Denison State Bank v. Madeira

Decision Date27 February 1982
Docket NumberNo. 53214,53214
Citation230 Kan. 684,640 P.2d 1235
Parties, 230 Kan. 815 The DENISON STATE BANK, Appellant, v. C. C. MADEIRA and Darlene M. Madeira, Appellees.
CourtKansas Supreme Court

Syllabus by the Court

1. In ruling on a motion for a directed verdict pursuant to K.S.A. 60-250, the court is required to resolve all facts and inferences reasonably to be drawn from the evidence in favor of the party against whom the ruling is sought, and where the evidence is such that reasonable minds could reach different conclusions thereon, the motion must be denied and the matter submitted to the jury. The same basic rule governs appellate review of a motion for a directed verdict. Following Simpson v. Davis, 219 Kan. 584, 549 P.2d 950 (1976).

2. Whether or not a confidential or fiduciary relationship exists depends on the facts and circumstances of each individual case. This court has refused, for that reason, to give an exact definition to fiduciary relations. Following Curtis v. Freden, 224 Kan. 646, 585 P.2d 993 (1978).

3. The concept of the fiduciary duty is an equitable one and while no precise definition may be given and strict parameters of the relationship cannot be established for use in all cases, there are certain broad general principles which should be considered in making the determination of whether a fiduciary relationship exists in any particular factual situation.

4. Courts of equity have carefully refrained from defining the particular instances of fiduciary relations in such a manner that other and perhaps new cases might be excluded, and have refused to set any bounds to the circumstances out of which a fiduciary relation may spring. It extends to every possible case in which a fiduciary relation exists in fact, and in which there is confidence reposed on one side and resulting domination and influence on the other.

5. While there is no invariable rule which determines the existence of a fiduciary relationship it is manifest that there must not only be confidence of one in another, but there must also exist a certain inequality, dependence, weakness of age, of mental strength, business intelligence, knowledge of the facts involved, or other conditions, giving to one an advantage over the other.

6. A fiduciary relation does not depend upon some technical relation created by, or defined in, law. It may exist under a variety of circumstances, and does exist in cases where there has been a special confidence reposed in one who, in equity and good conscience, is bound to act in good faith and with due regard to the interests of the one reposing the confidence. Following Lindholm v. Nelson, 125 Kan. 223, Syl. P 3, 264 P. 50 (1928).

7. 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. Following Wolf v. Brungardt, 215 Kan. 272, 524 P.2d 726 (1974).

8. The foregoing general principles are not all inclusive and need not all be present in any particular case but are representative of the various factors and principles which may be considered in determining whether a fiduciary relationship does, in fact, exist.

9. The general rule is that the relationship between a bank and its depositor is that of creditor-debtor and not of a fiduciary.

10. A person who is not under any disability or disadvantage may not abandon all caution and responsibility for his own protection and unilaterally impose a fiduciary relationship on another without a conscious assumption of such duties by the one sought to be held liable as a fiduciary.

Earnest Vincent Pease, Jr., of Pease & Lewis, Topeka, argued the cause and Michael L. Lewis, Topeka, was with him on the brief for appellant.

Lawrence P. Ireland, of Ireland, Enright & Baird, Topeka, argued the cause and was on the brief for appellees.

HOLMES, Justice:

This appeal involves an action originally filed by The Denison State Bank (the Bank) to recover on three promissory notes executed by the defendant C. C. Madeira and guaranteed by his wife, the defendant Darlene M. Madeira, and a counterclaim filed by the defendants against the Bank alleging breach of a fiduciary duty. In a jury trial the Bank was denied recovery on the promissory notes and the jury returned a verdict for the defendants for $25,000.00 on their counterclaim. The Bank appeals. We reverse. It is necessary that the facts be set forth in some detail.

In July, 1978, the defendant C. C. Madeira, age 49, an experienced businessman, ran a classified advertisement in Automotive News, a national publication, seeking to invest in an automobile dealership which was in need of finances and management expertise. The advertisement indicated Madeira wanted to buy into, buy out, or enter into a partnership relationship involving such a dealership. Tom King had just what Mr. Madeira appeared to be seeking. King was the owner and operator of a General Motors dealership in Holton, Kansas, known as Tom King Pontiac-Buick-GMC Trucks (King agency) which was in serious financial straits due largely to a lack of management and the generally depressed condition of the retail automobile and truck industry. King saw the Madeira advertisement in the Automotive News, contacted Mr. Madeira and made arrangements to fly in his private airplane to Elgin, Illinois, Madeira's home, for a meeting. Things progressed and King brought Madeira to Holton to look over the dealership, and the community so he could determine whether he might be interested in investing in Tom King's business. On his first visit to Holton, Madeira was introduced by King to officials of The Denison State Bank. King did business at the Bank and obtained his new car floor plan and other financing through the Bank. King was heavily indebted to the Bank and the officers of the Bank were aware of his financial difficulties. Thereafter things proceeded rather rapidly. Madeira made at least two trips to Holton during August and on both occasions met with the Bank officials about his possibility of investing in the King agency. He had $50,000.00 available and hoped to obtain an additional $100,000.00 through a Small Business Administration loan. Mr. Madeira was interested in establishing a line of credit with the Bank and talked primarily with Mr. Sheldon Hochuli, a vice-president. Mr. Madeira testified that he had full access to the financial records of the King agency and at Madeira's specific request consulted with King's certified public accountants about the financial condition of the agency. As King and Madeira appeared to be making progress, Madeira inquired of Mr. Hochuli about an attorney who might represent him. Mr. Hochuli recommended Marlin White who also represented Tom King and who represented the Bank on occasions. Mr. Madeira expected Mr. White to be protecting his interests in the transaction. White testified he represented both King and Madeira in the transaction and that he was also interested in protecting the interests of the Bank, as he represented it on numerous matters.

On the occasions that Madeira talked with Mr. Hochuli, they discussed establishing a line of credit for Mr. Madeira, the possibility of obtaining an SBA loan, and King's financial situation, including his obligations to the Bank, among other things. The defendants contend that Mr. Hochuli, acting on behalf of the Bank, failed to disclose certain financial matters involving the King agency which affected the Bank's status as a major creditor of the King agency.

It is the contention of the defendants that a fiduciary relationship had been established between the Bank and Mr. Madeira which was breached by the Bank when it did not make a full disclosure of the financial involvement of King with the Bank. There is no contention that Mr. Hochuli made any affirmative false representations about King's indebtedness to the Bank, but it is contended that certain financial information was withheld when the Bank was under a fiduciary duty to disclose the same. The information included $15,000.00 of outstanding drafts for automobiles, a $5,000.00 overdraft in Mr. King's checking account and the alleged failure to disclose that certain anticipated rebates to be paid by General Motors Corporation in December of 1978 were already pledged to one Kenneth P. Tate of Oklahoma and to the Bank. It is the policy of General Motors, as with other major car manufacturers, to pay an annual rebate to its dealers for each new unit sold by the dealership during the year and for each unit carried over into the new model year. This can amount to several thousands of dollars and Madeira asserted he understood these rebates would be available to repay part of the initial $50,000.00 loan he was going to put into the business. In July, 1978, King was having trouble with General Motors Acceptance Corporation, the credit arm of General Motors, because he had failed to remit certain trust funds to the Corporation which became due upon the sale of automobiles and trucks. King had previously negotiated a loan from his uncle, Kenneth P. Tate, and in an attempt to protect Tate, King executed an assignment and financing statement pledging the rebates to Tate as security for the loan. The financing statement was filed of record in the Jackson County Register of Deeds office on July 24, 1978. One day later, King executed a similar financing statement to the Bank as additional security for his indebtedness there. Both financing statements were a matter of public record prior to the time Mr. Madeira first came to Holton. King evidently neglected to...

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