Fouchek v. Janicek

Decision Date19 December 1950
Citation190 Or. 251,225 P.2d 783
PartiesFOUCHEK et al. v. JANICEK.
CourtOregon Supreme Court

Frank J. Healy and Charles H. Heltzel, of Salem, for appellants.

Bruce Spaulding and George A. Rhoten, of Salem, for respondent, Bruce Spauling, Rhoten & Rhoten, of Salem, on the brief.

Before BRAND, Acting C. J., and BAILEY *, HAY, LATOURETTE and WARNER, JJ.

WARNER, Justice.

This is a suit to establish a constructive trust in the hands of defendant and compel him to account for the profits arising therefrom.

Stephen J. Fouchek and Harry L. McBurnett, plaintiffs and appellants, allege that in 1946, they were copartners with Duane J. Janicek, defendant and respondent, doing business under the assumed firm name of Salem General Jobbing Company (hereinafter called the Salem Company). They claim that while that relationship subsisted, Janicek breached faith with them by turning to his personal account and profit a valuable business opportunity which properly belonged to the Salem Company. The transaction referred to springs from Janicek's alleged secret acceptance of an offer made to the partnership which carried the promise of $50,000 or more for the Company's use in buying war surplus supplies in a joint adventure arrangement wherein the Salem Company would be a party with an interest slightly in excess of fifty per cent. Janicek's espousal of the offer referred to (which we shall hereinafter call the Hickok offer) resulted in the formation of a joint adventure arrangement known as the Cascade Mercantile Co., Oregon, Ltd. (hereinafter called the Cascade Company) in which defendant owns a fifty-one per cent interest to the exclusion of plaintiffs. Plaintiffs pray that Janicek be decreed to hold two-thirds of his interest in the Cascade Company as a trustee for their use and benefit, and that he be required to account to them for all monies received by him in that capacity. Defendant's answer denies any partnership relation with plaintiffs. Janicek admits, however that the parties made what he calls a tentative agreement whereby at a future time, following August 10, 1946, he would associate himself with them as a partner but denies that the arrangements for the formation of that partnership were ever completed. He also denies that he breached faith with plaintiffs. After trial the circuit court entered a decree dismissing plaintiffs' complaint, from whence they appeal.

From March 28, 1946, to August 10, 1946, the plaintiffs as the sole partners operated the same business under the same name. It was a wholesale and retail enterprise with its principal office in Salem, Oregon, and from June 21, 1946, with a retail branch in Taft, Oregon. Then, as well as after August 10, 1946, the firm was engaged in the selling of sporting goods and substantial lines of war surplus items which they, as war veterans, were able to obtain on a preferential status.

The business, as operated by the plaintiffs, so prospered that it seemed to dictate the need for additional assistance in the operation of its affairs. This prompted them to solicit the services of the defendant, a fellow war veteran whom they had known before and who was then employed in Seattle, Washington. In response to plaintiffs' invitation, Janicek came to Salem, Oregon, in August, 1946. Here he surveyed plaintiffs' business establishment but declined to accept their invitation to join them as an employee. Instead, he offered to come if accepted as a full partner. This was readily agreed to by the parties on August 10, 1946. Indeed, the plaintiffs were so eager for his help and association that they included him as the owner of a one-third interest without demanding any present capital contribution on his part, agreeing that it might be made by withholding from his share of the future profits. On August 21, 1946, Janicek assumed an active place in the firm. This continued up to and including November 2, 1946, when the partnership between the three parties was terminated.

We have above referred to Janicek as being a member of the firm. We have done so advisedly, being persuaded that the record in this matter clearly sustains the conclusion that Fouchek, McBurnett and Janicek were copartners from August 10 to November 2, 1946. We deem it unnecessary, however, to extend this opinion by giving our reasons for that conclusion in view of the position taken and concessions made by the defendant in his brief. There we find the following statement: '* * * that so long as the business relations of the parties continued, whether those relations were as partners, joint venturors or otherwise, the parties each owed to the other duties similar to those owed in a partnership relation.'

Thus by reason of our conclusion on the issue of partnership, we find that a fiduciary relationship existed between all the parties between the last dates mentioned and that their conduct as between themselves is amenable to and should be measured by the rules applicable to partners.

In 40 Am.Jur., Partnership, 137, § 17, we read: 'It is also a fundamental characteristic of partnership that the relation existing between the partners is one of trust and confidence when dealing with each other in relation to partnership matters. Each partner is, in one sense, a trustee and at the same time a cestui que trust.'

Before proceeding to discuss plaintiffs' contentions respecting Janick's alleged unfaithfulness as a copartner, we pause here to relate the circumstances giving rise to the Hickok offer and its content.

At all the times above referred to, Guy W. Hickok was the manager of the Salem Branch of the First National Bank of Portland (Oregon). It was the bank where the Salem Company maintained its deposits and where it occasionally borrowed money. Mr. Hickok, on or about October 3, 1946, and for some time thereafter, at least up to and including the time of the creation of the Cascade Company, was the agent for a group of investors who were anxious to enter the then attractive war surplus market. The names of Hickok's principals did not become known to plaintiffs until after the termination of their partnership with Janicek, when they learned that they were incorporated as Capital Properties, Inc., and that Mr. Hickok was its president and one of its directors. We shall refer to these potential investors as Mr. Hickok's principals.

Shortly before October 3, Hickok called the plaintiff, McBurnett, at his place of business and asked him to stop at his desk when he, McBurnett, was in the bank. This McBurnett did on October 3 and in the conference at the bank at that time, Hickok asked McBurnett if he would be interested in obtaining some capital funds with which to increase the scope of operation of the Salem Company. Upon receiving McBurnett's affirmative reply, he proceeded to tell him that there was 'a considerable sum of money available, controlled by individuals that I represented, that they were interested in going into some sort of a joint venture deal and the Salem General Jobbing Company would conduct the business, with the profits to be divided approximately equally.' He indicated that the available funds represented a 'probable maximum of $50,000' but that 'the amount of funds was not necessarily limited.' If accepted by the Salem Company, the partners of that firm were to meet with Hickok's principals and work out the details. The statement of Hickok's proposal, as outlined in this paragraph, is what has been heretofore and will be hereinafter referred to as the Hickok offer.

Immediately after hearing Mr. Hickok's proposal, McBurnett carried the information to his copartners, Fouchek and Janicek. It was recognized as a real partnership opportunity and was seized upon with no small display of interest and avidity. We learn from Janicek that when McBurnett returned from the bank, he was 'all steamed up' about what he had learned from Hickok and that 'we all talked about it and decided that it would be a good deal. Any time anybody offered $50,000, we thought it would be a good deal to use.' We learn from McBurnett that 'the three of us agreed to accept it, and I went back to the bank and informed Mr. Hickok to that effect.' This acceptance was transmitted to Hickok on the evening of October 3 or morning of October 4.

According to Janicek, the partners then proceeded to address themselves to the subject of appropriate ways to invest the funds when available. They inclined for a while to the purchase of rain parkas at a sale of war surplus supplies soon to be held by the Government at Salt Lake City; and Janicek, at the instance of his copartners, called Salt Lake City to learn more about the prospective parka sale. Although they concluded, after consideration, to abandon investment in the rain parkas, the Hickok offer, Janicek says, 'was quite the subject of conversation for some time.'

In the interim between the receipt of the offer and the termination of the partnership--a significant thirty days so far as the instant suit is concerned--McBurnett had further conferences with Hickok, who tells us that they numbered 'two or three' over a space of 'a week or ten days or two weeks.' Coincident with these further conferences between McBurnett and Hickok, the partners were apparently preparing themselves to have some constructive and profitable plan of operation to present to Hickok's principals when the anticipated meeting for negotiation was held. This is borne out by Janicek's own recital of their activities prior to November 2, 1946. This valuable opportunity was never abandoned by the partners and was yet an active subject of concern up to the time Janicek left the firm on that date. Our last statement must be read with the understanding that Janicek's continued interest in the Hickok offer as a partnership opportunity, as demonstrated by his conduct in the presence of his copartners, very soon became a pretense which deceived plaintiffs, cloaking the self-interest...

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