Weiner?v.?Fleischman?(1991)?54?Cal.3d?476?,?286?Cal.Rptr.?40;?816?P.2d?892
[No.?S017856.?Oct?7,?1991.]BERYL?WEINER,?Plaintiff?and?Appellant,?v.?WILLIAM?O.?FLEISCHMAN?et?al.,?Defendants?and?Respondents.
(Superior?Court?of?Los?Angeles?County,?No.?C460038,?Arthur?Baldonado,?Judge.)
(Opinion?by?Panelli,?J.,?expressing?the?unanimous?view?of?the?court.)
COUNSEL
Kirsch?&?Mitchell,?Jonathan?L.?Kirsch,?Dennis?Mitchell,?Selvin,?Weiner?&?Ruben,?W.?Ruel?Walker?and?Arthur?E.?Schwimmer?for?Plaintiff?and?Appellant.
Garfield,?Tepper,?Ashworth?&?Epstein,?Scott?J.?Tepper,?Christopher?Ashworth,?Franklin?R.?Garfield,?Hufstedler,?Kaus?&?Ettinger?and?Otto?M.?Kaus?for?Defendants?and?Respondents.
Crosby,?Heafey,?Roach?&?May,?Peter?W.?Davis,?James?C.?Martin,?Kathy?M.?Banke,?White?&?Case,?Paul?J.?Bschorr,?Thomas?McGanney,?Richard?B.?Sypher?and?Terry?L.?Croghan?as?Amici?Curiae?on?behalf?of?Defendants?and?Respondents.
OPINION
PANELLI,?J.
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?[54?Cal.3d?480]?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.?[54?Cal.3d?481]
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.”?(Italics?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.”?(Italics?added.)fn.?1?[54?Cal.3d?482]
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.fn.?2
Discussion
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,?italics?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;?Sly?v.?Abbott?(1928)?89?Cal.App.?209,?216?[264?P.?507]),?or?”assumed?[54?Cal.3d?483]?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.?[2]?”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?[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.
[3a]?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.?[?]?Except?as?otherwise?provided?by?law,?the?burden?of?proof?requires?proof?by?a?preponderance?of?the?evidence.”?(Italics?added.)?”Law,”?as?referenced?in?section?115,?includes?”constitutional,?statutory,?and?decisional?law.”?(Evid.?Code,???160.)?[4a]?In?light?of?section?115,?we?must?determine?whether?constitutional,?statutory?or?decisional?law?(i.e.,?case?law)?requires?a?burden?of?proof?higher?than?preponderance?of?the?evidence?to?establish?an?oral?joint?venture?or?partnership.None?of?the?parties?asserts,?and?we?find?no?evidence,?that?constitutional?law?dictates?a?higher?standard?of?proof?on?the?issue?of?the?existence?of?an?oral?joint?venture?or?partnership?agreement.?Hence,?we?turn?our?attention?first?to?statutory?law.?As?Fleischman?correctly?notes,?sections?of?many?of?our?[54?Cal.3d?484]?codes?require?that?proof?of?an?issue?of?fact?must?be?by?a?higher?degree?of?proof?than?preponderance?of?the?evidence.?For?example,?in?1987?the?Legislature?amended?Civil?Code?section?3294?to?provide?that?punitive?damages?could?be?assessed?only?”where?it?is?proven?by?clear?and?convincing?evidence?that?the?defendant?has?been?guilty?of?oppression,?fraud?or?malice.?…”?(Stats.?1987,?ch.?1498,???5,?p.?5780.)?Similarly,?the?Probate?Code?requires?that?agreements?to?make?a?trust?must?be?established?by?clear?and?convincing?evidence.?(Prob.?Code,???15207.)
Significantly,?however,?no?California?statute?requires?that?an?oral?joint?venture?or?partnership?agreement?must?be?established?by?clear?and?convincing?evidence.?Since?statutory?law?does?not?provide?the?answer,?we?must?look?to?case?law?to?determine?whether?a?higher?degree?of?proof?is?required.
[3b]?While?it?is?clear?that?case?law?may,?in?some?instances,?suggest?a?higher?burden?of?proof?than?preponderance?of?the?evidence?is?required,?we?have?stated?as?a?general?principle?that?”judicial?expressions?purporting?to?require?clear?and?convincing?[or?clear?and?satisfactory]?evidence?must?be?read?in?light?of?the?statutory?provision?for?proof?by?a?preponderance?of?the?evidence?….?[Citations.]”?(Liodas?v.?Sahadi,?supra,?19?Cal.3d?at?p.?289,?fn.?6.)?[4b]?In?light?of?this?principle,?the?Court?of?Appeal?concluded?that?our?case?law?does?not?require?clear?and?convincing?evidence?to?prove?the?existence?of?an?oral?joint?venture?or?partnership?agreement.?We?agree.As?the?Court?of?Appeal?correctly?recognized,?we?have?never?held?that?the?existence?of?an?oral?joint?venture?or?partnership?agreement?must?be?established?by?clear?and?convincing?evidence.?Welch?v.?Alcott?(1921)?185?Cal.?731?[198?P.?626],?on?which?Fleischman?relies,?merely?noted?that?the?defendant?had?cited?authorities?to?support?the?proposition?that?proof?of?an?oral?partnership?agreement?had?to?be?”clear,”?a?principle?with?which?Welch?expressed?agreement.?(Id.?at?p.?742,?italics?added.)?In?light?of?section?115,?we?do?not?believe?that?this?language?in?Welch?should?be?interpreted?as?holding?that?a?”clear?and?convincing”?burden?of?proof?is?required.
Fleischman?contends?that?Cameron?v.?Crocker-Citizens?Nat.?Bank?(1971)?19?Cal.App.3d?940?[97?Cal.Rptr.?269],?and?Liodas?v.?Sahadi,?supra,?19?Cal.3d?278,?state?that?”clear?proof”?is?merely?a?variant?of?the?”clear?and?convincing”?standard?of?proof.?However,?Cameron,?which?involved?an?oral?contract?to?make?a?will,?did?not?hold?that?”clear?proof”?and?”clear?and?convincing?proof”?were?equivalent?standards.?Rather,?the?court?simply?noted?that?English?precedents?permitted?the?enforcement?of?oral?contracts?to?make?a?will?”upon?clear?proof”?of?their?execution.?(Cameron?v.?Crocker-?Citizens?Nat.?Bank,?supra,?19?Cal.App.3d?at?p.?943.)?Similarly,?Liodas?noted?that?some?Court?of?Appeal?cases?in?civil?fraud?actions?had?required?proof?of?fraud?[54?Cal.3d?485]?by?”?’clear?and?convincing?evidence,’?or?a?variant?of?that?standard.”?(Liodas?v.?Sahadi,?supra,?19?Cal.3d?at?p.?287?&?fn.?4.)?Liodas?itself?held?that?the?proper?standard?of?proof?in?civil?fraud?actions?is?preponderance?of?the?evidence.?(Id.?at?p.?286.)?Neither?Cameron?nor?Liodas,?therefore,?supports?the?proposition?that?”clear?proof”?is?necessarily?equivalent?to?”clear?and?convincing?evidence.”
Concededly,?certain?appellate?decisions?have?stated?that?proof?of?an?oral?joint?venture?or?partnership?agreement?must?be?by?clear?and?convincing?evidence.?(See?Sullivan?v.?Schellinger?(1959)?170?Cal.App.2d?111,?113?[338?P.2d?462]?[“where,?as?here,?there?is?no?written?agreement,?proof?of?the?partnership?must?be?clear?and?convincing”];?accord,?Smalley?v.?Baker?(1968)?262?Cal.App.2d?824,?839?[69?Cal.Rptr.?521];?Lyon?v.?MacQuarrie?(1941)?46?Cal.App.2d?119,?124?[115?P.2d?594].)?The?Smalley?court?cited?Sullivan,?supra,?as?authority?regarding?the?requisite?burden?of?proof,?and?the?Sullivan?court?cited?to?Lyon,?supra.?Lyon,?in?turn,?cited?to?Welch?v.?Alcott,?supra,?185?Cal.?731,?Swanson?v.?Siem,?supra,?124?Cal.App.?519,?and?Blinn?v.?Ritchie?(1929)?101?Cal.App.?691?[282?P.?390].
When?this?trail?of?citations?is?traced?and?the?cases?analyzed,?the?proposition?that?clear?and?convincing?evidence?is?required?loses?much?of?its?persuasiveness.?Largely?for?this?reason,?the?Court?of?Appeal?in?this?case?was?not?inclined?to?follow?the?cases?calling?for?clear?and?convincing?evidence?as?the?standard?of?proof.?For?example,?Swanson?v.?Siem,?supra,?stated?only?that?the?existence?of?oral?partnerships?need?be?proved?by?”competent?evidence.”?(Swanson?v.?Siem,?supra,?124?Cal.App.?at?p.?523.)?In?Blinn?v.?Ritchie,?supra,?the?court?stated?that?there?was?no?finding?that?a?copartnership?existed?between?the?parties,?nor?was?there?”competent?evidence?in?the?record?to?sustain?such?a?finding.?…”?(Blinn?v.?Ritchie,?supra,?101?Cal.App.?at?p.?692.)?The?Blinn?court?reasoned?that?”a?contract?of?copartnership?must?be?proved?in?the?same?manner?that?any?other?contract?must?be?established.”?(Id.?at?p.?693.)?Significantly,?Fleischman?does?not?contend?that?an?oral?contract?must?be?established?by?clear?and?convincing?evidence.?Welch,?as?seen?above,?merely?stated?that?there?must?be?”clear?proof.”?(Welch?v.?Alcott,?supra,?185?Cal.?at?p.?742.)
We?recognize?that?other?Court?of?Appeal?cases?have?also?indicated?that?an?oral?joint?venture?or?partnership?should?be?established?by?clear?and?convincing?evidence.?But?these?cases?either?cite?to?the?cases?discussed?above?(i.e.,?Sullivan,?Smalley?and?Lyon)?(see?ABC?Egg?Ranch?v.?Abdelnour?(1963)?223?Cal.App.2d?12,?15-16?[35?Cal.Rptr.?487]?[citing?Lyon?v.?MacQuarrie,?supra,?46?Cal.App.2d?119]),?or?are?based,?like?Sullivan,?Smalley?and?Lyon,?on?cases?that?do?not?stand?for?the?proposition?for?which?they?are?cited.?(See?Coronet?Constr.?Co.,?Inc.?v.?Palmer?(1961)?194?Cal.App.2d?603,?611?[15?Cal.Rptr.?[54?Cal.3d?486]?601]?[citing?to?Milstein?v.?Sartain?(1943)?56?Cal.App.2d?924,?932?[133?P.2d?836],?which?states?that?the?burden?is?upon?the?one?asserting?the?existence?of?a?copartnership?to?prove?it?by?”competent?evidence”].)
Fleischman?also?relies?on?Tannehill?v.?Finch?(1986)?188?Cal.App.3d?224?[232?Cal.Rptr.?749]?and?Toney?v.?Nolder?(1985)?173?Cal.App.3d?791?[219?Cal.Rptr.?497]?to?support?a?higher?burden?of?proof.?These?cases,?however,?are?inapposite?because?they?involved?attempts?to?rebut?the?legal?and?beneficial?title?to?real?property?and?were?expressly?decided?under?the?authority?of?Evidence?Code?section?662.?Evidence?Code?section?662?provides:?”The?owner?of?the?legal?title?to?property?is?presumed?to?be?the?owner?of?the?full?beneficial?title.?This?presumption?may?be?rebutted?only?by?clear?and?convincing?proof.”?Although?Weiner’s?original?complaint?stated?other?causes?of?action,?the?case?proceeded?to?trial?solely?as?an?action?for?damages?for?fraudulent?concealment.?Consequently,?the?trial?did?not?involve?an?effort?to?rebut?the?legal?or?beneficial?title?to?property.
In?summary,?we?believe?that?the?decisional?law?does?not?justify?or?require?a?departure?from?the?ordinary?civil?standard?of?”preponderance?of?the?evidence”?when?a?party?seeks?to?establish?the?existence?and?scope?of?an?oral?joint?venture?or?partnership?agreement.
We?note?that?our?determination?that?preponderance?of?the?evidence?is?the?correct?standard?for?establishing?an?oral?joint?venture?or?partnership?agreement?appears?to?be?consistent?with?the?decisions?of?a?majority?of?other?states?that?have?considered?this?question.fn.?3?Several?other?large?jurisdictions?have?[54?Cal.3d?487]?come?to?the?same?ultimate?conclusion,?including?New?York?(Kahn?v.?Kahn,?supra,?3?A.D.2d?820?[160?N.Y.S.2d?972,?973]?[“The?burden?of?establishing?the?existence?of?this?oral?partnership?by?a?fair?preponderance?of?the?credible?evidence?rests?upon?the?[party?asserting?its?existence].”]);?Pennsylvania?(Huron?v.?Schomaker,?supra,?123?Pa.Super.?82?[185?A.?859]?[“The?burden?of?proving,?by?a?fair?preponderance?of?the?evidence,?a?partnership?and?the?liability?of?the?defendant?rested?upon?the?[party?asserting?this?oral?agreement].”]);?and?Florida?(Trickey?v.?Stone,?supra,?152?So.2d?748,?750?[“We,?therefore,?hold?that?the?chancellor?should,?in?determining?the?quantum?of?proof?necessary?for?the?plaintiff?to?sustain?his?complaint?[based?on?an?oral?partnership?agreement]?adhere?to?the?preponderance?of?the?evidence?rule.”]).
Fleischman?contends?that?the?gravity?of?the?consequences?flowing?from?a?finding?that?an?oral?joint?venture?or?partnership?agreement?exists?compels?a?conclusion?that?such?an?agreement?must?be?established?by?clear?and?convincing?evidence.?We?disagree.?[5]?In?Addington?v.?Texas?(1979)441?U.S.?418,?423?[60?L.Ed.2d?323,?329,?99?S.Ct.?1804],?the?United?States?Supreme?Court?stated:?”The?function?of?a?standard?of?proof?…?is?to?’instruct?the?factfinder?concerning?the?degree?of?confidence?our?society?thinks?[the?fact-finder]?should?have?in?the?correctness?of?factual?conclusions?for?a?particular?type?of?adjudication.’?[Citation.]?The?standard?serves?to?allocate?the?risk?of?error?between?the?litigants?and?to?indicate?the?relative?importance?attached?to?the?ultimate?decision.”?We?have?noted?that?the?standard?of?proof?may?depend?upon?the?”gravity?of?the?consequences?that?would?result?from?an?erroneous?determination?of?the?issue?involved.”?(People?v.?Jimenez?(1978)?21?Cal.3d?595,?604?[147?Cal.Rptr.?172,?580?P.2d?672].)
[6]?Proof?by?clear?and?convincing?evidence?is?required?”where?particularly?important?individual?interests?or?rights?are?at?stake,”?such?as?the?termination?of?parental?rights,?involuntary?commitment,?and?deportation.?(Herman?&?MacLean?v.?Huddleston?(1983)?459?U.S.?375,?389?[74?L.Ed.2d?548,?560,?103?S.Ct.?683].)?However,?”imposition?of?even?severe?civil?sanctions?that?do?not?implicate?such?interests?has?been?permitted?after?proof?by?a?preponderance?of?the?evidence.”?(Id.?at?pp.?389-?390?[74?L.Ed.2d?at?p.?560],?citing?cases?involving?proof?in?civil?suits?of?acts?that?expose?a?party?to?[54?Cal.3d?488]?criminal?prosecution?or?disbarment.)?As?the?United?States?Supreme?Court?stated:?”A?preponderance-?of-the-evidence?standard?allows?both?parties?to?’share?the?risk?of?error?in?roughly?equal?fashion.’?[Citation.]?Any?other?standard?expresses?a?preference?for?one?side’s?interests.”?(Id.?at?p.?390?[74?L.Ed.2d?at?p.?561].) [4c]?Fleischman?lists?a?series?of?grave?consequences?that?a?defendant?might?suffer?from?an?erroneous?determination?that?an?oral?joint?venture?or?partnership?agreement?exists.?However,?for?each?of?the?serious?consequences?Fleischman?lists,?an?equally?serious?loss?of?rights?would?result?to?a?plaintiff?from?an?erroneous?determination?that?the?partnership?did?not?exist.?This?balance?of?interests?supports?the?use?of?the?preponderance?of?the?evidence?standard.Furthermore,?all?of?the?grave?consequences?listed?by?Fleischman?can?result?as?well?from?a?finding?of?an?oral?contract?or?an?oral?authorization?of?agency,?both?of?which?can?be?proved?by?a?preponderance?of?the?evidence.?For?instance,?an?agency?can?be?established?based?on?oral?communications?(Magnecomp?Corp.?v.?Athene?Co.?(1989)?209?Cal.App.3d?526,?536?[257?Cal.Rptr.?278]),?and?the?agent?can?subject?the?principal?to?individual?liability?and?indemnity?claims?based?upon?the?agent’s?conduct?or?omissions?(Warshauer?v.?Bauer?Construction?Co.?(1960)?179?Cal.App.2d?44,?48?[3?Cal.Rptr.?570];?Civ.?Code,???2338).?Indeed,?even?where?a?contract?has?been?solemnized?by?a?writing,?an?oral?modification?of?that?written?contract?may?be?proved?by?a?preponderance?of?the?evidence.?(Barrett?v.?Bank?of?America?(1986)?183?Cal.App.3d?1362,?1370-1371?[229?Cal.Rptr.?16].)
We?recognize?that?the?consequences?of?finding?an?oral?joint?venture?or?partnership?agreement?may?be?serious.?However,?the?serious?consequences?flowing?from?a?finding?that?a?contract?of?any?kind?exists,?be?it?oral?or?written,?are?not?a?sound?basis?for?requiring?a?higher?or?lower?burden?of?persuasion.?While?an?oral?contract?may?be?easier?to?create?than?a?written?contract,?and?the?precise?terms?of?an?oral?contract?may?suffer?from?the?faulty?memories?of?the?parties,?all?oral?contracts?suffer?from?these?disabilities.?We?find?no?compelling?reason?to?assign?a?higher?burden?of?proof?to?partnerships?or?joint?venture?agreements?than?any?other?oral?contract.?(Accord?Bernard?v.?Vatheuer,?supra,?303?Ore.?410?[737?P.2d?128,?130].)
Fleischman?seeks?to?draw?an?analogy?between?oral?joint?venture?or?partnership?agreements?and?other?areas?of?the?law?where?courts?have?traditionally?required?clear?and?convincing?evidence.?As?examples,?Fleischman?cites?oral?agreements?to?make?wills,?allegations?that?deeds?absolute?are?actually?mortgages,?that?conveyances?are?subject?to?a?trust,?or?that?property?whose?title?was?held?by?one?person?was?owned?in?full?or?in?part?by?another,?[54?Cal.3d?489]?and?oral?agreements?to?create?a?trust?of?personalty.?We?believe?that?each?of?these?areas?of?the?law?is?distinguishable?from?oral?joint?venture?or?partnership?agreements.
Oral?agreements?to?make?wills?are?disfavored?because?such?claims?arise?after?the?testator,?one?of?the?parties?to?the?oral?agreement,?is?deceased?or?incapacitated.?(Crail?v.?Blakely?(1973)?8?Cal.3d?744,?750?[106?Cal.Rptr.?187,?505?P.2d?1027].)?Such?concerns?generally?do?not?apply?to?oral?partnership?agreements,?since?the?person?to?be?bound?by?the?alleged?agreement?will?generally?be?present?to?rebut?the?plaintiff’s?testimony.
Allegations?that?deeds?absolute?are?actually?mortgages,?that?conveyances?are?subject?to?a?trust,?and?that?legal?title?does?not?represent?beneficial?ownership?have?also?been?historically?disfavored?because?society?and?the?courts?have?a?reluctance?to?tamper?with?duly?executed?instruments?and?documents?of?legal?title.?(See?Herman?&?MacLean?v.?Huddleston,?supra,?459?U.S.?at?p.?388,?fn.?27?[74?L.Ed.2d?at?p.?559];?Liodas?v.?Sahadi,?supra,?19?Cal.3d?at?p.?287;?Evid.?Code,???662.)?We?are?aware?of?no?comparable?body?of?evidence?showing?historical?legal?disfavor?directed?to?damage?suits?based?on?oral?partnership?agreements,?suits?that?do?not?necessarily?rebut?legal?or?beneficial?title?to?property.
Finally,?the?higher?burden?of?proof?required?to?prove?oral?trusts?of?personal?property?is?derived?from?the?special?care?that?courts?have?historically?shown?in?recognizing?the?creation?of?trusts.?The?law?has?shown?such?care?because?of?special?concerns?that?the?terms?of?the?trust?specify?the?information?needed?for?courts?to?deal?with?the?trust,?such?as?the?identification?of?the?trust?property?and?purpose,?the?beneficiaries?and?trustees,?and?any?special?administrative?provisions.?(Recommendation?Proposing?Trust?Law?(Dec.?1985)?18?Cal.?Law?Revision?Com.?Rep.?(1986)?p.?525.)?In?addition,?the?creation?of?trusts,?unlike?the?creation?of?oral?partnerships,?has?long?been?governed?by?highly?specific?case?law?and?statutes,?reflecting?trusts’?closely?regulated?character.?(See,?e.g.,?Prob.?Code,????15200-15210.)?Thus,?oral?partnership?agreements?are?distinguishable?from?other?areas?of?the?law?in?which?courts,?because?of?historical?and?pervasive?legal?protection?or?skepticism,?have?traditionally?required?the?”clear?and?convincing?evidence”?burden?of?proof.fn.?4?[54?Cal.3d?490]
In?conclusion,?we?find?that?nothing?in?our?constitutional,?statutory?or?case?law?requires?a?departure?from?the?ordinary?civil?standard?of?preponderance?of?the?evidence?when?a?party?seeks?to?establish?the?existence?and?scope?of?an?oral?joint?venture?or?partnership?agreement.?We?similarly?find?no?reason?why?proof?of?a?joint?venture?or?partnership?agreement?should?be?subject?to?any?higher?standard?of?proof?than?any?other?ordinary?oral?contract?in?a?civil?dispute.?Accordingly,?the?trial?court?erred?by?instructing?the?jury?that?Weiner?had?to?establish?the?existence?and?scope?of?any?oral?joint?venture?or?partnership?agreement?by?clear?and?convincing?evidence.
[7]?Article?VI,?section?13?of?the?California?Constitution?provides?that?error?in?instructing?the?jury?shall?be?grounds?for?reversal?only?when?the?reviewing?court,?”after?an?examination?of?the?entire?cause,?including?the?evidence,”?concludes?that?the?error?”has?resulted?in?a?miscarriage?of?justice.”?The?test?of?reversible?error?has?been?stated?in?terms?of?the?likelihood?that?the?improper?instruction?misled?the?jury.?(See?Henderson?v.?Harnischfeger?Corp.?(1974)?12?Cal.3d?663,?670?[117?Cal.Rptr.?1,?527?P.2d?353].)?Hence,?we?must?determine?whether?it?is?reasonably?probable?that?a?result?more?favorable?to?the?appealing?party?would?have?been?reached?in?the?absence?of?error.?(People?v.?Watson?(1956)?46?Cal.2d?818,?836?[299?P.2d?243].)?While?there?is?no?precise?formula?for?determining?the?prejudicial?effect?of?instructional?error,?we?are?guided?by?the?five?factors?enumerated?in?LeMons?v.?Regents?of?University?of?California?(1978)?21?Cal.3d?869,?876?[148?Cal.Rptr.?355,?582?P.2d?946]. [8]?The?first?factor?we?consider?is?the?degree?of?conflict?in?the?evidence?on?the?critical?issue,?here?the?existence?of?an?oral?joint?venture?or?partnership.?As?the?trial?court?itself?acknowledged,?the?evidence?was?sharply?conflicting?on?this?issue.?In?fact,?it?was?precisely?this?sharp?conflict?that?led?the?trial?court?to?instruct?the?jury?that?they?must?first?determine?whether?such?an?agreement?existed?before?they?could?consider?the?issue?of?fraudulent?concealment.?The?clear?and?convincing?standard?of?proof?is?an?exacting?standard.?When?there?is?sharply?conflicting?evidence,?as?in?this?case,?it?is?very?difficult?for?a?party?to?meet?this?high?standard.?If?the?jury?had?been?instructed?that?they?need?only?find?the?existence?of?this?agreement?by?a?preponderance?of?the?evidence,?they?may?well?have?reached?a?different?result.Second,?we?consider?whether?the?jury?asked?for?a?rereading?of?the?erroneous?instruction?or?of?related?evidence.?During?the?deliberations,?the?[54?Cal.3d?491]?jury?requested?three?readbacks?regarding?Fleischman’s?testimony?of?Weiner’s?possible?participation?in?Donnelley’s?Pioneer?offer,?Weiner?and?Fleischman’s?testimony?of?the?alleged?Pioneer?oral?agreement,?and?Weiner?and?Fleischman’s?testimony?on?a?prior?oral?agreement?between?the?parties?on?a?separate?business?venture.?The?court?denied?the?requests?because?the?portions?of?testimony?might?have?fostered?a?different?meaning?when?taken?out?of?context.?A?fourth?readback?request?concerning?Fleischman’s?testimony?as?to?his?desire?or?intention?to?buy?Pioneer?stock?was?granted.
Third,?we?analyze?the?closeness?of?the?jury’s?verdict.?The?jury?returned?a?nine-to-three?special?verdict?against?Weiner?finding,?inter?alia,?no?oral?joint?venture?or?other?relationship?between?Weiner?and?Fleischman.?This?verdict?indicates?that?instructions?including?a?preponderance?of?the?evidence?standard,?rather?than?a?clear?and?convincing?evidence?standard,?could?have?been?critical.
Fourth,?we?consider?the?emphasis?on?the?erroneous?instruction?in?argument?to?the?jury.?The?record?indicates?that?Fleischman?did?emphasize?the?erroneous?instruction?in?his?argument?to?the?jury.
Finally,?we?consider?the?effect?of?other?instructions?in?remedying?the?error.?Clearly,?no?other?instructions?of?the?trial?court?cured?this?error.?Both?instructions?on?this?issue?explicitly?stated?that?the?jury?was?to?use?the?clear?and?convincing?evidence?standard.
Based?on?the?foregoing?factors,?it?is?reasonably?probable?that?a?result?more?favorable?to?Weiner?would?have?been?reached?if?the?jury?had?been?properly?instructed?on?the?burden?of?proof.?The?trial?court’s?error?was,?therefore,?prejudicial?and?the?Court?of?Appeal?was?correct?to?remand?for?a?new?trial.
The?judgment?of?the?Court?of?Appeal?is?affirmed.
Lucas,?C.?J.,?Mosk,?J.,?Kennard,?J.,?Arabian,?J.,?Baxter,?J.,?and?George,?J.,?concurred.
FN?1.?The?full?texts?of?modified?BAJI?No.?12.35?and?jury?instruction?No.?2.60?given?by?the?court?are?as?follows:
Instruction?No.?12.35:
“1.?The?defendant?must?have?concealed?or?suppressed?a?material?fact;
“2.?The?defendant?must?have?been?under?a?duty?to?disclose?the?fact?to?the?plaintiff;
“3.?The?defendant?must?have?intentionally?concealed?or?suppressed?the?fact?with?the?intent?to?defraud?the?plaintiff;
“4.?The?plaintiff?must?have?been?unaware?of?the?fact?and?would?not?have?acted?as?he?did?if?he?had?known?of?the?concealed?or?suppressed?fact;
“5.?And,?finally,?as?a?result?of?the?concealment?or?suppression?of?the?fact,?the?plaintiff?must?have?sustained?damage.?You?must?find?damage.?Not?the?amount.?In?the?next?phase?of?this?trial,?if?any,?evidence?on?which?to?compute?damage?will?be?introduced.”
Instruction?No.?2.60:
“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.
“If?the?existence?and?scope?of?any?oral?joint?venture?is?proved?by?clear?and?convincing?evidence,?then,?thereafter,?the?plaintiff?has?the?burden?of?proving,?by?a?preponderance?of?the?evidence,?all?of?the?facts?necessary?to?establish?the?existence?of?fraud?by?intentional?concealment.?To?do?so,?the?plaintiff?must?prove?all?of?the?following?elements?by?a?preponderance?of?the?evidence,?except?on?those?certain?issues?that?I?instruct?you?require?a?higher?burden?of?proof:
“1.?That?the?defendant?must?have?concealed?or?suppressed?a?material?fact;
“2.?The?defendant?must?have?been?under?a?duty?to?disclose?the?fact?to?the?plaintiff.?As?noted?previously,?the?existence?of?the?oral?joint?venture?and?its?scope?must?be?proved?by?clear?and?convincing?evidence;
“3.?The?defendant?must?have?intentionally?concealed?or?suppressed?the?fact?with?the?intent?to?defraud?the?plaintiff;
“4.?The?plaintiff?must?have?been?unaware?of?the?fact?and?would?not?have?acted?as?he?did?if?he?had?known?of?the?concealed?or?suppressed?fact;
“5.?And,?finally,?as?a?result?of?the?concealment?or?suppression?of?the?fact,?the?plaintiff?must?have?sustained?damages.”
FN?2.?Because?the?trial?court?has?not?yet?reached?the?issue,?we?do?not?address?Fleischman’s?claim?that?Weiner’s?relationship?with?his?clients?rendered?any?agreement?between?Weiner?and?Fleischman?unenforceable?on?grounds?of?illegality.
FN?3.?A?search?indicates?that?of?the?24?states?other?than?California?that?have?indicated?their?choice?of?standard?of?proof?for?an?oral?partnership?or?oral?joint?ventures,?19?expressly?or?apparently?use?the?”preponderance”?standard.?This?group?of?states?includes:?Alabama?(McCrary?v.?Butler?(Ala.?1989)?540?So.2d?736,?739);?Arizona?(Tripp?v.?Chubb?(1949)?69?Ariz.?31?[208?P.2d?312,?314]);?Arkansas?(Carroll?v.?Kessinger?(1957)?228?Ark.?450?[307?S.W.2d?880,?882]);?Delaware?(Thomas?v.?King?(1953)?34?Del.Ch.?160?[99?A.2d?778,?779]);?Florida?(Trickey?v.?Stone?(Fla.Dist.Ct.App.?1963)?152?So.2d?748,?750);?Illinois?(Cline?v.?Cline?(1956)?12?Ill.App.2d?231?[139?N.E.2d?828,?831]);?Iowa?(Fowler?v.?Berry?Seed?Co.?(1957)?248?Iowa?1158?[84?N.W.2d?412,?415-416]);?Kansas?(Liberty?Glass?Co.?v.?Bath?(1960)?187?Kan.?54?[353?P.2d?786,?788];?Grannell?v.?Wakefield?(1952)?172?Kan.?685?[242?P.2d?1075,?1079]);?Louisiana?(Knighton?v.?Beckham?(La.Ct.App.?1963)?154?So.2d?232,?235);?Michigan?(Lobato?v.?Paulino?(1943)?304?Mich.?668?[8?N.W.2d?873,?874]);?Montana?(Antonick?v.?Jones?(1989)?236?Mont.?279?[769?P.2d?1240,?1244-1245]);?New?York?(Kahn?v.?Kahn?(1957)?3?A.D.2d?820?[160?N.Y.S.2d?972,?973];?Hanlon?v.?Melfi?(1979)?102?Misc.2d?170?[423?N.Y.S.2d?132,?134]);?Ohio?(Tanski?v.?White?(1952)?92?Ohio?App.?411?[109?N.E.2d?319,?325]);?Oklahoma?(Katnig?v.?Johnson?(Okla.?1963)?383?P.2d?195,?201-202);?Oregon?(Bernard?v.?Vatheuer?(1987)?303?Ore.?410?[737?P.2d?128,?131]);?Pennsylvania?(Barbet?v.?Ostovar?(1979)?273?Pa.Super.?256?[417?A.2d?636,?638,?641];?Huron?v.?Schomaker?(1936)?123?Pa.Super.?82?[185?A.?859]);?South?Dakota?(Insurance?Agents,?Inc.?v.?Zimmerman?(S.D.?1986)?381?N.W.2d?218,?222?[dis.?opn.?of?Hertz,?Acting?J.]);?Texas?(Visage?v.?Marshall?(Tex.Ct.App.?1982)?632?S.W.2d?667,?672;?First?Nat.?Bank?of?Amarillo?v.?Bauert?(Tex.Ct.App.?1981)?622?S.W.2d?464,?467-468);?and?Washington?(Ocean?View?Land,?Inc.?v.?Wineberg?(1965)?65?Wn.2d?952?[400?P.2d?319];?Eder?v.?Reddick?(1955)?46?Wn.2d?41?[278?P.2d?361,?365]).
The?five?states?found?in?the?search?that?expressly?or?apparently?use?the?”clear?and?convincing”?standard?are:?Alaska?(Innes?v.?Beauchene?(Alaska?1962)?370?P.2d?174,?179?[dis.?opn.?of?Arend,?J.]);?Missouri?(Nesler?v.?Reed?(Mo.Ct.App.?1985)?703?S.W.2d?520,?523);?Nebraska?(Evertson?v.?Cannon?(1987)?226?Neb.?370?[411?N.W.2d?612,?625]);?New?Jersey?(Friedlander?v.?Friedlander?(1948)?142?N.J.Eq.?3?[58?A.2d?782,?788]);?and?Tennessee?(Tidwell?v.?Walden?(1959)?205?Tenn.?705?[330?S.W.2d?317,?319]).
FN?4.?In?holding?that?an?oral?joint?venture?or?partnership?agreement?may?be?established?by?a?preponderance?of?the?evidence,?it?is?important?to?note?what?this?opinion?does?not?hold.?Contrary?to?the?suggestion?of?Weiner,?our?decision?is?not?compelled?by?our?holding?in?Liodas?v.?Sahadi,?supra,?19?Cal.3d?278.?Liodas,?in?holding?that?the?proper?standard?of?proof?in?civil?fraud?actions?is?preponderance?of?the?evidence,?did?not?disapprove?of?the?clear?and?convincing?standard?of?proof?in?all?civil?cases.?In?fact,?Liodas?noted?that?under?section?115,?the?clear?and?convincing?evidence?standard?is?”an?alternative”?standard?of?proof?that?”is?required?on?certain?issues”?by?statute?or?by?case?law.?(19?Cal.3d?at?p.?291.)?(Italics?omitted.)?The?trial?court?in?this?case?determined?that?before?the?issue?of?fraud?could?be?considered?by?the?jury,?the?jury?had?to?determine?if?there?was?a?”relationship”?between?Weiner?and?Fleischman.?Liodas?did?not?address?the?question?of?the?proper?standard?of?proof?on?predicate?issues?that?must?be?determined?in?a?civil?fraud?action.