Rumford Ins. Co., Inc., Dba Seaway Warehouse v. Francis X. Wack Dba Mid-State Surplus
| Decision Date | 01 March 1985 |
| Docket Number | L-84-251,85-LW-4177 |
| Parties | Rumford Insurance Co., Inc., dba Seaway Warehouse, APPELLANT-CRO S-APPELLEE v. Francis X. Wack dba Mid-State Surplus, APPELLEE-CROSS-APPELLANT C. A. |
| Court | Ohio Court of Appeals |
DECISION AND JOURNAL ENTRY
This cause came on to be heard upon the record in the trial court. Each assignment of error was reviewed by the court and upon review the following disposition made:
This case comes before the court on appeal from a judgment of the Lucas County Common Pleas Court, wherein appellant-cross-appellee Rumford Insurance Company, Inc., dba Seaway Warehouse (hereinafter "Rumford") was awarded judgment in the amount of $24,454.08 against appellee-cross-appellant Francis X. Wack, dba Mid-State Surplus (hereinafter "Wack"). The record discloses the following undisputed facts.
On October 18, 1980, Rumford and Wack executed a written contract, whereby Rumford granted to Wack the exclusive right, for a period of 90 days (or until completion of the sale), to sell damaged bags of Johns-Manville insulation owned by Rumford. Rumford had purchased the insulation from Johns-Manville for $24,000.00.
According to the terms of the contract, Wack was to attempt to sell all insulation provided by Rumford, to set the retail price for the insulation (subject to approval by Rumford), to maintain an accounting system which would reflect the price and quantity of insulation sold, and to deposit all proceeds from the sale in joint savings and checking accounts. These accounts were to be opened in the names of both parties, and any withdrawal was to require the signatures of both parties. Profits on the sale of the insulation were to be divided between the parties, based upon the cost of goods sent to Wack, on a "50%-50% basis."
Wack proceeded to sell the insulation and collected $25,554.08 in proceeds. Wack also opened a savings account at the Sylvania Savings Bank, in accordance with the terms of the contract, but deposited therein only $1,100.00 of the sales proceeds. Wack never accounted to Rumford for the sales, despite several demands that he do so. On November 12, 1981, the savings account was closed by William Rowland, an officer of Seaway Warehouse, who withdrew the balance on behalf of Rumford.
Rumford filed the suit below, on July 28, 1982, seeking judgment against Wack for the sum of $25,554.08, representing the sales proceeds, and also seeking $15,000.00 in punitive damages for the alleged fraudulent conversion of those funds.
On August 3, 1983, Rumford moved for partial summary judgment, requesting the trial court to award damages for the sales proceeds and also to make a specific finding of fraud. Wack filed no response to the motion. The trial court denied the motion on September 6, 1983, and thereafter the case proceeded to trial to the court. On June 12, 1984, the trial court issued its opinion and entered judgment, finding that Wack had breached his contractual obligation to account for and deposit the sum of $24,454.08. The trial court, however, denied Rumford's claim for punitive damages, finding that Rumford had failed to prove fraud, either actual or constructive. From this final judgment, both parties have appealed.
Appellant-cross-appellee Rumford, in its brief, has set forth the following two "arguments," which we shall construe to be assignments of error as required by App. R. 16(A)(2):
We observe that both of appellant-cross-appellee's assignments of error are premised on the argument that, because Rumford and Wack were either partners or, in the alternative, joint venturers, each owed the other a fiduciary duty, the alleged breach of which gave rise to Rumford's claim against Wack for fraud. A brief review of the pertinent law of partnerships, joint ventures, fiduciary relationships and fraud is, therefore, in order before proceeding to a more detailed examination of appellant-cross-appellee's assignments of error.
Revised Code 1775.05(A) defines a partnership as "an association of two or more persons to carry on as co-owners a business for profit." R.C. 1775.06(D) provides that "[t]he receipt by a person of a share of the profits of a business is prima-facie [sic] evidence that he is a partner in the business." However, R.C. 1775.06(C) states that "[t]he sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived."
The Court of Appeals for Mahoning County, in Bouslough v. Shingledecker (1953), 97 Ohio App. 329, 336, further defined a partnership as follows:
' (Emphasis added.)
The partnership contract need not be in writing, but may be proven by showing acts and conduct of the parties from which the fact may be inferred that the parties have agreed to become partners. Id., at 338. "A court can properly find a partnership exists from evidence that there has been a sharing of net profits from a continuing business operated by two or more persons, where each is capable of binding the business entity." Simandl v. Schimandle (1982), 3 Ohio App. 3d 357, paragraph one of syllabus. (Emphasis added.) However,"[p]articipation in the profits of a business, although strong evidence of partnership, is not conclusive where the persons participating in such profits do not take them as principals in a joint enterprise in which each has authority, express or implied, to bind the other." Garrison v. Place (1952), 92 Ohio App. 239, paragraph one of syllabus. (Emphasis added.)
A joint venture (formerly "joint adventure"), was defined by the Ohio Supreme Court, in Ford v. McCue (1955), 163 Ohio St. 498, paragraph one of syllabus, as follows:
"A joint business adventure is an association of persons with intent, by way of contract, express or implied, to engage in and carry out a single business adventure for joint profit, for which effort they combine their efforts, property, money, skill and knowledge, without creating a partnership, and agree that there shall be a community of interest among them as to the purpose of the undertaking, and that each coadventurer shall stand in the relation of principal, as well as agent, as to each of the other coadventurers, with an equal right of control of the means employed to carry out the common purpose of the adventure." (Emphasis added.)
See also, Al Johnson Constr. Co. v. Kosydar (1975), 42 Ohio St. 2d 29, paragraph one of syllabus.
The Court of Appeals for Clermont County, in Kahle v. Turner (1979), 66 Ohio App. 2d 49, paragraph two of syllabus, enumerated a number of factors which are prerequisite to the formation of a joint venture, to wit:
"The following factors must be present, in one form or another, depending upon the agreement of the parties, in order for a joint venture to exist: contributions of effort, property, skill, knowledge and other assets to the common undertaking; a joint property interest in the subject matter of the venture and a right of mutual control or management of the enterprise; expectation of profits; a right to participate in the profits; and, usually, a limitation of the objective to a single undertaking."
A fiduciary relationship is "one in which special confidence and trust [are] reposed in the integrity and fidelity of another and there is a resulting position of superiority or influence, acquired by virtue of this special trust." In re Termination of Employment (1974), 40 Ohio St. 2d 107, 115. "A fiduciary relationship may be created out of an informal relationship, but this is done only when both parties understand that a special trust or confidence has been reposed." Umbaugh Pole Bldg. Co. v. Scott (1979), 58 Ohio St. 2d 282, paragraph one of syllabus. See also, Stone v. Davis (1981), 66 Ohio St. 2d 74, 78, certiorari denied sub nom. Cardinal Fed. Sav. & Loan Assn. v. Davis (1981), 454 U.S. 1081 (following cited cases).
Concerning the issue of fraud, Ohio courts have held that "[t]o constitute positive or 'actual fraud,' there must be such fraud as affects the conscience; that is, there must be an intentional deception." Lake Hiawatha Park Assn. v. Knox Cty. Agricultural Soc. (1927), 28 Ohio App. 289, paragraph one of syllabus. "Actual fraud, when alleged as a ground of action, will not be presumed, but must be proved, and the burden of establishing its existence is on the one making the claim, and the proof must be of such facts, circumstances, and surroundings as will make it manifest." Id., paragraph three of syllabus.
Ohio courts have uniformly held that, in order to maintain an action for damages for fraud, the following elements must be proved: (1) an actual or implied misrepresentation or concealment of a...
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