Sicklesteel v. Edmonds

• Citation: 147 N.W. 1024,158 Wis. 122
• Decision Date: 17 June 1914
• Docket Number: No. 118.,118.
• Parties: SICKLESTEEL v. EDMONDS ET AL.
• Court: United States State Supreme Court of Wisconsin

158 Wis. 122

147 N.W. 1024

SICKLESTEEL

v.EDMONDS ET AL.

No. 118.

Supreme Court of Wisconsin.

June 17, 1914.

Appeal from Circuit Court, Portage County; F. C. Eschweiler, Judge.

Suit by D. I. Sicklesteel against E. A. Edmonds, H. J. Grell, A. Lorenze, and others, to dissolve and wind up affairs of alleged copartnership. From a judgment determining the rights of the parties, E. A. Edmonds, H. J. Grell, and A. Lorenze appeal. Reversed, with directions.

Vinje and Siebecker, JJ., dissenting in part.J. J. Cunningham, of Janesville (Daniel H. Grady, of Portage, of counsel), for appellants.

W. E. Fisher, of Stevens Point (D. D. Conway, of Grand Rapids, of counsel), for respondents.

D. I. Sicklesteel, of Stevens Point, pro se.

TIMLIN, J.

The plaintiff brought this suit for dissolution and winding up of the affairs of an alleged copartnership between himself and 31 defendants. Eighteen of these defendants appeared in the action in person or by attorney. Others defaulted, or were not served with process. No copartnership was proven. No objection was made on the ground of lack of equity jurisdiction, and the case is before us on its merits. Edmonds and Grell appeal from a judgment in favor of their codefendant Lorenze and against them for upwards of $6,000, and Lorenze appeals from the same judgment, claiming only that sufficient damages were not allowed to him. All other parties acquiesce in the judgment of the court below by not appealing and not joining in either appeal. By the judgment all of the notes were ordered to be returned to the subscribers. One J. A. Ryan had paid cash, and he was awarded a judgment against Lorenze for $1,216.39, Lamb was awarded a like judgment for $3,642, Halverson for $80; and it was further decreed that Ryan and Lamb have each a lien to the amount of his allowance against Lorenze upon the judgment in favor of Lorenze and against Edmonds and Grell. The two appeals may be considered together.

The facts found by the circuit court together with the undisputed facts which are not all covered by the findings may be set forth as follows: On May 1, 1909, J. P. Malick and Abraham Lorenze secured from Messrs. J. O. Terrell and Edward Roos, of Texas, a contract for the sale by the latter to the former of about 72,000 acres of land in Brewster county, Tex., part at $1 and part at $1.20 per acre, paid down $4,000, and agreed to pay $16,000 additional upon the execution and delivery of a bond for title from the vendors; and this bond for title was to be executed upon the acceptance of the title by the vendees after an abstract of title was furnished by vendors, and 30 days allowed in which to examine the same. They also assumed and agreed to pay in the event of their acceptance of the title liens to the amount of $28,000 resting upon the land, and the balance, or about $36,000, by two notes which they agreed to have negotiated and cashed at face value, but, if such notes were not cashed, then to be paid, with interest at 7 per cent., and to be secured by a trust deed not specifying what property the trust deed should cover. When the $16,000 and the $28,000 were paid, or at any time after 50 per cent. of the purchase price was paid, the vendees were to receive a deed, while the vendors were to retain a vendor's lien for unpaid remainder. The $4,000 first paid was to be forfeited to the vendors in case of default by the vendees. Malick advanced this first $4,000 payment for himself and Lorenze. Malick and Lorenze did not have the means to carry out this contract or make the payments due thereon, and immediately upon their return to Wisconsin with their duplicate original, had drawn up and circulated a subscription agreement which the plaintiff calls a partnership agreement, and this continued open to subscriptions until about November 18, 1909, when 32 signatures, including those of Malick and Lorenze, for amounts varying from $1,000 to $5,000, and aggregating $53,000 were obtained. Of this amount, Malick subscribed $5,000, Lorenze $5,000, and Edmonds $5,000, and a person named Julius Cohn, of Kansas City, Mo., who is named as a defendant in this action, subscribed $5,000; all other subscriptions were for lesser amounts. Malick turned over what is termed the “financing” of this matter to Lorenze, the latter employed one Margraf, and personally and through Margraf procured all the subscriptions mentioned. Some of these were procured by fraudulent representations and concealments, some like Edmonds and McKenny mere decoys, that is to say, they subscribed under a private agreement with Lorenze which was intended to guarantee them against liability on the subscription, and some subscribed with knowledge that Lorenze was making a profit. Malick was apparently held out by Lorenze as a person interested in this contract as vendee subscriber and trustee, and all subscribers signed, of course, with reference to the subscription paper as written. Malick died prior to judgment, leaving little or no estate. This subscription agreement declared that the signers subscribed for and agreed to pay Malick, trustee, the sums set opposite their respective names for the purchase of the lands in question. The subscriptions were to be paid 25 per cent. cash, balance in notes running three, six, and nine months, respectively, with interest at 6 per cent. These notes were to be payable to Malick, as trustee, and the purchase price of the land was to be $1.50 per acre, with 5 cents per acre additional for expense of consummating the purchase. The writing also contained this statement:

“It is distinctly understood that the subscribers do not incur any other liability than the amount set opposite our names, and that we assume no other obligation than this.”

It is also provided that, as soon as a sufficient amount was subscribed to insure the first payment of $25,000, then a company should be organized and incorporated to take over the lands above mentioned at the purchase price of not less than $2 per acre. There was in fact no first payment of $25,000 to be made. This remarkable document states the quantity of land to be about 72,000 acres, and the price to be $1.50 per acre, which would make the cost $108,000, or $111,600, with 5 cents per acre for expenses. The total subscriptions procured were only $53,000 at most; according to the subscription agreement only one-quarter of these, or $13,250, was payable in cash, and the liability of each signer was limited to the amount subscribed by him. The land was to be turned over to a corporation at $2 per acre after a sufficient amount was subscribed to insure the payment of $25,000, and there is no provision that the subscribers should have any interest in the lands or any shares in the corporation or with reference to their pro portionate interest in either.

[1] Nor is it stated how much is expected to be procured in subscriptions before the subscriptions become binding. The true interpretation of such a subscription agreement is that the vendee in the land contract who procures the subscriptions will carry the unsubscribed portion of the liability thereon. Where each subscriber is bound as he comes in, whether more subscriptions are obtained or not, this must be the case. Mr. Lorenze, having at this stage sole charge of the matter, immediately disabled himself from getting the cash therein subscribed by taking a note from each subscriber for the whole amount of his subscription due for the most part later than December 6, 1909, and by failing to pay over or collect the $2,500 cash due from himself and Malick according to the subscription agreement. He did not give his own note or cash for his $5,000 subscription, except as hereinafter stated, nor did he take any note or cash from Malick for the $5,000 subscription of the latter, nor any note or cash from Julius Cohn for his $5,000 subscription. He did, however, take notes, or cause notes to be taken, from the other subscribers to the amount of $27,900 upon the $53,000 subscriptions. Why he did not get notes from the others is not shown. Lorenze did take a note from Edmonds for the amount of the subscription of the latter, but made an agreement in writing the substance of which was to protect Edmonds from liability on this note. On August 23d Malick assigned all his interest in this contract to his associate vendee Lorenze; but Malick continued to act as trustee, and to appear interested in the contract. The situation at this time was such that there was no prospect of getting any money from the subscribers to make the $16,000 payment due upon the land contract to Terrell and Roos, much less the remaining payments. Lorenze sent Mr. Burke, his attorney, to Texas and obtained an extension of time for the payment of the $16,000 due upon the land contract until December 6, 1909; the vendors making it clearly known that no further extension would be granted. On or about November 10th Lorenze sent out notices to the subscribers in the name of Malick calling a meeting of said subscribers at the office of the “syndicate” in the Majestic Building in Milwaukee for November 18, 1909. He also sent out proxies with these notices to be signed by each subscriber who could not attend appointing Lorenze attorney in fact for such subscriber at said meeting with broad powers. The meeting was accordingly held. A small number of the subscribers attended. The defendant Grell was present; but Edmonds was not, he having signed one of the proxies to Lorenze. It was apparent to all that neither the vendees nor the subscribers, nor both together, had funds or resources with which to meet the payment of $16,000, much less the $25,000 specified in the subscription agreement. No one seemed to have any very clear idea of how much money was on hand, or how much was required, or whether the payment to be made was $25,000, or $20,000 or $16,000. Proposed articles of incorporation of a Texas corporation authorized to go into the business of cattle...