Schmitt v. Schmitt
| Citation | 169 Wis. 28,171 N.W. 655 |
| Parties | SCHMITT v. SCHMITT ET AL. |
| Decision Date | 02 April 1919 |
| Court | United States State Supreme Court of Wisconsin |
OPINION TEXT STARTS HERE
Appeal from Circuit Court, Milwaukee County; Martin L. Lueck, Judge.
Suit by Mathias F. Schmitt against C. M. Schmitt and others. From a decree for plaintiff, defendants appeal. Reversed and remanded, with instructions to dismiss complaint.
This is an independent action in equity commenced by the plaintiff August 20, 1915, in the circuit court for Milwaukee county, for the purpose of vacating an order affirming a foreclosure sale of corporate stock under date of February 16, 1910. From a judgment vacating and setting aside an order of confirmation and ordering a resale of the stock, the defendants appealed.
The facts are as follows: June 25, 1907, the parties to this action and one Conrad Schmitt were stockholders in the Schmitt Bros. Tobacco Works which at or about that time had acquired the property of the Hansen-Schmitt Company, a competitor of the Schmitt Bros. Tobacco Works, the consolidation having been brought about by an exchange of stock in the Schmitt Bros. Tobacco Works for the stock of the Hansen-Schmitt Company. Mathias F. Schmitt, C. M. Schmitt, and Conrad Schmitt are brothers. Mathias F. Schmitt, C. M. Schmitt, and Carl W. Walter were in the active management of the corporation. The defendant Franke was a tobacco broker of Louisville, Ky., of considerable means, the largest stockholder, and contributed the principal financial support to the company.
On June 25, 1907, an agreement of sale was entered into between E. C. Franke, as party of the first part, and Mathias F. Schmitt, C. M. Schmitt, Carl W. Walter, and Conrad Schmitt, as parties of the second part, providing for the sale by E. C. Franke to the said parties of the second part of 701 shares of the capital stock of said corporation, the parties of the second part executing to said Franke their three promissory notes in payment thereof as follows: One for $11,750, due July 1, 1909; one for $9,320 due July 1, 1910; one for $9,320, due July 1, 1911. The agreement of sale contained a provision that upon default in the payment of any of said notes those remaining unpaid might at the option of said Franke be declared due. Thereafter, and before the first note became due, disagreements arose between the plaintiff, Mathias F. Schmitt, and the others, resulting in his withdrawal from the active participation in the affairs of the company and his removal to California. There was default in the payment of the first note upon its coming due. Thereupon Franke declared the whole amount due. Extended negotiations occurred between Franke, C. M. Schmitt, Conrad Schmitt, and Walter with a view of devising some plan by which the former might retain their interest in the stock upon some terms satisfactory to E. C. Franke.
It pretty plainly appears that there was a desire on the part of all to eliminate the plaintiff, Mathias F. Schmitt, from the company. No satisfactory arrangements, however, were agreed upon, and in November, 1909, Franke brought an action to foroclose the contract of sale. A foreclosure judgment was entered January 27, 1910, which ordered a sale of the stock, pursuant to which order the stock was sold at public auction February 14, 1910, and sale was in due time confirmed.
It appears that Conrad Schmitt made some effort to place himself in a position to bid at the sale, and to that end negotiated with one Epstein, who indicated a certain willingness to advance money which would enable Conrad to bid about $3,100 for the stock at the sale. Conrad now claims that he was induced to refrain from bidding at the sale because of an agreement between himself, his brother C. M. Schmitt, Carl W. Walter, and E. C. Franke that Franke should bid in the stock at the sale for the amount due on the notes plus expenses of sale, and thereafter enter into a new arrangement with himself, C. M. Schmitt, and Carl W. Walter for the sale of the stock upon terms which would enable them eventually to pay therefor and become the owners thereof. This arrangement contemplated the elimination or Mathias F. Schmitt from any interest in the company. That there was such an arrangement is denied by Franke, C. M. Schmitt, and Walter. At the sale the stock was bid in by Franke for $31,552.65, being the entire amount which was due on the stock, together with the costs and expenses of the foreclosure and sale.
On the day of and after the sale Franke gave to C. M. Schmitt and Carl W. Walter an option for the purchase of 651 shares of such stock for $31,500.90, plus fees and expenses incurred in the foreclosure suit, which option expired May 15, 1910. Schmitt and Walter were unable to avail themselves of the option before it expired. Further negotiations followed and on October 1, 1910, Franke entered into another contract of sale with C. M. Schmitt and Carl W. Walter for the sale of 501 shares of such stock for the sum of $3,100, to be paid upon terms therein indicated, with which contract the said C. M. Schmitt and Carl W. Walter eventually complied and became the owners of said stock.
This action was brought by Mathias F. Schmitt in September, 1915, to set aside the sale and confirmation thereof under the foreclosure action upon the theory that the agreement claimed by Conrad Schmitt to have been entered into which prevented him from bidding at the sale resulted in a chilling of the sale and operated as a fraud upon his rights.
The circuit court found the existence of the agreement claimed by Conrad Schmitt which resulted in his refraining from bidding at the sale, and also found that “after the entry of the judgment of foreclosure and prior to the sale Conrad Schmitt had some negotiations with one Isador Epstein in regard to the raising of money with which to purchase said 701 shares of stock at the sale, but prior to the time said negotiations ceased neither Conrad Schmitt nor said Isador Epstein had considered the raising of an amount of money more than sufficient to pay the principal, interest and costs due to E. C. Franke; that Conrad Schmitt was not able financially to purchase said 701 shares of stock without assistance from others;” and as a conclusion of law it was found that “a fraud was committed upon the plaintiff, Mathias F. Schmitt, by the defendants E. C. Franke, C. M. Schmitt, and Carl W. Walter and Conrad Schmitt in the stifling of competition at the sale.”
Frank M. Hoyt, of Milwaukee, for appellant E. C. Franke.
Van Dyke, Shaw, Muskat & Van Dyke, of Milwaukee, for appellants C. M. Schmitt and C. W. Walter.
Maurice A. McCabe and Walter H. Bender, both of Milwaukee, for respo...
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