Milwaukee Western Bank v. Lienemann

• Court: Wisconsin Supreme Court
• Writing for the Court: MARTIN
• Citation: Milwaukee Western Bank v. Lienemann, 15 Wis.2d 61, 112 N.W.2d 190 (Wis. 1961)
• Decision Date: 28 November 1961
• Parties: MILWAUKEE WESTERN BANK, a Wisconsin corporation, Appellant, v. A. A. LIENEMANN, Respondent.

Page 190

112 N.W.2d 190

15 Wis.2d 61

MILWAUKEE WESTERN BANK, a Wisconsin corporation, Appellant, v. A. A. LIENEMANN, Respondent.

Supreme Court of Wisconsin.

Nov. 28, 1961.

The facts will be stated in the opinion.

Whyte, Hirschboeck, Minahan, Harding & Harland, Milwaukee, Victor M. Harding, Milwaukee, of counsel, for appellant.

Affeldt & Lichtsinn, Eldred Dede, Milwaukee, for respondent.

MARTIN, Chief Justice.

From 1940 to 1956 defendant was a part-time director and officer of the plaintiff bank and a member of its executive committee in charge of loan applications. Defendant also operated a finance business through Merchants Acceptance Corporation, of which he was the sole stockholder.

Early in 1950 Lienemann learned of the financial condition of Mercury Engineering Corporation, which was engaged in manufacturing and selling machinery used in the paper and printing industry. Mercury was in need of working capital and was desirous of acquiring a financial adviser. Lienemann was willing to perform such services but wished to be compensated with stock in the company rather than cash.

In late March or early April of 1950 Lienemann met with J. R. Baumgartner, the president, general manager and sole stockholder of Mercury. It was agreed between them that Lienemann would receive ten per cent of the capital stock of Mercury, or 100 shares, in consideration of which Lienemann would arrange a $100,000 line of credit for Mercury with a local bank, would invest $25,000 from his own funds and would become a director and financial adviser of the company.

On April 25, 1950 Mercury made application to the plaintiff for a $100,000 line of credit and on the same date the executive committee approved the loan. The action of the executive committee was approved by the board of directors on May 2, 1950. Lienemann was present and participated in both meetings. On the same date the executive committee approved Mercury's line of credit Lienemann received from Baumgartner a certificate for 100 shares of Mercury stock. In order to make Lienemann's $25,000 personal loan to Mercury, Merchants Acceptance borrowed $18,000 from the plaintiff. Subsequently, Lienemann was made a director and treasurer of Mercury and rendered various financial services to the company.

Plaintiff alleges in its complaint that Lienemann's receipt of the Mercury stock under these circumstances constituted a fraud upon the bank, and for the purposes of this opinion we may assume this is true.

The question to be determined is whether the trial court correctly held that plaintiff's cause of action is barred by the statute of limitations. Sec. 330.19(7), Stats. provides for a limitation of six years in----

'An action for relief on the ground of fraud. The cause of action in such case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud.'

Plaintiff's action was commenced on December 29, 1958. Thus, if it discovered the 'facts constituting the fraud' before December 29, 1952, its cause of action is barred.

It was held in O'Dell v. Burnham (1884), 61 Wis. 562, 569-570, 21 N.W. 635, 639, construing the predecessor of sec. 330.19(7), Stats.:

'When the information brought home to the aggrieved party is such as to indicate where the facts constituting the fraud can be effectually discovered upon diligent inquiry, it is the duty of such party to make the inquiry, and if he fails to do so within a reasonable time he is, nevertheless, chargeable with notice of all facts to which such inquiry might have led.'

See, also, Ludington v. Patton (1901), 111 Wis. 208, 86 N.W. 571, and Hinkson v. Sauthoff (1956), 272 Wis. 33, 74 N.W.2d 620.

The trial court found:

'That the plaintiff bank in the year 1950 not only had good reason to suspect but had actual knowledge that part of the consideration Mr. Lienemann received from Mercury Engineering Corporation was for his financial services, which included obtaining the line of credit from the plaintiff bank.'

Plaintiff contends this finding is...