SanDers v. Newman

• Citation: 181 N.W. 822,174 Wis. 321
• Parties: SANDERS ET AL. v. NEWMAN ET AL.
• Decision Date: 08 March 1921
• Court: United States State Supreme Court of Wisconsin

174 Wis. 321

181 N.W. 822

SANDERS ET AL.

v.NEWMAN ET AL.

Supreme Court of Wisconsin.

March 8, 1921.

Appeal from Circuit Court, La Crosse County; A. H. Reid, Judge.

Action by L. C. Sanders and others against Gideon E. Newman and others. From an order sustaining demurrers to the complaint, plaintiffs appeal. Order affirmed.

The action was brought for an accounting of funds alleged to be in the hands of certain of the defendants and the La Crosse Land & Investment Company. Demurrers to the amended complaint were interposed by three of the defendants upon the ground that it appears upon the face of said complaint that the cause of action was barred by the statute of limitations (section 4222 of the Wisconsin Statutes). The demurrers were sustained.

The complaint alleges, in substance: That defendant Gideon E. Newman in 1910 procured an option to purchase from the Musselshell Valley Land Company 13,261.64 acres of land in Montana at the price of $7.15 per acre, payable one-fourth down and one-fourth each year for three successive years; that defendant Dow became associated with defendant Newman to assist him in finding a purchaser; that together they found a purchaser, Wheelock & Wheelock, a corporation, who were willing to purchase the lands at $10 per acre without any cash payment down, but with payments in three annual installments; that, being unable to finance the deal themselves, Newman and Dow associated themselves with the defendants Morris and Lyons, and the four together agreed to raise the money by subscriptions to an enterprise to buy the land under the option and to sell it to the proposed purchaser. The complaint further alleges that they represented to the persons who subscribed to said syndicate that the purchase price of the land in question was to be $8.50 per acre, whereas in reality it was $7.15; that the cash payment required was $41,608.39, instead of $23,705.18; that the selling price to Wheelock & Wheelock was to be $9.50 per acre, when they really intended to sell it for $10 per acre; that the defendants, Newman, Dow, Morris, and Lyons, by means of the above-mentioned misrepresentations, induced the plaintiffs, other than plaintiff Holley, together with a certain number of defendants and persons deceased to furnish capital in specified amounts to the enterprise, and that such agreement was evidenced by a written subscription; that such plaintiffs, together with defendants Newman, Dow, and Lyons and three “dummies,” O'Connor, Baker, and Appleby, signed such subscription list, each for a separate amount, in all totaling $42,000, which it was represented would pay the cash payment of $41,608.39 and leave a few dollars for expenses in handling the deal; that the subscribers paid in cash $29,600, and the defendants Lyons, Dow, Newman, and Morris and their dummies paid nothing. It is further alleged that defendant Morris was made trustee for all of the persons interested; that, as such trustee, Morris, on April 6, 1910, made a contract with the Musselshell Valley Land Company and Wheelock & Wheelock for the purchase of the lands; that this contract falsely stated that the cash payment was to be $41,608.39, when in truth and fact such payment was $23,705.18; that Morris as such trustee received a receipt from the Musselshell Valley Land Company, purporting to acknowledge the payment of $41,608.39; that thereby the defendants were enabled to retain their interest in said syndicate without paying anything, besides leaving $5,894.72 in Morris' hands. It is also alleged that on the same day the defendant Morris, as trustee, made a contract to sell the lands to Wheelock & Wheelock at the actual price of $10 per acre, but executed a contract in writing by which it was made to appear that the selling price was $9.50 per acre, the difference being made good by Wheelock & Wheelock giving their two promissory notes aggregating $6,630.50, which the conspiring defendants appropriated to themselves; that the plaintiffs and their associates, who were deceived in the above-stated manner, did not discover the truth regarding the aforesaid facts until about May, 1916. The complaint further alleges that at the time of the transactions on April 6, 1910, Morris did not have any written contract with the members of the syndicate defining the terms of the trust under which he was acting, and that none had been prepared before that date; that on April 6 the representatives of the Musselshell Valley Land Company and Wheelock & Wheelock insisted that a written agreement should be prepared and executed by Morris and the members of the syndicate for which he acted; that such a document was afterwards prepared and executed; that on April 13, 1910, a corporation was organized, known as the La Crosse Land & Investment Company, to succeed Morris as trustee and to take over his title and duties; that at this time the following resolution was adopted:

“Resolved that the assignment executed by Thomas Morris, trustee, be, and is hereby, accepted; that the president and secretary be and hereby are directed to issue stock in payment for said contract to the parties for whom Thomas Morris has been acting as trustee.”

The complaint avers that, although the above resolution recites that an assignment of these contracts had been executed, such assignment had not in fact been executed, nor was ever executed. It is further alleged that at the time of the adoption of said resolution such of the bona fide subscribers to the syndicate agreement who were then present had no knowledge of the fact that the land had been bought by Morris as trustee for $7.15 per acre and resold by him for $10 per acre; that no such consent to an assignment by Thomas Morris, trustee, of the contracts of purchase and sale entered into by him as such trustee was ever given by the Musselshell Valley Land Company or Wheelock & Wheelock; that Edward Lyons became president of the company, and Thomas Morris secretary, and as such officers issued certificates of stock to the various members of said syndicate or partnership for their respective interests in the deal, including the defendants and their dummies; that the new corporation, while yet under the control and officered by two of the defendants, carried out both contracts, receiving the money due on the one contract from Wheelock & Wheelock, and paying out the money due on the other contract to the Musselshell Valley Land Company; that since such transaction the corporation has performed no other business than to distribute certain surplus money among the stockholders; that it had in its possession at the time of bringing this action, undistributed, about the sum of $14,500. The complaint further alleges that the paymentof the purchase price of the land by Thomas Morris, or his successor, the corporation, was not completed until about the month of July, 1913, and that the Wheelock & Wheelock contract of April 6, 1910, was not fully executed and completed until about December 1, 1916, at which time said parties finished payments for the land; that Morris had never been discharged or released by the members of the syndicate from his duties and obligations as trustee; nor has he ever made a report or accounted to them for his acts and doings as trustee; that he still has, or should have, in his possession as such trustee the sum of $5,894.72, or thereabouts, of the original trust funds paid into his hands by members of the syndicate; that as trustee Morris had notice and knowledge of the giving of the two notes by Wheelock & Wheelock to defendants Dow and Newman, representing the difference between $9.50 and $10 per acre, aggregating $6,630.50, and that the proceeds thereof...