Gates v. Paul

• Decision Date: 20 March 1906
• Parties: GATES v. PAUL.
• Court: Wisconsin Supreme Court

127 Wis. 628

107 N.W. 492

GATES

v.PAUL.

Supreme Court of Wisconsin.

March 20, 1906.

Appeal from Circuit Court, La Crosse County; C. M. Webb, Judge.

Action by James L. Gates against John Paul for an accounting. From a judgment for plaintiff, defendant appeals. Modified and affirmed.

This is an appeal from final judgment entered in the same case considered by this court in 117 Wis. 170, 94 N. W. 55. Upon remittitur from this court, the reference was taken up, and a large amount of evidence introduced, including evidence tending to prove that misrepresentations were made by plaintiff to defendant as an inducment to purchase the schedule A lands, whereby he was induced to believe their value to have been much greater than it was and to pay for five-sixths thereof $57,200, while, in fact, their value was much less, also tending to prove that no title was conveyed to defendant by plaintiff's deed of the D lands; that defendant supposed he was receiving a warranty deed while, in fact, the instrument only contained a warranty against acts of the plaintiff. At the close of the testimony the referee made findings that defendant had expended for taxes upon the A lands $2,212.10 (changed by the court to $3,212.10); also had necessarily expended in addition on account of said lands $1,231.88 (changed by the court to $653); that plaintiff was entitled to no credits by reason of earnings or profits derived from the lands; that the transaction of organizing the corporation, East Coast Lumber Company, had between the defendant, Withee & Gile, to whom the defendant had conveyed certain shares of various tracts of land in Florida and Georgia, consisted in a transfer of those lands to the corporation and the payment at the time of incorporating of certain sums of money and the issue of stock to each upon the basis of $1.489 of stock at par value for each $1 contributed by each of the incorporators either toward the acquirement of those lands or to the treasury of the corporation at the time of incorporating; that the amount paid by Paul and his associates in the purchase of the A lands was $57,200, and that, therefore, there had been issued stock on account of the five-sixths of the A lands owned by Paul and his associates, and transferred to the corporation stock in proportion aforesaid, and that, at the same rate, the one-sixth thereof, which belonged to the plaintiff, represented a value of $11,440, so that he held that 1.489 per cent. of this, or $17,034.16 was the amount of stock issued upon account of the one-sixth of those lands belonging to the plaintiff; that plaintiff's one-sixth of the D lands had in no manner been transferred to the corporation, and no stock had been issued on account thereof. Both parties alleged exceptions to those findings and report of the referee, and the defendant moved for leave to amend his answer so as to allege (1) that he had been defrauded by misrepresentations of Gates as to the quality and value of the A lands to the extent of $30,000; (2) that he had failed to receive a warranty deed or any title of the D lands and had lost the entire consideration of $7,200 paid therefor. The court denied the motion to amend, and overruled all of defendant's exceptions, except as to the amount of taxes paid on the A lands, as to which no dispute is here made, and sustained plaintiff's exceptions and amended the findings as by him requested: (1) With reference to the expenses incurred, as above stated, and as to which no question is raised, and made findings that neither the D, E, F, or G lands were ever transferred to the corporation; that all of its 5,000 shares of stock had been issued; that $3,462.30 shares were issued for the various parcels of land transferred to it at agreed prices; 289 shares for money paid to the said corporation, and that the remaining 1,248.70 shares of stock were issued without consideration and that one-sixth of the lands described in Exhibit A are represented in said corporation by 2535/37515 of its stock, namely, 337.85 shares thereof, and accordingly judgment was entered that plaintiff pay into court for the defendant the $2,280, as adjudged by this court on the former appeal, and $553.33 as one-sixth of the taxes paid, together with interest on both said sums from April 16, 1895, and also the sum of $108.83, being one-sixth of the other expenses incurred by defendant, with interest from the commencement of the suit, and that, upon such payment less taxed costs, defendant execute to plaintiff conveyance of an undivided one-sixth of the D lands and procure to be transferred to him on the books of the corporation 337.85 shares of its stock. From this judgment the defendant appeals.G. M. Woodward, E. C. Higbee, and C. D. Rinehart, for appellant.

George H. Gordon (Winkler, Flanders, Smith, Bottum & Fawsett, of counsel), for respondent.

DODGE, J. (after stating the facts).

The interlocutory judgment in this case substantially settled all the rights of the parties except those expressly reserved for further decision, in this respect according with the provisions of section 2883, Rev. St. 1898, providing that an interlocutory judgment may be made disposing of all issues covered by the finding or decision and reserving further questions until the report, verdict, or subsequent finding. That judgment having been affirmed by this court with certain modifications is conclusive, except as to the matters reserved. It decided that defendant held one-sixth of the A and D lands in trust for the plaintiff; that the plaintiff is chargeable with certain specific amounts and with the taxes paid by the defendant on account of such one-sixth interest and any other necessary expenses paid by the defendant on account thereof, less any income derived therefrom; and that the plaintiff is entitled to receive from the defendant such proportion of the shares of the East Coast Lumber Company as are fairly and equitably represented by plaintiff's one-sixth interest in the lands described in Exhibit A, also by his one-sixth interest in the lands described in Exhibit D, if the same shall be found to have been conveyed to that corporation. There were, therefore, left open for future consideration the questions of the amount of taxes and other expenses paid by the defendant, conveyance of the plaintiff's one-sixth interest in the D lands to the corporation, and the amount of capital stock issued by the corporation by reason of the receipt by it of the plaintiff's interest in the lands. This last question became confined to the one-sixth interest in the A lands upon its appearing, as it does without dispute, that the one-sixth interest in the D lands has never been conveyed away by defendant, and can be reconveyed to plaintiff. The application to amend the answer by setting up: (1) The failure of title to the D lands; and (2) misrepresentation as to the quality of the A lands, was properly denied, for the reason that no such amendments were necessary. Such questions, if they bore in any way upon the equitable rights of the plaintiff to receive any sums from the defendant, were open under the pleadings as they already existed, and evidence was admissible upon them just as it was admissible upon the question of plaintiff's misrepresentation as to the amount paid for the D lands upon which this court passed in correction and modification of the trial court's interlocutory judgment. As stated in our former opinion, any evidence which the defendant considered necessary by reason of the amendment to plaintiff's cause of action, he had ample opportunity to apply to the trial court for leave to introduce before that judgment and, doubtless, so far as any such evidence bore upon the issues submitted to the referee, it was admissible without any amendment.

Among the issues so submitted by reference, the only one of special importance upon this appeal is the amount of stock issued by the corporation fairly and equitably represented by plaintiff's one-sixth interest in the A lands. This, of course, depends on what was the transaction in fact had between the defendant and his associates, Withee & Gile, with reference to the organization of the corporation and the consideration for which the stock was issued by it. As preliminary to that transaction, which took place in December, 1896, and January, 1897, it must be borne in mind that for some two years or more Mr. Paul, in this association, had been making large investments in timber lands in Florida and Georgia, involving extended negotiations for, and examinations of, numerous different tracts as to some of which the negotiations resulted in purchase either of the whole title or of some interest therein, and as to others fell through without result and, in some cases, lands for which money had been spent were apparently deemed not worth conveying...