Wolf v. Brungardt

• Decision Date: 17 July 1974
• Docket Number: No. 47255,47255
• Citation: 524 P.2d 726,215 Kan. 272
• Parties: Donald J. WOLF and Anna Wolf, Appellees, v. F. C. BRUNGARDT and Charles D. Taylor, Appellants, and Farmers National Bank of Victoria, Kansas, Defendants.
• Court: Kansas Supreme Court

Page 726

524 P.2d 726

215 Kan. 272

Donald J. WOLF and Anna Wolf, Appellees, v. F. C. BRUNGARDT and Charles D. Taylor, Appellants, and Farmers National Bank of Victoria, Kansas, Defendants.

No. 47255.

Supreme Court of Kansas.

July 17, 1974.

Rehearing Denied Oct. 13, 1974.

Syllabus by the Court

1. Under K.S.A. 60-512 a cause of action for breach of contract not in writing must be instituted within three years from the date of the breach of the contract.

2. Under K.S.A.1973 Supp. 60-513 an action for relief on the ground of fraud must be brought within two years, but the cause of action shall not be deemed to have accrued until the fraud is discovered.

3. The law does not deprive a defrauded party of relief because he had opportunity to investigate, when his lack of knowledge was such that the investigation would disclose nothing to him.

4. Where one party to a contract or transaction has superior knowledge, or knowledge which is not within the fair and reasonable reach of the other party and which he could not discover by the exercise of reasonable diligence, or means of knowledge which are not open to both parties alike, he is under a legal obligation to speak, and his silence constitutes fraud, especially when the other party relies upon him to communicate to him the true state of facts to enable him to judge of the expedience of the bargain.

5. Fiduciary relationships recognized and enforceable in equity do not depend upon nomenclature; nor are they necessarily the product of any particular legal relationship. They may arise out of conduct of the parties evidencing an agreement to engage in a joint enterprise for the mutual benefit of the parties.

6. In an action to recover damages for fraud and breach of an oral contract, the record is examined on appeal and it is held: (1) The trial court did not err in holding that the statute of limitations was not a bar to the action for fraud and breach of oral contract; and (2) the evidence presented at the trial was sufficient to submit the case to the jury on the grounds of fraud and breach of oral contract.

Lelyn J. Braun, Garden City, argued the cause, and was on the brief for the appellants.

Edwin P. Carpenter, Topeka, argued the cause, and H. Lee Turner, of Turner, Chartered, Great Bend, and Raymond L. Dahlberg, Great Bend, were on the brief for the appellees.

SCHROEDER, Justice:

This is an action to recover damages for fraud and breach of contract. It arises from a rather complex set of pleadings. The Farmers National Bank of Victoria, Kansas, commenced an action against Donald J. Wolf, and Anna Wolf to collect on notes payable to the bank and on a guaranty agreement. The Wolfs counterclaimed against Farmers National Bank alleging fraud and breach of contract. The Wolfs also joined F. C. (Frank) Brungardt as a third-party defendant upon similar allegations of fraud and breach of contract. The present action was thereafter commenced by Donald J. Wolf and Anna Wolf against F. C. Brungardt, Charles D. Taylor and the Farmers National Bank. The petition alleged fraud and breach of contract arising from the same facts set forth in the counterclaim and third-party claim alleged in the previous action filed by the bank. The issues were consolidated for trial in the latter case presently here on appeal. The trial resulted in a jury verdict and judgment for the plaintiffs and against F. C. Brungardt and Charles Taylor in the amount of $25,000. The verdict absolved the Farmers National Bank from any liability.

This court was informed on oral argument the cross-appeal filed by the Wolfs against the bank had been settled and the cross-appeal is no longer an issue in the case.

The basic questions in the case are: (1) Whether the statute of limitations is a bar to the action for fraud and breach of oral contract; and (2) whether the evidence presented at the trial was sufficient to submit the case to the jury on any theory.

The record in this case, consisting of 387 pages, is literally a transcript. The following is brief summary of the evidence.

Charles Taylor owned and operated the Hays Electronic Supply Company, a dealership of wholesale electronic parts. Early in 1968 Taylor and the business were in financial difficulty, being indebted some $25,000 in excess of their assets, including a large amount to the Farmers National Bank. With the advice and counsel of F. C. Brungardt, the president of the bank, Taylor decided to seek a partner willing to supply additional capital deemed necessary to get the business back on its feet.

About this time Taylor met Donald Wolf, then nineteen years old, who expressed an interest in coming into the business. Donald Wolf, a high school graduate without any business experience whatever, met Raylor while Wolf was working in a Pizza Hut. The two discussed the proposition and Taylor showed Wolf a paper disclosing there was approximately $5,000 in accounts payable. There was no other indication of any indebtedness, though Wolf did not specifically ask about other indebtedness. Taylor said he would require $15,000 for Donald Wolf to buy into the business.

Taylor testified the business was actually in 'bad financial condition' at the time of the discussion with Donald Wolf, and, in fact, had been for several years. The business had done its banking at the Farmers National Bank of Victoria, Kansas, since 1964, and in May of 1968 it was indebted at the bank to the extent of $33,039.03. However, Taylor felt the business could become a going concern, if he could obtain twenty-five, twenty-six or twenty-seven thousand dollars.

Donald Wolf did not have the money to make such an investment, but his mother, Anna Wolf, was willing to help him obtain a loan. They talked with two lending institutions but were unsuccessful. After these rejections Donald Wolf talked with Taylor again. Taylor suggested that Donald and Anna Wolf talk with F. C. Brungardt, who was president of the Farmers National Bank of Victoria (hereafter referred to as the bank).

F. C. Brungardt had handled the banking needs for the business for several years and was familiar with its problems and the extent of its indebtedness at the bank.

On May 24, 1968, the Wolfs met with F. C. Brungardt at the bank and discussed the possibilities of borrowing the money. F. C. Brungardt assured them the bank would loan them the money. Anna Wolf filled out a financial statement on this occasion. According to Anna, F. C. Brungardt told them the business was a 'good deal' for Donald; Donald would make it 'real good'; that F. C. Brungardt was going to invest $12,500 as a silent partner; and that F. C. Brungardt assured Anna she would not lose her house, which she was going to mortgage. Donald and Anna Wolf testified they delieved F. C. Brungardt should know what a good business would be particularly if he were investing in it himself. F. C. Brungardt denied making any of these statements at this meeting.

The following day, on May 25, 1968, a meeting was held in the office of Robert Glassman, who was the attorney for the bank and represented F. C. Brungardt personally in some matters. F. C. Brungardt arranged the meeting. Those present in addition to F. C. Brungardt and Mr. Glassman were Donald Wolf, Anna Wolf, Richard Wolf (Donald's brother), and Charles Taylor. The purpose of the meeting in Anna's words was, 'To make an agreement and discuss about this business that I was mortgaging my home to get into.' During the meeting F. C. Brungardt kept notes. These notes were later given to Mr. Glassman to prepare a written agreement. At the meeting an oral agreement was reached which provided that Charles Taylor would have a 45% interest in return for his present investment, Donald Wolf would invest $15,000 'Cash as of date' for a 30% interest and F. C. Brungardt would invest $12,000 as a silent partner 'Cash Nov. 1, 1968' for a 25% interest. The notes made by F. C. Brungardt in his own handwriting disclosed the agreement provided life insurance was to be procured for each of the three partners, and the salaries for Charles Taylor and Donald Wolf were set at $600 and $440 per month respectively.

During this meeting in the attorney's office both Charles Taylor and F. C. Brungardt reasserted to the Wolfs that this was a 'good deal' for Donald and he was going to make a lot of money. No disclosure of the financial condition of the business or the indebtedness to the bank was made. No financial statement was presented or prepared.

F. C. Brungardt testified his proposed investment was expressly conditioned upon the Kansas State Corporation Commissioner's releasing from escrow 51,000 shares of stock which he owned in a Kansas corporation that he had no other funds available with which to make the investment; and that the stock was not released by the commissioner from escrow until 1970.

Robert Glassman, F. C. Brungardt's attorney, drew up a document embodying the terms agreed upon at the meeting, and notified F. C. Brungardt of its completion sometime after June 6, 1968. Brungardt did not pick up the written agreement until after the Wolfs instituted this action, in July 1971. Neither Taylor nor Donald Wolf ever inquired about the written contract and apparently they were not aware of any intention to memorialize the agreement between the parties in writing at that time.

Subsequent to the meeting at Glassman's office and before the end of May 1968, Anna Wolf borrowed $17,000 from the bank. She executed a note for the loan and later, on September 13, 1968, mortgaged her home to secure the loan. She loaned Donald Wolf $15,000 in return for his note. Donald then wrote a check to Hays Electronic Supply for $15,000. This investment by Donald Wolf was placed in the business account. Charles Taylor immediately paid on the indebtedness at the bank reducing the total indebtedness at the bank to $24,500. This fact, the amount of the payment, was recorded only in the checkbook retained at the...