Marston Bros. Co. v. Oliver W. Wierdsma Co.

• Decision Date: 18 January 1944
• Citation: 244 Wis. 394,12 N.W.2d 748
• Parties: MARSTON BROS. CO. v. OLIVER W. WIERDSMA CO. et al.
• Court: Wisconsin Supreme Court

244 Wis. 394

12 N.W.2d 748

MARSTON BROS. CO.

v.OLIVER W. WIERDSMA CO. et al.

Supreme Court of Wisconsin.

Jan. 18, 1944.

Appeal from an order of the Circuit Court for Outagamie County, Wisconsin; Henry P. Hughes, Acting Judge.

Reversed and remanded.

This is an action commenced on September 17, 1942, by Marston Brothers Company, plaintiff, against Oliver W. Wierdsma Company, Board of Trustees of Lawrence College of Wisconsin, and Ralph J. Watts, as Business Manager, Officer and Agent of such Board of Trustees of Lawrence College of Wisconsin and Home Savings Bank, defendants. Plaintiff sought to foreclose a mechanic's lien, and in the alternative, to recover from the bank the amount of its claim, based upon allegations that the bank knowingly converted to its use, funds of the principal contractor which were, and were known to be trust funds. There was a demurrer by Home Savings Bank upon the grounds that there was a misjoinder of causes of action and the trial court on June 19, 1943, sustained the demurrer. Plaintiff appeals. The allegations of the complaint will be summarized in the opinion.

Claude G. Cannon, of Appleton, for appellant.

Benjamin F. Saltzstein, of Milwaukee (Howard G. Brown, of Milwaukee of Counsel), for respondent.

WICKHEM, Justice.

The essential facts as they appear from the complaint will first be stated.

On March 5, 1940, Oliver W. Wierdsma Company, hereafter called the “contractor”, agreed in writing with the trustees of Lawrence College to build five fraternity houses on the college campus. No bond was required of the contractor. Shortly after the execution of the contract the contractor assigned to the Home Savings Bank as collateral security for loans previously made to said bank all its interest in and to the proceeds of the contract. During September and October, 1940, plaintiff furnished materials for these buildings. On October 8, 1940, the board of trustees of the college, after exacting waivers of lien from all materialmen including the plaintiff, made a final payment of $14,000 to the contractor. The contractor immediately delivered checks to plaintiff and other materialmen. On the 9th of October, 1940, the contractor deposited the proceeds of the check with the defendant bank. Defendant bank knew that the contractor was hopelessly insolvent and had given no bond to insure performance of its contract. On October 9, 1940, the bank charged the contractor's account and applied the $14,000 to debts of the contractor having nothing to do with the contract in question. At this time the bank knew plaintiff and other materialmen had waived their lien rights and that the $14,000 was the proceeds of the contract of the college. The bank also knew that the materialmen would not be paid if the amount of $14,000 was applied to the debt at the bank. The checks issued by the contractor to materialmen were dishonored by the bank because of insufficient funds.

On the basis of these facts plaintiff attempts to state two causes of action. The first assumes to affect all of the parties to this action with one exception hereafter noted, and is for a materialman's lien and the foreclosure of the same against all of the defendants. Failing that, plaintiff asks in this count a money judgment against all the defendants for the amount due. Watts, business manager of the college, is joined as a nominal and proper, but not necessary party, and no relief is asked against him. The bank is joined in the first cause of action because the building contract was assigned to it as collateral.

The second cause of action is in the alternative. Plaintiff seeks to state a cause of action under section 289.02(4), Stats., based upon allegations that the transaction with the bank heretofore mentioned constituted a breach of trust by the contractor, and the taking of the funds by the bank a participation in this breach of trust.

Defendant bank claims, and the trial court held, that the causes of action attempted to be stated by plaintiff do not affect all the parties to the action and that they require different places of trial. There is a great deal of embroidery in this complaint but stripped down to its essentials, plaintiff seeks in one paragraph to foreclose a lien as against the college and if it cannot have that, then a money judgment against the college, contractor and bank. In the alternative it seeks in a separately stated cause of action to hold the bank liable for plaintiff's claim because, as it alleges, the bank with knowledge of the source of the $14,000 check participated in the contractor's breach of trust by applying this deposit to its own debt. Plaintiff claims that it has one primary right-to recover its debt; that the complaint simply asks for different and alternative forms of relief affecting different defendants, but not constituting separate causes of action. Plaintiff relies upon section 260.11(1), which reads as follows: “(1) Any person may be made a defendant who has or claims an interest in the controversy adverse to the plaintiff, or who is a necessary party to a complete determination or settlement of the questions involved therein. A plaintiff may join as defendants persons against whom the right to relief is alleged to exist in the alternative, although recovery against one may be inconsistent with recovery against the other; * * *.” Plaintiff claims that this section, and not section 263.04, Stats., is applicable to its complaint and cites in support of this DeGroot v. People's State Bank, 183 Wis. 594, 198 N.W. 614. In that case two of the defendants had sold plaintiff for resale at auction certain personal property and had given a bill of sale warranting the vendors to be owners of the property free and clear of encumberance. Prior to the auction the defendant bank asserted its claim to a chattel mortgage on the property and this caused plaintiff to abandon the auction. The vendors claimed that the mortgage was invalid as to plaintiff, while the bank claimed that the chattel mortgage was valid and enforceable. Plaintiff stated three causes of action. The first and second affected only the vendors, the first being based upon breach of warranty, and the second upon fraudulent misrepresentation. The third cause of action affected only the bank and sought damages by reason of the bank's claim to a chattel mortgage. The complaint concluded with the statement that because of the conflicting claims of defendants, plaintiff's right to relief necessarily existed in the alternative. The prayer demanded a judgment against the vendors and failing that, a judgment against the bank. A demurrer for misjoinder of causes of action was overruled and this court affirmed the ruling of the trial court.

After discussing the requirement of section 263.04, Stats., that causes of action joined in a single complaint must affect all of the parties and not require separate places of trial, the court held that section 260.11(1), Stats., heretofore quoted, was applicable. It did this because upon the complaint as a whole it appeared that either the vendors or the bank were liable to plaintiff, and that a determination as to the validity of the chattel mortgage would determine which was liable. If the chattel mortgage was valid there would be no cause of action against the bank but plaintiff would be entitled to relief against the vendors. On the other hand, if the chattel mortgage were held to be invalid, then plaintiff's cause of action would be against the bank. The court considered that this was an ideal situation for the application of section 260.11(1) because plaintiff's right to relief existed in the alternative and recovery against one defendant would be inconsistent with recovery against the other. In other words, there was a single cause of action. Plaintiff was uncertain, and would be uncertain until the issues of the case were determined, which of several defendants was liable, and hence asked relief in the alternative. He was simply joining defendants and not stating separate causes of action. This rule was adhered to in Lukken v. Hanover Fire Ins. Co., 194 Wis. 569, 217 N.W. 404 and in Wisconsin Orange Crush B. Co. v. Meicher, 198 Wis. 461, 224 N.W. 702,225 N.W. 737. The reasoning in Astin v. Chicago, M. & St. P. R. Co., 143 Wis. 747, 128 N.W. 265, 31 L.R.A., N.S., 158, supports the result of these cases although when the Astin case was decided section 263.04, Stats., imposed additional requirements for joinder.

This case presents a different situation. Plaintiff's right here does not exist in the alternative. It has a free choice as to whom it will sue. It may foreclose its claimed lien as against the college, or it may sue the bank for its participation in the contractor's breach of trust. True, it may have only one execution and...