Hey v. Duncan

United States Court of Appeals for the Fourth Circuit · 1926 · Corporations

13 F.2d 794 (1926)

Updated August 22, 2026

CorporationsJoint adventureDeceitFiduciary dutyfiduciary relationgood faithfraudconcealment

Facts

Plaintiff and defendant agreed to buy a boar together, with plaintiff to own two-thirds and defendant one-third, and with the purchase to be funded from 25 percent of the gross receipts of plaintiff's future sow sales. The count alleged that defendant falsely told plaintiff the boar was owned by Donald, had been bought for $4,000, could not be bought for less than $4,000, and was worth $4,000, while knowing those statements were false. It further alleged that defendant knew the boar had actually been bought by Boyd Morgan and Charles Marker for $900, secretly bought a one-quarter interest for $225, failed to disclose those facts, and later told plaintiff he had paid Donald $4,000. Relying on those representations, plaintiff sold sows and paid defendant $5,000, although the boar was alleged to be worth not more than $900.

Issue

Whether the amended amended first count stated a valid cause of action for deceit arising out of a joint adventure, and whether the evidence was sufficient to require submission of that claim to the jury rather than a directed verdict for the defendant.

Rule

A joint adventure exists where persons engage in a common enterprise for their mutual benefit without necessarily becoming strict partners, and each may demand and expect good faith from the other in matters relating to their common interests. Because the relation is fiduciary in character, conduct insufficient to constitute actionable fraud between parties dealing at arm's length may be sufficient between joint adventurers. A defrauded joint adventurer may, instead of rescinding or seeking an accounting, sue for damages for deceit.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Des Moines, Nora Patel and Ethan Cole agreed to acquire a champion dairy bull for their breeding operations. Nora would own 60% and Ethan 40%, and the purchase would be funded from a fixed share of future calf-sale receipts. Ethan told Nora the owner had paid $30,000 for the bull and would not take less, but Ethan knew the bull had recently sold for $9,000 and did not disclose that fact.

If Nora sues Ethan for deceit after paying based on Ethan's statements, Ethan's best argument is that the parties were not technical partners. How should the court rule?

Explanation. The majority treated an arrangement to buy and own property together for mutual benefit as a joint adventure even though the parties were not strict partners. Joint adventurers stand in a fiduciary relation and owe good faith in matters affecting their common enterprise. Thus Ethan's concealment and misstatements can support deceit without proof of a formal partnership.