Weiner v. Fleischman

• Court: California Supreme Court
• Writing for the Court: PANELLI; LUCAS
• Citation: Weiner v. Fleischman, 54 Cal.3d 476, 286 Cal.Rptr. 40, 816 P.2d 892 (Cal. 1991)
• Decision Date: 07 October 1991
• Docket Number: No. S017856,S017856
• Parties: , 816 P.2d 892 Beryl WEINER, Plaintiff and Appellant, v. William O. FLEISCHMAN et al., Defendants and Respondents.

Page 40

286 Cal.Rptr. 40

54 Cal.3d 476, 816 P.2d 892

Beryl WEINER, Plaintiff and Appellant, v. William O. FLEISCHMAN et al., Defendants and Respondents.

No. S017856.

Supreme Court of California In Bank.

Oct. 7, 1991.

Kirsch & Mitchell, Jonathan L. Kirsch, Dennis Mitchell, Selvin, Weiner & Ruben, Los Angeles, W. Ruel Walker, San Francisco, and Arthur E. Schwimmer, Los Angeles, for plaintiff and appellant.

Garfield, Tepper, Ashworth & Epstein, Scott J. Tepper, Christopher Ashworth, Franklin R. Garfield, Hufstedler, Kaus & Ettinger, and Otto M. Kaus, Los Angeles, for defendants and respondents.

Crosby, Heafey, Roach & May, Peter W. Davis, James C. Martin, Kathy M. Banke, Oakland, White & Case, Paul J. Bschorr, Thomas McGanney, Richard B. Sypher, New York City, and Terry L. Croghan, San Francisco, as amici curiae, on behalf of defendants and respondents.

PANELLI, Justice.

The issue presented is whether the existence of an oral joint venture or partnership agreement must be established by clear and convincing evidence or by a preponderance of the evidence. We conclude that the correct standard of proof is preponderance of the evidence.

FACTS

The underlying dispute in this case centers on the sale of stock in Pioneer Theatres. Beryl Weiner (Weiner), an attorney, represented a group of Pioneer Theatres (Pioneer) shareholders who wished to sell their stock. Weiner also owned 100 shares of Pioneer stock. In December 1979, Weiner informed William O. Fleischman (Fleischman), also an attorney, of the group of Pioneer shareholders' interest in selling their stock. Weiner and Fleischman entered into an oral agreement whereby they would find a third party buyer of the stock and equally share the finder's fee. The parties gave conflicting testimony, however, concerning the extent of that oral agreement. Contrary to Fleischman, Weiner claimed that they had further agreed to purchase the stock together if they were unable to find a third party buyer.

In January 1980, Fleischman told Weiner that Thorne Donnelley, Jr. (Donnelley) was interested in being the sole purchaser of the Pioneer stock. Weiner's clients accepted Donnelley's written offer to purchase their Pioneer stock. Fleischman proceeded to form T.D.J. Pioneer Corporation (T.D.J. Pioneer), the initials symbolic of the prospective purchaser.

In late January 1980, a dissenting Pioneer shareholder tried to block the sale to T.D.J. Pioneer. The attempt was unsuccessful. As a result, however, Donnelley, who had not anticipated becoming involved in any litigation, withdrew from the purchase. The exact date of Donnelley's withdrawal is not contained in the record. Although Fleischman did not mention Donnelley's withdrawal at a June 2, 1980, Pioneer shareholders' meeting, he claims to have sent a letter in late May informing the shareholders, and Weiner, of Donnelley's withdrawal.

The Pioneer stock sale closed on July 14, 1980. Again, there was conflicting testimony surrounding what occurred moments before the closing of the stock sale. Weiner testified that Fleischman introduced William Warnick (Warnick) as an employee of Donnelley who would operate Pioneer after acquisition. In contrast, Fleischman claims to have introduced Warnick as his business partner.

Soon after the sale, T.D.J. Pioneer changed its name to Pioneer Theatres, Inc. (Pioneer Theatres), and the shares were reissued in the names of Fleischman and Warnick. Pursuant to their oral agreement, Weiner and Fleischman each received their share of the finder's fee.

In October 1982, Weiner read a newspaper article that named Fleischman as one of the owners of Pioneer Theatres. Weiner then filed this action in July 1983, alleging that Fleischman fraudulently concealed his participation in the Pioneer stock sale as a buyer and hence violated their alleged oral agreement.

The trial court ordered bifurcation of the alleged fraud from other issues. Upon conclusion of the trial testimony, the court instructed the jury to return a special verdict. The first question on the special verdict form read: "Did Plaintiff Beryl Weiner and Defendant William O. Fleischman have a relationship, contractual, fiduciary or other, to participate equally in the acquisition of shares of stock of Pioneer Theaters, Inc., if the opportunity of such acquisition arose, aside and apart from any agreement only to share or split the attorney's or finder's fee relative to the stock sale?" The jurors were instructed that if they answered this first question in the negative, they were to discontinue their deliberations and were not to consider the question of the alleged fraud.

At Fleischman's request, and over Weiner's objections, the jury was given "jury instruction No. 2.60" (Burden of Proof and Preponderance of Evidence) and a modified version of BAJI No. 12.35 (Fraud and Deceit--Concealment). The modified version of BAJI No. 12.35 presented the five elements necessary for a fraudulent concealment cause of action. Instruction No. 2.60 stated in part: "In this case, the plaintiff claims that he had an oral joint venture with the defendant to accomplish certain purposes. As a threshold matter, you must find by clear and convincing evidence, first, that the plaintiff and the defendant did enter into an oral joint venture and, second, the essential terms of that joint venture." (Emphasis added.) Instruction No. 2.60 also repeated the second element of BAJI No. 12.35, that "[t]he defendant must have been under a duty to disclose the [allegedly concealed] fact to the plaintiff," with the following addition, "[a]s noted previously, the existence of the oral joint venture and its scope must be proved by clear and convincing evidence." (Emphasis added.) ¹

On a vote of nine to three, the jury returned a special verdict finding, inter alia, no oral joint venture or other relationship between Weiner and Fleischman. A motion for new trial was denied. Weiner appealed. The Court of Appeal reversed and remanded for a new trial, holding that the trial court erred in instructing the jury that the existence of the oral joint venture agreement had to be proved by clear and convincing evidence. We granted Fleischman's petition for review to determine the correct standard of proof for establishing an oral joint venture or partnership. ²

DISCUSSION

A joint venture is "an undertaking by two or more persons jointly to carry out a single business enterprise for profit. [Citations.]" (Nelson v. Abraham (1947) 29 Cal.2d 745, 749, 177 P.2d 931.) "Like partners, joint venturers are fiduciaries with a duty of disclosure and liability to account for profits." (9 Witkin, Summary of Cal.Law (9th ed. 1989) Partnership, § 19, p. 418.)

The distinction between joint ventures and partnerships is not sharply drawn. A joint venture usually involves a single business transaction, whereas a partnership may involve "a continuing business for an indefinite or fixed period of time." (9 Witkin, Summary of Cal.Law, Partnership, supra, § 17, at p. 416, emphasis deleted.) Yet a joint venture may be of longer duration and greater complexity than a partnership. From a legal standpoint, both relationships are virtually the same. Accordingly, the courts freely apply partnership law to joint ventures when appropriate. (Orlopp v. Willardson Co. (1965) 232 Cal.App.2d 750, 754, 43 Cal.Rptr. 125.) A joint venture or partnership may be formed orally (Nelson v. Abraham, supra, 29 Cal.2d at p. 749, 177 P.2d 931; Sly v. Abbott (1928) 89 Cal.App. 209, 216, 264 P. 507), or "assumed to have been organized from a reasonable deduction from the acts and declarations of the parties." (Swanson v. Siem (1932) 124 Cal.App. 519, 524, 12 P.2d 1053.)

Both the trial court and the Court of Appeal determined that before the issue of fraud by concealment could be raised, Weiner had to establish the existence of some type of legal relationship giving rise to a duty to disclose. "Although material facts are known to one party and not the other, failure to disclose them is ordinarily not actionable fraud unless there is some fiduciary relationship giving rise to a duty to disclose." (5 Witkin, Summary of Cal.Law (9th ed. 1988) Torts, § 697, p. 799; Swanson v. Siem, supra, 124 Cal.App. at p. 523, 12 P.2d 1053 [Before a partner may be charged, a prima facie showing of the copartnership should first be established.].)

The trial court, in considering what would be proper jury instructions, did not determine the existence or nature of any relationship between Weiner and Fleischman. The court determined, however, that Weiner had proceeded to trial solely on an oral agreement or oral joint venture theory. Accordingly, the trial court left to the jury, by way of a response to the request for a special verdict, the determination of whether such an oral joint venture agreement existed. The court instructed the jury to first determine by "clear and convincing" evidence whether in fact a relationship existed between Weiner and Fleischman.

The general rule in this state is that "[i]ssues of fact in civil cases are determined by a preponderance of testimony." (Liodas v. Sahadi (1977) 19 Cal.3d 278, 288, 137 Cal.Rptr. 635, 562 P.2d 316, citing Ford v. Chambers (1861) 19 Cal. 143, 144.) Evidence Code section 115 (section 115) provides in pertinent part: "The burden of proof may require a party to raise a reasonable doubt concerning the existence or nonexistence of a fact or that he establish the existence or nonexistence of a fact by a preponderance of the evidence, by clear and convincing proof, or by proof beyond a reasonable doubt. [p] Except as otherwise provided by law, the burden of proof requires proof by a preponderance of the evidence." (Emphasis added.) "Law," as referenced in section 115, includes "constitutional, statutory, and decisional law." (Evid.Code, § 160.) In light of section 115, we must determine whether constitutional, statutory or decisional law (i.e., case law) requires a burden of proof...