Daily Development for Wednesday, March 31, 1999
by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
TENANCY IN COMMON; FIDUCIARY DUTIES; TENANT IN POSSESSION: Cotenant has a right to rely upon cotenant in possession to disclose all material facts pertinent to a decision to agree to a proposed partition. A cotenant's duty to hold property for all cotenants necessarily give rise to a relationship of trust and confidence between cotenants, which includes a duty to disclose.
Watts v. Krebs, 962 P.2d 387 (Idaho 1998).
Following a divorce decree, a husband and wife held as tenants in common certain property that they formerly had owned as community property. The decree ordered that the property be sold and the proceeds divided, but, subsequent to the decree, the parties agreed to partition. Some time passed before the partition actually occurred, and during that time the former wife was outside of the jurisdiction and the former husband apparently was in possession of the property, although the court does not indicate whether the former husband had exclusive right to possession under the decree.
In the course of negotiations leading up to the partition, the former husband did not disclose that he had logged timber on the portion of the property to be taken by the former wife. The net profits of this logging operation amounted to $28,000.
The former wife, following the partition, discovered the logging operations and brought an action for fraudulent inducement and fraud by concealment of waste. She later amended to include a specific claim for the waste itself. The former husband argued that the former wife in fact intended to sell the land for its land value, and that she had placed no stock in the value of the timber. Therefore, he argued, the information concerning the logging was not material. In any event, he argued, the evidence of the logging was patent from a review of the property, he did not misrepresent anything affirmatively, and wife had no right to rely upon him to inform her of the logging.
The trial court awarded the former wife treble damages and attorney's fees under a waste statute.
On appeal: held: Affirmed: The supreme court held, as a matter of apparent first impression, that a cotenant in possession has a fiduciary duty to other cotenants, and this duty comprehends the responsibility to keep cotenants fully informed of all material facts concerning a partition proposal, even facts that are readily discoverable.
The materiality argument made by former husband was to no avail. The court elected to use an "objective measure" of materiality. The net proceeds from the logging were substantial, and it would have been important to a reasonable person in the position of the former wife to know that the property recently had been logged.
The court found that the husband was guilty of waste for removing the timber from property that was partitioned to the former wife, and consequently awarded the former wife the total net proceeds for lumber taken the property, and then tripled the award as required by the statute for waste damages.
Comment 1: As noted, the court does not indicate that the former husband had the right to exclusive possession of the property. He just happened to be the only party interested in possession. If the other cotenants have free right to be on the property at any time and inspect and evaluate it, does it really make sense to impose a high duty of fiduciary responsibility upon the party who elects to occupy the property?
Comment 2: The real anomaly here is the waste finding and the award of the total net proceeds. At the time the former husband cut the logs, he owned an undivided one half interest in them. It is true that he later transferred the logged property to his wife, but there is no indication that the property he transferred to her had been reduced in value by $28,000. Is wife entitled to resititution of the entire net proceeds, or only her undivided half?
It is possible that the husband had logged timber of an equivalent value from other portions of the land, or that his retained portion included harvestable timber in an equivalent amount. But the court doesn't indicate any of these facts. Instead, it concludes that by concealing the fact that the land had been logged, the former husband, in effect "trespassed" on the wife's property before she owned it, and that the remedy was the equivalent of a trespass and conversion claim.
Can this be correct? It is understandable that the court wants to "spank" the husband for what it concludes is fraud, but isn't this identification of the wife as a sole owner at a time when she is nothing more than a cotenant a little over the top?
Contra: Douglas v. Jepson, 945 P.2d 244 (Wash. App. Div. 1 1997). (DD for May 4, 1998) (Cotenant has no duty to disclose to other cotenant a potential resale of the property during negotiations to acquire that tenant's cotenancy interest. Jepson involved a commercial, not a family, cotenancy.)
COTENANCIES; WASTE: Cotenants in possession owe duties to other cotenants not to commit waste on the property by removing more than their individual share of timber or minerals.
Watts v. Krebs, 962 P.2d 387 (Idaho 1998), discussed under the Heading: "Tenancy in Common; Fiduciary Duties; Tenant in Possession."
Comment: Note that terming the former husband's conduct "waste" instead of "conversion" led to a greatly enhanced recovery for the wife. There is some authority that removal of minerals or timber from a cotenancy estate constitutes waste, but one should be cautious in characterizing the waste duties of occupying cotenants. They do have extensive rights to use and enjoy the land, and only limited responsibilities to carry out repairs. The duty of a cotenant in waste is proably less thasn that of a life tenant, say, because in the life tenant's case, the remainder person has no present right of use and enjoyment, so the future interest holder must rely upon the life tenant for protection. That was not the situation in this case.
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