Krebs v. Blankenship
| Decision Date | 27 January 1914 |
| Citation | 80 S.E. 948,73 W.Va. 539 |
| Parties | KREBS v. BLANKENSHIP ET AL. |
| Court | West Virginia Supreme Court |
Submitted January 6, 1914.
Syllabus by the Court.
By a contract in writing, K. and B. agreed "to option coal and timber lands" and to secure, when necessary renewals of options; K. to furnish the "option money" to offset the services of B. in securing the options and renewals, and, "in case of a sale of the property under option or what may be optioned," to divide the profits equally between them, "less option money." Each of them was thereby authorized "to sell the property under option, and to do all in his power to negotiate such sale." Held, that K. and B thereby became partners for the purposes stated; that, when properly construed according to its terms alone or by its terms and the conduct of the partners, the contract authorized dealings in lands optioned, as well as in the instruments under which they thus controlled the lands.
A partner occupies a dual relation in respect of his dealings with his associates and with the partnership assets. As to the former, he is a trustee; as to the latter, a cestui que trust. Out of this dual relation arises the reciprocal duty by which each partner is required to refrain from all conceal ment in his transactions with his copartners and with the common property; and if, by fraud or concealment, he derives a benefit to the exclusion of his associates, equity will treat him as a trustee of the firm and compel him to account therefor.
Partners in their dealings with each other are required to use the utmost good faith. If either of them seeks to acquire the interest of another, he must make to him a frank and honest disclosure of all knowledge possessed by him, from which his associate may form a sound judgment as to the value of such interest.
If without a full disclosure of all knowledge within his exclusive possession, one partner, by the purchase of his copartner's interest, secures an unfair and inequitable advantage, he commits a breach of faith, from the effect of which equity will grant relief at the suit of the injured partner.
A partner cannot terminate the partnership relation in order to secure to himself a profit from a sale secretly effected by him of the community property, unless he makes a full, frank, and honest disclosure of all the facts and circumstances, from which his copartners may form a sound judgment as to the purpose and propriety of such dissolution.
If to the firm property a pretended right is fraudulently obtained by one partner, who thereafter, with it as a nucleus, secretly secures other like property, and, by a sale of all of it, derives a profit, he will, at the suit of his copartner thus defrauded, be required to account to the latter for his proportionate share.
Additional Syllabus by Editorial Staff.
To bind one by estoppel from conduct, he must have reasonable ground to anticipate that another will change his position, or in some way act on the faith of the conduct to his detriment.
Appeal from Circuit Court, Raleigh County.
Bill by George R. Krebs against P. L. Blankenship and others. From decree for defendants, plaintiff appeals. Reversed and remanded.[Copyrighted Material Omitted]
Brown, Jackson & Knight, of Charleston, for appellant.
Sanders & Crockett, of Bluefield, for appellees.
Upon final hearing on pleadings and proof, the circuit court dismissed the bill of George R. Krebs, by which he sought a decree requiring P. L. Blankenship to pay to him a share of the profits derived, as charged by the bill, from the sale of certain lands in which Krebs and Blankenship were interested as partners. From the decree of dismissal, Krebs has appealed to this court.
On May 29, 1909, Krebs and Blankenship entered into an agreement "to option coal and timber lands" and to secure renewals of options when necessary, Krebs to furnish the "option money" to "offset the services" of Blankenship in securing the options and renewals. In case of a sale of the property under option "or what may be optioned," they were to divide the profits equally, one-half to each, less "option money." Each of them was thereby authorized to sell the property under option and to do all in his power to negotiate such sale. This agreement is properly construed by the parties as constituting a partnership between Krebs and Blankenship. They differ only as to the scope of the dealings within its terms, Blankenship contending that the firm cannot deal as partners in the property optioned, though they may deal in options. This distinction is not warranted by The terms of the agreement. In fact, it is not seriously urged. The contract speaks of the "property under option or what may be optioned," and gives to each partner authority "to sell the property under option." Besides, in the course of the joint dealings, the partners construed the terms as comprehending lands, and not merely the instruments under which they controlled the lands.
At the date of the agreement, Blankenship had options on 2,100 acres of coal and timber lands in Mercer county--the Davis-Smith-Maitland 1,100 acres, that is, a boundary in which the three persons named had interests, and the Karnes 1,000 acres. Although the options themselves bear a subsequent date, these are the tracts in contemplation as a nucleus of a larger acreage at the inception of the joint dealings, whether, in fact, under their joint control at that time or later. This fact is conceded; at least it is affirmed by Krebs, and not satisfactorily denied by Blankenship.
After agreeing among themselves upon the location of the territory to which the joint dealings should be confined, Blankenship acquired in his own name options on other lands, thereby increasing the quantity controlled by the firm to 3,300 acres. On September 23, 1909, he sold the entire boundary to A. D. Harrah at the rate of $50 per acre, the exact quantity to be ascertained by survey. Of this sale Krebs was not advised, as claimed by him, until a short time before the institution of this suit, August, 1910. Blankenship admits he did not at any time inform Krebs of the sale or the contract in pursuance of which it was made, but insists that he knew of its final consummation in February, 1910, and that, with such knowledge, he adjusted by settlement between the parties all matters incident to the partnership transactions.
Blankenship, through Bolen as his agent, on October 14, 1909, purchased Krebs' interest in the options on lands owned by Karnes and others, in which, for purposes hereafter explained, Blankenship previously pretended to assign his interest to Krebs, although he, in fact, still retained a half interest, being the only interest he really had therein prior to his assignment. As an inducement, Bolen informed Krebs that he had a purchaser, whose name he declined to disclose, who would buy the firm property, but would not pay the consideration theretofore named by the partners. Krebs declined to deal with Bolen at that time, because, as conceded, he had given to one Anderson an option to buy the lands at the rate of $55 per acre. At the expiration of the Anderson option, Bolen renewed the effort to deal with Krebs, and again failed. But later he and Blankenship together succeeded in persuading Krebs to assign his interest to Bolen, provided Bolen's purchaser accepted the property. If he did accept, the purchaser thus secured was to execute a note for $5,000 to each of the partners, Blankenship agreeing at the same time to assign to Bolen his interest upon the same term and conditions; and the notes were later executed by Bolen, and not by his purchaser. For his services in effecting the assignment of Krebs' interest, Bolen was paid $1,000 by Blankenship; or, what is the same in effect, Blankenship offered to pay $6,000 for Krebs' interest, with the understanding that, if Bolen secured the interest for less, he was to have the difference.
The terms of the agreement thus made by Krebs, Blankenship, and Bolen were by Krebs' letter communicated to the law firm of Woods & Martin, to be put in proper legal form, with the understanding that both Krebs and Blankenship should sign it. But Woods by letter informed Krebs that it was not necessary for Blankenship to execute the paper, because he was protected by some arrangement, not stated, between him and Bolen, and Krebs accordingly executed and returned to Woods the assignment of his interest in the lands. The acquisition of Krebs' interest, as clearly appears, in fact admitted by Blankenship and Bolen, was for the sole use and benefit of Blankenship, who was Bolen's undisclosed purchaser; for, as soon as Bolen obtained the assignment from Krebs and the pretended assignment from Blankenship, he at once reassigned to the latter the interests of both partners.
The intervention of Bolen being thus far successful, Blankenship further enlisted his services in securing, first, a reduction in the $5,000 note due Krebs under the Bolen assignment to $4,500, and, second, the exchange of the note, when thus reduced, for stocks owned by Blankenship in the New River Coal Company, the value of which was gradually decreasing; in each of which transactions Bolen was also successful. The first he accomplished by inducing Krebs to believe that the purchaser secured by him, but whose name he did not reveal, and who, as stated, was Blankenship, declined to accept 500 acres of the boundary the sale of which he had secured, because of some defect in the title; and the second, by repeated efforts by himself personally and by other influences under his direction, to impress upon Krebs the importance of the coal company stock as a profitable investment.
The contract of sale between...
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