Appeal by plaintiffs from judgment filed 31 October 2002 by
Judge Ronald E. Spivey in Forsyth County Superior Court. Heard in
the Court of Appeals 26 February 2004.
David B. Hough, P.A., by David B. Hough, for plaintiff-
appellants.
Forsyth Legal Associates, by William L. Durham; and Michelle
D. Reingold, for defendant-appellee.
BRYANT, Judge.
Marketplace Antique Mall, Inc., D.G. Samuel, Jr. (Samuel),
individually, and D.G. Samuel, Jr., d/b/a Queen Street Antiques
(collectively plaintiffs) appeal a judgment filed 31 October 2002dismissing plaintiffs' action with prejudice and awarding damages
on defendant Steven M. Lewis' counterclaim for constructive fraud
and breach of contract.
(See footnote 1)
With respect to his counterclaim, defendant presented evidence
at trial establishing that Samuel and he had been life partners who
had joined as equal partners in a business venture restoring and
selling antique furniture. Defendant had some experience in this
field because his family had worked in the antique business.
Samuel and defendant opened and operated two stores: Queen Street
Antiques and Marketplace Antique Mall. As to Marketplace Antique
Mall, defendant testified and the documentary evidence showed that
Samuel and defendant signed the lease for the premises “as business
partners.” In addition, they “filed for a partnership tax number”
for the business and submitted their “income tax returns at the end
of the year as partners.” As to Queen Street Antiques, defendant
acknowledged that, for tax purposes, the business was classified as
a sole proprietorship run by Samuel. However, he explained the set
up was an initial arrangement in order to expedite assignment of
the tax number required to operate the business in a booth at an
antique mall. Tax numbers for sole proprietorships were issued on
the spot whereas a partnership tax number could take up to six
weeks to be issued. Defendant testified the intent was to get into
the booth right away by registering as a sole proprietorship and
then to “come back to the tax office and change [theclassification] immediately to a partnership.” The partnership tax
number, however, never came into effect because Samuel did not
apply for a change in classification. Defendant reminded Samuel to
do this “[m]any, many times,” and Samuel “said that he would but
never did.” When the parties' personal relationship deteriorated,
Samuel took defendant's keys to the businesses and changed the
locks. Defendant was no longer allowed on the business premises.
Samuel testified that although it was defendant's idea to go
into business, Samuel contributed all the working capital. Samuel
denied the existence of a business partnership and characterized
defendant's contributions to the businesses as those of an
employee. Samuel admitted defendant co-signed the lease for
Marketplace Antique Mall but explained that he was simply indulging
the lessor, who wanted defendant's name on the lease because he was
the beneficiary under Samuel's will, and defendant, who “wanted his
name on everything.” Samuel stated the tax returns for Marketplace
Antique Mall were filed as a partnership to allow defendant, his
life partner, to use some of the business losses to offset his tax
obligations. A few years after its creation, Marketplace Antique
Mall was incorporated. The articles of incorporation filed with
the North Carolina Secretary of State listed both Samuel and
defendant as incorporators.
_________________________
The sole issue addressed on appeal is whether defendant
presented sufficient evidence of a fiduciary relationship between
himself and Samuel to warrant submission of the claim ofconstructive fraud to the jury.
[1] At the outset we note that several of plaintiffs'
assignments of error fail to comply with the North Carolina Rules
of Appellate Procedure. Assignments of error one through three and
eight through nine fail to provide any record or transcript
references as required by Rule 10.
See N.C.R. App. P. 10(c)(1)
(“[a]n assignment of error is sufficient if it directs the
attention of the appellate court to the particular error about
which the question is made,
with clear and specific record or
transcript references”) (emphasis added). “Rule 10 allows our
appellate courts to 'fairly and expeditiously' review the
assignments of error without making a 'voyage of discovery' through
the record in order to determine the legal questions involved.”
Rogers v. Colpitts, 129 N.C. App. 421, 422, 499 S.E.2d 789, 790
(1998) (quoting
Kimmel v. Brett, 92 N.C. App. 331, 335, 374 S.E.2d
435, 437 (1988)). Considering the 697 pages of testimony and trial
proceedings documented in the transcript, the voluminous exhibits
submitted by both parties, and the 85-page record that collectively
represents the record on appeal, plaintiffs' omission of the
relevant record and transcript references amounts to a substantial
violation of the Rules. We thus dismiss assignments of error one
through three and eight through nine. Furthermore, as assignments
of error two and six are not presented and discussed in plaintiffs'
brief to this Court, they are deemed abandoned.
See N.C.R. App. P.
28(a).
[3] Plaintiffs argue the trial court erred in denying theirmotions to dismiss, for directed verdict, and for judgment
notwithstanding the verdict on defendant's counterclaim for
constructive fraud. Specifically, plaintiffs contend the evidence
at trial failed to establish a fiduciary relationship between
Samuel and defendant.
(See footnote 2)
“'Constructive fraud arises where a confidential or fiduciary
relationship exists, and its proof is less “exacting” than that
required for actual fraud.'”
Cash v. State Farm Mut. Auto. Ins.
Co., 137 N.C. App. 192, 206, 528 S.E.2d 372, 380 (citation
omitted),
aff'd, 353 N.C. 257, 538 S.E.2d 569 (2000) (per curiam).
In order to show constructive fraud, a
plaintiff must establish (1) facts and
circumstances creating a relation of trust and
confidence; (2) which surrounded the
consummation of the transaction in which the
defendant is alleged to have taken advantage
of the relationship; and (3) the defendant
sought to benefit himself in the transaction.
Sullivan v. Mebane Packaging Grp., Inc., 158 N.C. App. 19, 32, 581
S.E.2d 452, 462,
disc. review denied, 357 N.C. 511, 588 S.E.2d 473
(2003). “Where a fiduciary relationship exists between the
parties, the presumption of fraud arises where the superior party
obtains a possible benefit.”
Id.;
see Compton v. Kirby, 157 N.C.
App. 1, 16, 577 S.E.2d 905, 914 (2003) (“a breach of fiduciary duty
amounts to constructive fraud”). A fiduciary duty in turn “'exists in all cases where there has
been a special confidence reposed in one who in equity and good
conscience is bound to act in good faith and with due regard to the
interests of the one reposing confidence.'”
Compton, 157 N.C. App.
at 15, 577 S.E.2d at 914 (quoting
Abbitt v. Gregory, 201 N.C. 577,
598, 160 S.E. 896, 906 (1931)). With respect to business partners,
our Courts have stated:
“It is elementary that the relationship
of partners is fiduciary and imposes on them
the obligation of the utmost good faith in
their dealings with one another in respect to
partnership affairs. Each is the confidential
agent of the other, and each has a right to
know all that the others know, and each is
required to make full disclosure of all
material facts within his knowledge in any way
relating to the partnership affairs.”
Id. (quoting
Casey v. Grantham, 239 N.C. 121, 124-25, 79 S.E.2d
735, 738 (1954)). Consequently, it has been held that “[b]usiness
partners . . . are each other's fiduciaries as a matter of law.”
Hajmm Co. v. House of Raeford Farms, 328 N.C. 578, 588, 403 S.E.2d
483, 489 (1991);
Stamm v. Salomon, 144 N.C. App. 672, 680, 551
S.E.2d 152, 158 (2001).
In the case
sub judice, defendant testified he and Samuel were
equal partners in the two antique furniture businesses. Defendant
co-signed the lease for Marketplace Antique Mall; defendant and
Samuel “filed for a partnership tax number” for the business; and
they submitted their “income tax returns at the end of the year as
partners.” When Marketplace Antique Mall was incorporated, the
articles of incorporation listed defendant as one of the twoincorporators. The documentary evidence submitted at trial
confirmed defendant's testimony. Defendant further testified that
although Queen Street Antiques was registered as a sole
proprietorship, this was done to expedite the opening of the store.
Defendant and Samuel had agreed that Samuel would file for a
partnership tax number for Queen Street Antiques as soon as the
business became operational, but Samuel never did.
This evidence was sufficient for the jury to find that
defendant and Samuel were business partners in Marketplace Antique
Mall and Queen Street Antiques. Because business partners are
fiduciaries as a matter of law,
Hajmm, 328 N.C. at 588, 403 S.E.2d
at 489, defendant properly presented evidence of a fiduciary
relationship. Accordingly, this assignment of error is without
merit.
[4] We now turn to plaintiffs' remaining issues raised in
their brief to this Court and not related to assignments of error
one through three and eight through nine dismissed above. Issues
one, three, and five in plaintiffs' brief relate to the submission
of certain issues to the jury and the trial court's jury
instructions. As a review of the transcript reveals that
plaintiffs did not object to the jury instructions on the bases
contended in their brief, these issues were not preserved for
appeal and are therefore not properly before this Court.
See
N.C.R. App. P. 10(b)(1) (“[i]n order to preserve a question for
appellate review, a party must have presented to the trial court a
timely request, objection or motion, stating the specific groundsfor the ruling the party desired the court to make”).
Affirmed.
Judges TIMMONS-GOODSON and ELMORE concur.
Footnote: 1