Breach of Confidential Relationship in Failing To Account For Farm Finances?

November 30, 2009 | Erin Herbold

 

Here, parents owned 120 acres of Iowa farmland in Davis County in joint tenancy with rights of survivorship. When the father passed away, the mother deeded her survivorship interest in the land to her five children as tenants in common. Three of the children disclaimed their interest, causing their interests to pass to the remaining siblings- two brothers. In 2002, deeds were executed with 30 acres going to the first brother and 90 acres going to the second brother. It was here that the confusion began. The first brother was under the impression that the second brother would share ownership with two of the sisters, by giving them each a deed to 30 acres. However, the second brother “bought” his sisters out by offering them a sum of money- even though they had already disclaimed their interests. 

At trial, the first brother claimed that the second brother fraudulently misrepresented the arrangement, breached a confidential relationship, and further did not account for any of the transactions. The major problem for the first brother was that there was no enforceable agreement between the brothers.  In addition, to prove fraudulent misrepresentation, the first brother needed to show an intent to deceive that resulted in an injury.  The sisters had previously acknowledged that they “wanted nothing to do with the farm.” Unfortunately for the first brother, there was little evidence to show the understanding of the parties before the transaction. Thus, the trial court dismissed his claims and the deeds stood. 

On appeal, the court found that there was no basis for a fraudulent misrepresentation or for breach of a confidential relationship. To assert a confidential relationship, a party must prove that there was a presence of a dominant influence under which the act is presumed to have been done. The appellate court pointed out that there must be clear and convincing evidence that a dominant influence existed between the parties- one that also requires an accounting. The first brother could not prove the existence of this type of a relationship, so the appellate court agreed with the trial court and dismissed all claims. 

Here’s the bottom line- even in instances of family transactions, it is best to get the intent of the parties in writing to avoid this kind of mess.  Snook v. Snook, No. 9-630/08-1407, 2009 Iowa App. LEXIS 1572 (Iowa Ct. App. Nov. 25, 2009).