Laun v. Kipp

• Decision Date: 13 January 1914
• Citation: 145 N.W. 183,155 Wis. 347
• Parties: LAUN ET AL. v. KIPP.
• Court: Wisconsin Supreme Court

155 Wis. 347

145 N.W. 183

LAUN ET AL.

v.KIPP.

Supreme Court of Wisconsin.

Jan. 13, 1914.

Syllabus by the Judge.

In testing a complaint for sufficiency all facts expressly alleged and all reasonably inferable from the whole pleading as well, giving to the language thereof, the most liberal construction in favor of the plaintiff which it will reasonably bear and without necessary reference to the prayer are to be regarded as stated; the ultimate question being, does the pleading viewed as indicated show the rights of plaintiff to have been remediably invaded or a wrong in that regard to be remediably threatened.

The rule that fraud must be pleaded by a statement of the facts constituting the fraud and that an allegation that a particular act was fraudulent is not sufficiently precise and definite, is subordinate to the foregoing rule and the one that mere indefiniteness does not go to sufficiency.

If the term “fraudulent” or “fraudulently” is used in a pleading in such a way as to state facts in legal effect, so that with its context the subsidiary facts are reasonably inferable the charge of fraud is to be regarded as sufficiently pleaded as regards a general demurrer, though the pleading may be open to a motion to make more definite and certain.

Previous decisions to the effect that to allege an act to have been fraudulently done does not tender an issue of fact for want of precision and definiteness, but is a mere conclusion of law, must be restrained to the now recognized spirit of the Code requiring obvious matters of mixed law and fact when pleaded in their legal effect to be regarded as matter of fact, and all facts reasonably inferable from a pleading, resolving all reasonable doubts in favor of the pleader, to be deemed sufficiently stated, upon a challenge for insufficiency.

An independent action to prevent the enforcement of a judgment because of happenings after its rendition, by a practice so settled as to be regarded jurisdictional, cannot be maintained in the same or any other court, the remedy being confined to proceedings by motion in the original action.

Equity having properly acquired jurisdiction to restrain the enforcement of a judgment upon the ground of its being unconscionable ab initio, it may deal with the subject of whether such judgment should not be enforced because of happenings subsequent to its rendition where the later wrong, perpetrated or threatened, is germane to that characterizing the judgment originally.

As a general rule, any fact which clearly proves it to be against conscience to execute a judgment and of which the injured party might have availed himself in the original action, but was prevented by fraud or accident unmixed with any fault or negligence of himself or his agents, will justify an application to a court of chancery to prevent such execution.

The rule above stated is one of judicial policy applicable to all ordinary situations and not one of limitation of judicial power,--the power itself being as broad as the maxim, “There is no wrong without a remedy.”

The public policy, requiring the general rule to be as stated, does not militate against the power of equity going further in exceptional situations where the ends of justice clearly require it.

No rule can be formulated setting a definite boundary beyond which a court of equity cannot go as matter of power, or will not go under any circumstances, as matter of sound public policy, in preventing the enforcement of an unconscionable judgment.

The fraud which will justify a court of equity in preventing the enforcement of an unconscionable judgment may be intrinsic as well as extrinsic,--the test being, not the nature of the fraud, but the injustice of wrongfully impoverishing one for the enrichment of another.

Though equity may restrain enforcement of a judgment which is unconscionable because of fraud intrinsic as well as fraud extrinsic, whether the court should interfere in such cases being matter of wise administration rather than of power, fraud of the latter kind would call successfully for judicial interference in circumstances where fraud intrinsic would not.

Where a person occupies trust relations to another it is his duty to speak whenever the interests of such other would otherwise be prejudiced; he cannot, legally or equitably, remain silent and secure to himself an advantage over such other.

In case of a person sustaining the relation of trustee to another, he owes to such other the duty of making a full disclosure of all matters appertaining to the trust, and neglect to do so to such other's injury, knowing or having good reason to believe that silence will so result, is a fraudulent act and the duty exists independently of inquiry in judicial proceedings and failure of the trustee in that regard, persisted in in judicial proceedings, to the prejudice of such other and advantage to himself, may be regarded as fraud extrinsic under the rule in U. S. v. Throckmorton, 98 U. S. 61, 25 L. Ed. 93, as well as fraud intrinsic.

In case of a judicial remedy in equity being invoked to prevent the enforcement of a fraudulent judgment, the rule that facts relied upon for a recovery on the ground of fraud must be established by clear and satisfactory evidence applies and with considerable emphasis.

Appeal from an Order of the Circuit Court for Milwaukee County; Oscar M. Fritz, Judge. Reversed.

Action to restrain enforcement of a judgment because of its being inequitable.

This is the substance of the complaint: In an action for specific performance, in the circuit court for Milwaukee county, Wisconsin, wherein the defendant herein was plaintiff, and the plaintiffs herein were defendants, it was decided, June 23, 1910, that the former contracted to sell to the latter who agreed to buy from the former the corporate stock, business and property of the B. A. Kipp Company, giving therefor the fair value October 1, 1909, a specified inventory to be regarded prima facie proof thereof; that Mr. Kipp, who had been in possession of the subject of the transaction from the date of the contract, administered the same as trustee for plaintiffs; that it was necessary to measure the amount they should pay by the fair value of the subject October 1, 1909, and also that defendant should account as trustee. The questions of value and accounting were referred to John A. Harper and Mr. Kipp was made receiver in the meantime; judgment to await confirmation of the report. In due course, a referee hearing was had; defendant offering in evidence only a statement of the financial condition of the B. A. Kipp Company, June 23, 1910--nothing definitely showing administration by him as trustee subsequent to the date of the sale. The statement was not represented as a trustee's account nor supposed by plaintiffs or their attorneys to be such, nor did they suppose it would be considered such by the referee. It appertained to the relations between defendant and the B. A. Kipp Company covering the period prior to October 1, 1909. Plaintiffs had no concern therewith, so waited for some disclosure of the transactions as trustee. They relied upon a report not being made without such a definite disclosure and opportunity to examine and contest it. The statement, viewed as a trustee disclosure, was grossly fraudulent, in that it omitted $20,000, more or less, which should have been charged defendant as trustee and credited on the purchase price of the property in closing the litigation by judgment. The account, in the particular form, was exhibited to deceive plaintiffs, their attorneys and the referee. The latter was deceived thereby. Without citing defendant to account as trustee, the receiver reported “that B. A. Kipp as receiver in this action, has made and filed his report, dated July 16, 1910, which report is filed herewith and marked Exhibit 6 and contains his accounts down to the 23d day of June, 1910, and there being no objection on the part of defendant to said report, the same is recommended for approval.” Plaintiffs contested confirmation of such report upon the ground that there had not been any accounting as trustee. Defendant, however, by his counsel, fraudulently induced the circuit court to confirm the report and thereafter prevented said plaintiffs from procuring any relief therefrom in the Supreme Court by representing that the circuit court could correct any error in such report upon the settlement of the account as receiver. The circuit court, in fact, confirmed the report thinking that it did not include an accounting as trustee, and that the omission was without prejudice because the matter could be taken up, later, as part of the accounting as receiver. Judgment, however, was rendered, in form, so as to cover the trustee period, although such period was in fact ignored by the court. The judgment was for the entire purchase price of the subject of the sale, undiminished by any receipts therefrom by defendant during the trust period.

Plaintiffs made an unsuccessful effort in the circuit court and also in the Supreme Court to have the judgment corrected, so as to give them the benefit, by a credit upon the purchase price of the property, of what defendant realized therefrom during the trustee period, but was prevented by the attitude of defendant's counsel, inducing the belief that the judgment would not preclude plaintiffs from obtaining redress from their alleged grievance at the accounting as receiver. Subsequent to the trustee period, defendant received from the property $34,000, more or less, or more than the sum equitably due him.

Plaintiffs appealed from the judgment and it was affirmed without determining the amount due from defendant to them. Thereafter they petitioned the circuit court for an accounting during the trustee period and application of any sum chargeable to defendant upon the judgment. The court decided that there was no authority to change the judgment, which had become that of ...