Krzysko v. Gaudynski

• Decision Date: 05 April 1932
• Citation: 207 Wis. 608,242 N.W. 186
• Parties: KRZYSKO ET AL. v. GAUDYNSKI ET AL.
• Court: Wisconsin Supreme Court

207 Wis. 608

242 N.W. 186

KRZYSKO ET AL.

v.GAUDYNSKI ET AL.

Supreme Court of Wisconsin.

April 5, 1932.

Appeal from a judgment of the Circuit Court for Milwaukee County; E. W. Crosby, Circuit Judge.

Action by Dr. S. L. Krzysko and others against Walter Gaudynski and others. From judgment for plaintiffs, defendants appeal.--[By Editorial Staff.]

Modified and affirmed.

Action to hold as trustee an agent under oral contract to negotiate for purchase of real estate who took title in his own name, commenced July 21, 1924; judgment for plaintiffs entered March 12, 1931. Defendants appeal.

The action was brought to have the defendant adjudged to hold the title of a tract of land known as the Seerup tract as trustee for the plaintiffs under a constructive trust. The constructive trust is claimed to have arisen from defendants' relations with the plaintiffs as agent for the purchase of the tract combined with his membership in a group for whom the land was to be purchased. Gaudynski, besides being one of the group, was to receive a five per cent. commission for securing the land from the owners. No written agreements or writings evidencing the nature of the relations of the parties or for the purchase of the land were executed.

The basic facts are that Krzysko and several others of the plaintiffs agreed orally to purchase the Seerup tract if it could be obtained, with a view to dividing it up among those who should become members of the group for the erection of residences thereon to be occupied by themselves as their own permanent homes. There was no idea of purchasing the land for resale or profit. In the latter part of September, 1923, Gaudynski, a licensed real estate agent, was requested to negotiate for the purchase and report to the members of the group, and he promised to do so, and it was understood that he was to receive a five per cent. commission in case the tract was purchased. A meeting of the members of the group was held on October 19, 1923, of which minutes were made and kept. The minutes recite that Gaudynski reported that the Seerup tract was not for sale, but that an adjacent tract, known as the Agnew tract, could be purchased for $1,000 per acre, plus five per cent. commission. A motion was made and carried that the group purchase the Agnew tract of thirty and one-half acres for $30,000, plus five per cent. commission, through Gaudynski and Fons Company, and authorized them to purchase the property with an initial payment of $1,000. Fourteen names were set down as of “charter members” of the group. Checks of the members, aggregating $900, were delivered to Gaudynski which, with the $100 set down for him, made up the down payment contemplated. Gaudynski was told at this meeting, however, to keep after the Seerup tract, and the minutes of the meeting recite that the subject of the meeting was the purchase of the Seerup tract, and that Gaudynski had “been employed as the agent in behalf of the members above listed for the purpose of acquiring the Seerup farm.”

On July 15, 1924, another meeting of group members was held of which minutes were kept, which recite that the subject of the meeting was “the matter of purchasing” the Agnew and Seerup tracts, and that Gaudynski reported that the Agnew tract could be purchased at $1,000 an acre, and that the Seerup tract of forty-three and a third acres could be purchased for $1,500 an acre all cash; that Seerup would not accept a mortgage for any part of the purchase price; that a member stated that Seerup offered the tract for $1,000 an acre to his partner, and he could not understand why he now asked $1,500; that Gaudynski reported that the Seerup price was $1,500, and that Seerup would not deal with the group, but would deed to him and he would transfer to the group; that a committee of four, of which Gaudynski was a member, call on Seerup with a view to obtaining a lower price; that Gaudynski agreed to meet with the rest of the committee on July 17, to call on Seerup; and that another meeting be held on July 21, to receive the report of the committee.

At the time this meeting was held, Gaudynski had a land contract for the purchase of the Seerup tract, forty-three and a third acres for $40,000, $500 of which Gaudynski had paid down, $19,500 to be paid on delivery of deed, and a mortgage for $20,000 at five per cent. to be given for the remainder of the purchase price. Gaudynski failed to meet with the rest of the committee, who, without him, called on Seerup and ascertained the fact of Gaudynski's contract.

In a letter dated July 21, 1924, the date of the adjourned meeting, Gaudynski returned to each contributor his check unindorsed, with a statement that it was returned because the checks were delivered in contemplationof the purchase of the Agnew tract, and that the group were now claiming he had acted as their agent in the purchase of the Seerup tract. The group demanded that Gaudynski assign his contract to them, which he refused. The court found that the plaintiffs are “able and willing” to reimburse the defendants their expenditures. On August 27, 1924, the defendant Joseph Gaudynski and Jacob Petroviak acquired an interest in the property from Walter Gaudynski, and the defendants have expended in furtherance of the contract with the Seerups and for taxes and interest over $33,000 which plaintiffs are adjudged to pay into court. Summons was served on Gaudynski in this action on July 21, 1924, and Gaudynski retained counsel and demanded service of the complaint within twenty days, but none was served. Gaudynski never moved for dismissal, however, and on April 16, 1928, a complaint was served on Gaudynski's counsel, to which answer was made without objection. In May, 1929, the summons and complaint were amended to make Joseph Gaudynski and Mary Petroviak, administrators of the estate of Peter Petroviak, defendants on the ground that they were interested with Walter Gaudynski under the contract of purchase of the Seerup tract. Joseph Gaudynski and Peter Petroviak were found to have had knowledge of the facts and plaintiffs' claims when they acquired their interests. The case after languishing for nearly seven years, during which the condition of the property remained unchanged, went to trial and judgment.

Corrigan & Backus and Ruppa & Bortin, all of Milwaukee, for appellants.

Wolfe & Hart and Poss, Toelle & Schuler, all of Milwaukee (H. O. Wolfe, Benjamin Poss, and J. P. Brazy, all of Milwaukee, of counsel), for respondents.

FOWLER, J.

The appellants assign error in each of the court's several findings of fact and conclusions of law. The contentions as to the facts we will pass by saying that we consider the findings amply supported. The errors of law claimed are: (1) That Gaudynski's agreement with the plaintiffs, if made, was an agreement for an interest in land and void under the statute of frauds because not in writing; and (2) that his agency agreement, if made, was void for the same reason under section 240.10 Stats.

[1] (1) The fact that Gaudynski was acting as a member of the group seems not, of itself, to afford ground under the Wisconsin decisions for holding him as trustee, because the agreement respecting the purchase of land by the members of the group was not in writing. This court has many times held that an oral agreement to enter into a partnership to deal in lands, or to purchase land for resale and divide the profits, does not make a party to the agreement who purchases land and takes the title in his own name a trustee and require him to account to the other for the profit made on resale of it, on the ground that the agreement is void under the statute of frauds because for purchase of an interest in land and not in writing. Bird v. Morrison, 12 Wis. 153;Clarke v. McAuliffe, 81 Wis. 104, 51 N. W. 83;Seymour v. Cushway, 100 Wis. 580, 76 N. W. 769, 69 Am. St. Rep. 957;Scheuer v. Cochem, 126 Wis. 209, 105 N. W. 573, 4 L. R. A. (N. S.) 427;Langley v. Sanborn, 135 Wis. 178, 114 N. W. 787. This phase of the case is considered in a note in 18 A. L. R. 484, 497, where it is stated that, contrary to the general rule, courts in some jurisdictions, including Wisconsin, hold that a partnership or joint adventure to engage in the business of dealing lands is a contract respecting an interest in land and void under the statute unless in writing. That the group here was to purchase to hold the land for making their own homes upon it instead of for resale at a profit should make no difference in application of the rule.

[2] (2) The statutes relating to trusts that must be expressed in writing, sections 240.06 and 240.07, except trusts which arise from “operation of law.” The excepted trusts are “resulting trusts” which are implied “from the supposed intention of the parties and the nature of the transaction,” and “constructive trusts” which “are raised independently of any such intention and which are enforced on the conscience of the trustee by equitable construction and the operation of law.” 3 Bouv. Law Dict. (Rawles 3rd Rev.) 2947. The obligation of the trustee is the same in both cases. Purchasing property with money belonging to another creates a resulting trust. When an agent fraudulently purchases with his own money property he is employed to purchase for his principal, a “constructive trust” is created by the better if not greater weight of authority.

While the trust here cannot here be held to be a resulting trust, because the defendant used his own money instead of plaintiffs' to make the down payment, his fraud, assuming him to be an agent, created a constructive trust. By reason of his breach of trust, the principals were prevented from conducting the negotiations themselves or procuring others to do so, and the unfaithful agent is estopped by his fraudulent conduct from setting up the statute of frauds. The principal by relying on the faith of an agreement is misled to his injury when the agent repudiates the...