Young v. Taylor

• Citation: 466 F.2d 1329
• Decision Date: 19 September 1972
• Docket Number: No. 658-70.,658-70.
• Parties: Fred L. YOUNG and Eleanor L. Young, Husband and Wife, and Robert C. Donihue, Plaintiffs-Appellees, v. John W. TAYLOR, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

466 F.2d 1329 (1972)

Fred L. YOUNG and Eleanor L. Young, Husband and Wife, and Robert C. Donihue, Plaintiffs-Appellees, v. John W. TAYLOR, Defendant-Appellant.

No. 658-70.

United States Court of Appeals, Tenth Circuit.

September 19, 1972.

COPYRIGHT MATERIAL OMITTED

Walter P. Faber, Jr., Salt Lake City, Utah, for plaintiffs-appellees.

Ronald N. Spratling, Jr., Salt Lake City, Utah, for defendant-appellant.

Before PHILLIPS, MURRAH and HOLLOWAY, Circuit Judges.

HOLLOWAY, Circuit Judge.

This is an appeal from a judgment against appellant John W. Taylor and other defendants in a suit under § 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 of the Securities and Exchange Commission, the Utah Blue Sky Law, Utah Code Ann. § 61-1-22(1)(b) (1953), and common law fraud principles. The judgment recovered was for general damages of $263,800, punitive damages of $50,000 and attorney's fees of $15,000. A separate appeal consolidated with this proceeding and appeals by other parties have all been dismissed and we are concerned solely with that of appellant Taylor. For convenience we will refer to the parties as designated in the trial court.

The complaint centered around an agreement for sale of an office building in Salt Lake City by plaintiffs to defendant Texas Uranium Corporation. Discussions by plaintiff Donihue with the defendants Jenson, Lund, Taylor and others began in May, 1968, and the written agreement was signed shortly. In essence it provided that the purchase price for the building would be $400,000; that the buyer was to assume a mortgage of $125,000 on the building and issue to the seller-plaintiffs investment stock of Texas Uranium; that the value assigned to the stock was twenty cents per share, or a total value of $275,000; and that the buyer would pay certain taxes.

In addition proof of the plaintiffs tended to show that there was also a contemporaneous oral agreement. The plaintiffs testified that the oral agreement was made separately because defendant Lund explained that it could not lawfully be made a part of the contract involving transfer of the stock. This oral understanding was for payment of $35,000 in cash and delivery of two automobiles in connection with the sale of the office building, and there was also an understanding that $10,000 in cash would be paid on the related sale of a motel to Texas Uranium, but that transaction is not involved on this appeal.

The gist of the misrepresentations claimed was that the plaintiffs were told that the Texas Uranium stock was registered with the Securities and Exchange Commission, which was false; that they were misinformed as to the time the stock had to be held before transfer; that the corporation owned assets of over $8,000,000, including certain business assets, which in fact were nonexistent; and that the corporation owned certain producing mines and business interests, which were not as represented. It was generally on the basis of such proof that the jury returned the verdict against defendants and we will detail the facts further in discussing the issues raised by appellant here.

First, Taylor argues that there was error in admission of prejudicial testimony in violation of the attorney-client privilege. The contention is based on testimony of Mrs. Hansen, secretary to defendant Lund. She testified that she heard a conversation between defendants Lund and Jenson shortly after Mr. Jenson had a conversation with plaintiff Donihue. She was permitted to testify that defendant Jenson remarked to defendant Lund that plaintiffs Donihue and Young "weren't so smart; that they could possibly end up with the properties for nothing."

Counsel for defendants Taylor and Texas Uranium objected, arguing that the statement was heard by Mrs. Hansen in her capacity as secretary to Mr. Lund, attorney for Texas Uranium. Appellant Taylor now says that the trial court instructed that the defendants were in the same status as to liability; that if any defendant should have a judgment against him, then all of the defendants should be held liable; and that, therefore, the privilege extended to each of the co-defendants, except the attorney, and may be asserted by appellant Taylor. We cannot agree and conclude that the contention on the privilege must be rejected.

An attorney cannot, without the consent of his client, be examined as to any communication made by the client to him or his advice given in the course of his professional employment. Utah Code Ann. § 78-24-8(2) (1953); see Wilcoxon v. United States, 231 F.2d 384 (10th Cir.), cert. denied, 351 U.S. 943, 76 S.Ct. 834, 100 L.Ed. 1469. Moreover, the privilege does include the communications heard by a secretary or clerk of the attorney, as § 78-24-8(2) also provides. United States v. Kovel, 296 F.2d 918 (2d Cir.).

The trial court overruled the privilege objection for several reasons. First, he held that by examining the attorney, Mr. Lund, the corporation had waived the privilege. Second, he found that there was proof indicating that Mr. Lund was acting as a participant in the transactions and that the consultation was with one interested other than as an attorney. We are satisfied that the record shows that there was a waiver that binds Taylor. See Steen v. First National Bank of Sarcoxie, 298 F. 36 (8th Cir.). We also feel that the record sustains the view that the communication was not privileged because it was made to one who was acting as a participant. United States v. Vehicular Parking, 52 F.Supp. 751, 753 (D.Del.). See also Lowy v. C. I. R., 262 F.2d 809 (2d Cir.). The court also added that there was evidence that this was a communication to facilitate a fraud so that it should not be suppressed, but this further ground need not be considered. In sum, we are satisfied that the record sustains the ruling and that it was proper as a matter of law.¹

On this appeal there is an added reason why the privilege argument of Taylor is without merit. Texas Uranium is no longer a party to the appeal. Mr. Lund was shown to have been an attorney for Texas Uranium and Jenson, but not to have been counsel for Taylor. "The rule is for the protection of the client. . . ." Wilcoxon v. United States, supra, 231 F.2d at 386. Thus, Taylor may not assert the privilege as a ground for reversal. See In re Young's Estate, 33 Utah 382, 94 P. 731, 732; United States v. Le Pera, 443 F.2d 810, 812 (9th Cir.); McCormick, Law of Evidence § 96 (1954); 8 Wigmore, Evidence § 2196 (1961).

Appellant Taylor's second proposition on appeal is that the court erred by instructing that if any of the defendants should be found liable then all should be found liable. The challenged portion of the charge is set out in the margin.² This instruction relates also to the form of verdict submitted which did not provide for separate verdicts against individual defendants but submitted one form for a verdict assessing damages against all defendants, if the jury found for the plaintiffs. Appellant vigorously argues that the defendants were entitled to a jury finding on the factual question as to whether the defendants were agents of one another, and as to whether each defendant was severally liable, and that the charge and form of verdict decided these questions and improperly removed them from the jury's deliberations.

While these contentions would be forceful in a proper case, we cannot agree that they are valid here. As the trial court's charge says, the form of verdict was submitted with the consent of the parties. Moreover, there was no objection made after the giving of the court's instruction on this point. The defendants apparently were willing to go the jury on the basis that they were all in the same boat.³ Therefore a challenge may not now be made to this instruction and the form of verdict. Rule 51 Fed.R.Civ.P.; United States v. Atkinson, 297 U.S. 157, 160, 56 S.Ct. 391, 80 L.Ed.2d 555; Murphy v. Dyer, 409 F.2d 747 (10th Cir.).

Third, Taylor argues that the plaintiffs failed to sustain their burden of proof of common law fraud and that the trial court failed to instruct on all the elements of such a claim. Taylor's brief stresses the contention that the several elements of such fraud under Utah law were not expressly covered by the charge.

We cannot agree that the trial court failed to instruct sufficiently on fraud. The gist of such a claim does include some nine elements as stated by the Utah Supreme Court; that a representation was made; that it concerned an existing material fact; that it was false; that the person making the representation knew it to be false or made the statement recklessly, knowing he had insufficient knowledge on which to base the representation; that it was made to induce action; that the other party acted on it reasonably and in ignorance of its falsity; that the other party did in fact rely on the statement; that he was induced to act; and that he thereby suffered injury and damage. See Pace v. Parrish, 122 Utah 141, 247 P.2d 273; Stuck v. Delta & Water Co., 63 Utah 495, 227 P. 791; Estate Counselling Service, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 303 F.2d 527 (10th Cir.).

The essential instructions of the trial court on liability and damages are set out in the margin.⁴ In the charge the court did not separate the different types of claims asserted by the plaintiffs under the Federal and Utah Securities Acts and common law fraud. Instead he stated together the required elements of the various theories for recovery. From an examination of the charge as a whole on liability and damages, we are satisfied that the instructions substantially complied with the requirements of Utah law as to common law fraud. Moreover, there was no objection by Taylor to the instructions on these grounds. Since the charge substantially followed the Utah law and was not claimed to be defective in these respects by Taylor, we are satisfied that no reversible error is shown. Rule 51 Fed.R.Civ.P.; ...