McKibben v. Byers

• Decision Date: 07 October 1933
• Docket Number: 31125.
• Citation: 138 Kan. 216,25 P.2d 357
• Parties: McKIBBEN v. BYERS.*
• Court: Kansas Supreme Court

25 P.2d 357

138 Kan. 216

McKIBBEN v. BYERS.*

No. 31125.

Supreme Court of Kansas

October 7, 1933

Syllabus by the Court.

Party who financed purchase, kept accounts, received income, and took title to land selected by realtor under agreement for division of net profits upon resale occupied fiduciary relation toward realtor, and was bound to render accurate accounts.

In accounting between parties engaged in purchase and sale of lands under agreement for division of net profits, burden was on party keeping accounts, receiving income, and making disbursements to show right to credits claimed.

Failure to keep proper accounts and preserve vouchers by party occupying fiduciary relation may result in failure to establish claimed credits, or give rise to presumption that if best evidence were produced it would be against allowance of credits.

Where in suit for accounting party occupying fiduciary relation kept inaccurate accounts and knowingly made false claims, he should be held to strict proof of credits claimed.

Where parties, engaged in purchase and sale of lands under agreement to divide net profits, had discontinued relations prior to suit for accounting by one of them, account should have been stated as of date of filing petition.

Where party financing purchase and sale of lands under agreement to divide net profits secretly purchase sheep to put on ranch he could not charge any part of loss on sheep against other party.

1. Transactions between plaintiff and defendant involving purchase and sale of real estate and division of net profits considered, and held, defendant occupied a fiduciary relation toward plaintiff, and rested under the duties incident to such relation.

2. Principles governing accounting between the parties stated.

Appeal from District Court, Ford County; Karl Miller, Judge.

Action by Clay McKibben against Reed Byers, who filed a counterclaim. From a judgment for defendant, plaintiff appeals.

Reversed and remanded, with directions.

F Dumont Smith, Eustace Smith, and Claude E. Chalfant, all of Hutchinson, for appellant.

Carl Van Riper, of Dodge City, and W. Raleigh Gough, of Kansas City, Mo., for appellee.

BURCH Justice.

The action was one by plaintiff to recover his share of profits accruing from transactions with defendant relating to purchase and sale of land. The petition disclosed relations between the parties with respect to two tracts only. The answer disclosed relations with respect to eight other tracts, and an accounting became necessary. The court stated the account, found a balance due defendant, and rendered judgment accordingly. Plaintiff appeals.

The petition was filed in August, 1930. The answer, which contained a counterclaim, was filed March 28, 1931, and the reply was filed April 23, 1931. The abstract shows an amended petition filed June 22, 1931. The nature of the amendment is not disclosed. On April 1, 1931, plaintiff filed a written motion for reference of the cause to a referee for trial. The motion was denied, and the trial was before the court. The trial commenced on June 8, 1931. There were some continuances, and the trial was concluded on January 10 1932. On February 15, 1932, the court submitted what was called a statement of the McKibben-Byers account. This statement consisted of a sort of balance sheet summary which showed plaintiff indebted to defendant in the sum of $11,393.10. Nobody could tell how or why the court arrived at the items of the statement, or what the court's views might be with respect to various law questions necessarily involved in stating the account. On March 7, 1932, plaintiff filed a motion requesting clarification of the tentative findings, and filed a motion requesting certain conclusions of law. On March 12 the motions were denied, except as to a portion of one of them, the statement of account referred to was placed on file, and judgment was rendered in favor of defendant against plaintiff for $11,393.10. A motion for new trial was duly filed, and overruled. On September 8, 1932, four days before time for appeal expired, plaintiff served notice of appeal. On September 21, 1932, the journal entry of judgment, containing the court's findings of fact, was filed. It occupies 38 printed pages of the abstract.

As indicated, the controversy arose over dealings regarding land. Plaintiff resided in Dodge City, Kan., and for some years previous to 1917, was engaged in the general real estate business, buying and selling real estate, both on his own account and as agent or broker for others. Defendant was an investor who resided in Kansas City, Mo. The petition pleaded an oral agreement that whenever plaintiff found land he considered a bargain, defendant would finance the purchase, take title in his own name, and when the land was sold the profit would be divided equally between plaintiff and defendant. The answer pleaded an oral agreement that plaintiff would discover and investigate opportunities for acquisition of tracts of land, report to defendant, and, if defendant approved, defendant would furnish the money and take title in his own name; plaintiff would oversee and manage improvement and operation of the land, all revenue to be property of defendant; plaintiff would exercise diligent effort to find purchasers for the land; when a purchaser on terms acceptable to defendant was found, the land would be sold; as compensation to plaintiff for his services rendered in acquiring, holding, and selling the land, defendant would pay plaintiff one-half the net profit, computed according to a method described.

There is no testimony purporting to give the facts concerning what occurred which led to plaintiff and defendant having relations regarding land. Tracing the relations historically, in 1916 or 1917 they arranged to purchase about 52 quarter sections of land in Baca county, Colo. Before that they had no agreement or understanding about handling land. Defendant testified the agreement with reference to that land was, they would buy the land together, defendant would furnish the funds and take title, and net profits were to be divided equally. Net profit was to be computed by taking out interest on mortgages on the land, taxes, abstract and incidental expenditures, and 6 percent. interest to defendant on his investment. The land was raw, unfenced, scattered land. There was nothing to be done in the matter of looking after it, except to sell it, and there was no further agreement respecting it. The arrangement did not contemplate improving the land, or using it for farming or ranching, but was confined to buying and selling the land.

Subsequently other tracts of land were purchased, and the relations of the parties broadened. Raw land was fenced, and other improvements were made. One tract was hay land, and hay was cut each year. Improved land was purchased, and it became necessary to procure tenants, look after crops, market crops, and in general to conduct farming operations. The result was, there came into the relation of the parties the new element of use of land pending sale, involving management, income, and expenditure, not foreseen or considered when the relation concerning the Baca county land was formed.

Defendant testified he was in full active charge of use of land, and plaintiff was resident supervisor. Part of the time it might have been as nearly descriptive if defendant had said he was nonresident supervisor, with plaintiff in active charge. Plaintiff testified he did nothing except what defendant directed him to do. This was true in a general sense, but there was undisputed evidence that he in fact exercised independent judgment and discretion with respect to important matters. The testimony of each with respect to division and comparison of function is not important, because it is clear what acts each one performed. These need not be detailed.

Considering the evidence realistically, uncolored by legal theory, and uncolored by fudging statements and conclusions designed to sustain or oppose legal theory, the actual relations between the parties were simple enough. Plaintiff discovered land, which was purchased and held to be sold. Defendant furnished the purchase money and other money necessary to finance the project, and took title. When plaintiff found a buyer and the land was sold, defendant's expenditures and interest on his advancements were deducted, and the net profit was divided equally. When the relationship was extended to meet new conditions, the parties agreed respecting the conditions. Defendant advanced funds and took title as before. From gross receipts, which included income from land, expenditures by and interest to defendant were deducted as before, and net profit was divided equally. Whenever a new tract was purchased there was an understanding with respect to how it would be handled, and that it was purchased under the plan pursuant to which plaintiff and defendant had been operating. Ultimately there was an agreement that loss on one venture might be deducted from profit on another.

In presenting the appeal the parties are not content to accept the facts and discuss legal consequences on the basis of actualities of the relationship. The facts must be cast into some legal mold having a recognized name, and rights and liabilities must be deduced from the name. Plaintiff says the relation was one of joint adventure. Defendant says the relation was one of master and servant. The district court in effect adopted the method of the parties and the theory of defendant. The court found that defendant Byers employed plaintiff McKibben to assist Byers in the acquisition holding, and disposition of various tracts of land in Kansas, Oklahoma, and Colorado, and, as compensation for McKibben's...