Figge v. Bergenthal

• Court: Wisconsin Supreme Court
• Writing for the Court: KERWIN
• Citation: Figge v. Bergenthal, 130 Wis. 594, 109 N.W. 581 (Wis. 1906)
• Decision Date: 07 November 1906
• Parties: FIGGE v. BERGENTHAL ET AL.

130 Wis. 594

109 N.W. 581

FIGGE

v.BERGENTHAL ET AL.

Supreme Court of Wisconsin.

Nov. 7, 1906.

Appeal from Circuit Court, Milwaukee County; Warren D. Tarrant, Judge.

Action by Henry Figge against William Bergenthal and others. From a judgment in favor of plaintiff, defendants appeal. Reversed and remanded, with instructions.

This is an appeal from an interlocutory judgment of the circuit court of Milwaukee county. The case was commenced October 10, 1902, by the respondent, vice president, and director of the Wm. Bergenthal Company, under sections 3237-3239, Rev. St. 1898. The issues involved appear by the findings of fact. The court found as facts, substantially:

(1) That in April, 1879, the Wm. Bergenthal Company was incorporated under the laws of Wisconsin, with a board of three directors, and a capital stock of $100,000, divided into 1,000 shares of $100 each, and was authorized to carry on the business of distilling, redistilling, and rectifying alcoholic spirits, and of wholesale and retail liquor business in Milwaukee and elsewhere.

(2) Defendants William and Anna M. Bergenthal are husband and wife, and at all times after March 26, 1888, Anna M. Bergenthal owned 504 shares, and William 1 share of stock, and were two of the three directors. William Bergenthal was president and treasurer, and Anna M. Bergenthal secretary of the Wm. Bergenthal Company. Anna M. Bergenthal took no active part in the business, but William, by virtue of holding the majority of the board of directors and the principal offices, at all times directed and dominated the business policy.

(3) March 26, 1888, plaintiff purchased from Anna M. Bergenthal 159 shares of the capital stock of the Wm. Bergenthal Company for $17,490, paying $1,590 down and executing to Anna M. Bergenthal four notes of $3,975 each, with interest at 6 per cent., payable annually, running two, three, four, and five years respectively. Plaintiff also deposited the 159 shares of stock as collateral security for the payment of interest and principal on these notes under an agreement that the dividends upon the stock should be applied first to interest due upon said notes, the earliest maturing notes first, and then to the principal in the same order, and as each note was fully paid a proportionate amount of stock should be released to the plaintiff, but until surrendered Anna M. Bergenthal should have the right to vote upon said stock at all meetings of the stockholders.

(4) On or about February 16, 1889, the Wm. Bergenthal Company held the note of one William F. Bergenthal, one of its stockholders, for $5,000, and other retiring stockholders held notes of said corporation for $15,768, and said William F. Bergenthal owed the corporation $20,768 and had 176 shares of the capital stock of the corporation pledged as collateral security to said debt. Plaintiff about this time purchased 59 additional shares out of said 176 shares, and agreed to pay said corporation therefor, which together with one other share held in his name gave him 60 shares of the capital stock of the corporation fully paid, and said plaintiff was, at the time of the commencement of this action, and since March 26, 1888, the other director and vice president of the corporation, and held 1 share of stock absolutely and the equity in 159 shares and the equity in said 60 shares up to the time of payment, which was the 26th day of January, 1903, in all 219 shares of the par value of $21,900, but really of much greater value on account of the large surplus hereinafter mentioned. That plaintiff was engaged during all this time as a traveling salesman for the corporation on a salary and spent most of his time on the road traveling in Wisconsin, Michigan, and parts of Illinois selling liquors to retail dealers, and although attending directors' and stockholders' meetings and to some extent at the taking of annual inventory, was not familiar with the business transactions of the corporation in detail, or with its books of account.

(5) June 16, 1888, plaintiff and defendants William and Anna M. Bergenthal entered into the following agreement:

“Milwaukee, June 16th, 1888.

I hereby agree to give Henry Figge three and one-half per cent. credit as his interest may appear in the William Bergenthal Co. for interest on notes given to Anna M. Bergenthal upon March 26th, 1888, until the time I shall reduce my salary from six thousand to three thousand dollars as officer of the William Bergenthal Co. William Bergenthal.

I accept the above agreement. Anna M. Bergenthal. In witness of Emilia Pickrnton.”

After March 26, 1888, the defendant corporation, through its directors William and Anna M. Bergenthal, and with the consent of plaintiff carried on the collection of the principal and interest on the indebtedness of plaintiff on the contracts of March 26, 1888, June 16, 1888, and February 16, 1889, by crediting certain dividends and other accounts of plaintiff with said corporation to plaintiff on the books of the corporation and debiting him with moneys paid by said corporation on said notes, and plaintiff was credited with a portion of said 3 1/2 per cent. under the contract of June 16, 1888, and the parties to said contract of June 16, 1888, understood that the 3 1/2 per cent, should be computed on the face value of the plaintiff's stock, $21,900, and entered credits to him accordingly.

(6) The principal trade of defendant corporation was in whiskys in barrels. Whiskys after being distilled are delivered to the United States and by it inspected, gauged, and put into bonded warehouses, and warehouse receipts issued to the distiller, which are known as “United States bonded warehouse receipts,” and the whisky represented thereby is bought and sold by indorsement and transfer of such receipts. All whisky lawfully on the market must have originally come from some bonded warehouse of the United States, the first market value of new distilled whisky is from 20 to 50 cents per gallon, and the gallon tax of the United States thereon is $1.10 per gallon, based upon the number of gallons shown by the gauge made by the United States at the time of reception into the warehouse, less estimated allowance for shrinkage up to seven years. The gallon tax and other charges must be paid before the whisky can be removed from the United States warehouse. Since 1894 whiskys cannot be left in United States warehouses longer than eight years, and at the end of that time must be taken out and the gallon tax and other charges paid, unless the whisky is intended for exportation to foreign countries, in which case it must be taken out at the end of eight years, but the gallon tax need not be paid. On whisky imported into the United States, which was previously exported, there is a custom duty of $1.10 per gallon. Prior to 1894 when the bonded warehouse period was three years a custom sprang up of exporting American made whiskys to Europe just before expiration of permissible bonded warehouse period, and storing them in European warehouses, not with the intention of selling in Europe, but of importing back to the United States when the owner would be able to pay the gallon tax thereon, thus postponing the time of payment to the United States of the gallon tax, and this practice has continued after the bonded warehouse period was extended to eight years, but the practice has fallen off and is unprofitable where whiskys have remained a long time in Europe. Whisky in barrels shrinks in quantity, and this adds to cost of carrying it, but improves its quality. After eight years, improvement in value or quality is not equal to loss in quantity and cost of carrying. Old whiskys are very costly by reason of losses of shrinkage, storage, investment in taxes, and other expenses, and the market therefor is limited compared with the market for newer whiskys. Old whiskys are liable to be lost by accidental leakage or rendered worthless by acquiring a woody taste from contact with the inside of insufficiently charred barrels. Besides postponement of time of payment of gallon tax an advantage results from exporting to Europe in that the quantity upon which custom duty is paid is the actual quantity contained in the barrel, but this advantage is insufficient to offset losses from year to year after whisky is about 8 years old. Whisky after being taken out of the United States bonded warehouses and the gallon tax paid must either be sold, carried in owner's store, or carried in private warehouses at fixed charges for storage and insurance, and the latter warehouses are known as “free warehouse” in contradistinction to the bonded warehouses of the United States. Defendant William Bergenthal dominating the business of the corporation since January 1, 1889, so increased the unsold stock of goods on hand that the amount and value of whisky carried in private warehouses increased from nothing on January 1, 1889, to $52,825.81 on January 1, 1904. The amount exported and remaining in warehouses in Europe increased from $2,345.18 on January 1, 1889, to $117,932.85 on January 1, 1904. The liabilities of the corporation increased from $44,127.89 on January 1, 1889, to $100,190.76 on January 1, 1904. The annual sales decreased from $335,356.14 for the year ending January 1, 1889, to $216,356.42 for the year ending January 1, 1904, and the amount of merchandise in bonded warehouses and in store at Milwaukee was also increased. January 1, 1904, the surplus carried by the corporation in merchandise and accounts and bills receivable over and above debts and capital stock was $276,936.74, and the fiscal condition of the corporation January 1, 1904, according to valuations carried on the books was as follows:

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