into any course of bxxsiness, or to any single transaction, by these means, and losses occur, he must sustain them or compensate for them. So, if he proposes to buy of them the whole or any part of their share of their business, and by any false statement or intimation on his part, or any concealment or prevarication, influences them to enter into an arrangement to effect his wishes, it will not be obligatory on them.” In Smith on Fraud, section 114, the author says: “Where a confidential relation exists and there is any misrepresentation, or concealment of a material fact, or any just suspicion of artifice, or undue influence, courts of equity will interfere and pronounce the transaction void, and, as far as possible, restore the parties to their original rights.” To the same effect are the following authorities: Lindley on Partnership (2 Am. Ed.), section 486; Pomeroy v. Benton, 57 Mo. 531; Goldsmith v. Koopman, 152 Fed. 173, 81 C. C. A. 465 ; Brooks v. Martin, 2 Wall. 70, 17 L. Ed. 732; Holmes v. Gilman, 138 N. Y. 369, 34 N. E. 205, 20 L. R. A. 566, 34 Am. St. Rep. 463. Applying the law as declared by the foregoing authorities to the facts in this case, we are clearly of the opinion that Nelson is entitled to recover in this action. The record shows that the net value of the ore in question at the time the transaction was entered into (October 5, 1907) was three thousand, five hundred and eighty-one dollars and twenty cents, of which one-half (one thousand, seven hundred and ninety dollars and sixty cents) belonged to Nelson. Matsch paid Nelson five hundred dollars, which deducted from one thousand, seven hundred and ninety dollars and sixty cents leaves one thousand, two hundred and ninety dollars and sixty cents still due Nelson.

It is therefore,,, ordered that the judgment be reversed, with directions to the trial court to set aside its findings heretofore made in so far as they are inconsistent with this opinion, and1 to make findings in accordance with the views herein expressed and enter judgment in favor of Nelson for the sum of one thousand, two hundred and ninety dollars and sixty cents, with interest thereon at the rate of eight per cent, per annum from October 5, 1907, costs to be taxed against respondent.

STEAUP, O. J., and FEICK, J., concur.