Simonson v. McInvaille

Decision Date01 April 1969
Docket NumberNo. 182,182
Citation42 Wis.2d 346,166 N.W.2d 155
PartiesA. E. SIMONSON, Trustee of Contractors Service, Inc., a bankrupt Wis. Corp., Appellant, v. William James McINVAILLE et al., Respondents.
CourtWisconsin Supreme Court

A. E. Simonson, Madison, for appellant.

Maurice B. Pasch, Madison, for respondents, Harry Sauthoff, Jr., Madison, of counsel.


Defendant William James McInvaille organized and incorporated Home Service, Inc., in 1947. This corporation was engaged primarily in the home improvement business.

In 1959, he organized and incorporated Contractors Service, Inc. This corporation was principally engaged in the business of purchasing building materials in large quantities and then wholesaling most of these materials to Home Service, Inc., usually on a job-to-job basis.

The two corporations had the same stockholders, directors and officers. They used the same warehouse, office space and equipment.

For the period of time relevant to this case, Mr. McInvaille as a director and the president and treasurer of Home Service, Inc., and a director and the president of Contractors Service, Inc. Mrs. McInvaille was a director and secretary of both corporations. Mr. Pasch was a director and vice president of both corporations.

Both corporations became insolvent in 1965. Petitions and schedules were filed in bankruptcy. Contractors Service, Inc., listed seventeen creditors and listed $34,465.98 from Home Service, Inc., as its only account receivable.

Home Service, Inc., did not keep any kind of trust accounting records or a bank trust accout for the protection of various materialmen or suppliers. The gross receipts of Home Service, Inc., were deposited in a general business checking account out of which were paid both the debts due to materialmen and the operating expenses.

The plaintiff claims that pursuant to sec. 289.02(4), Stats. (1963), 1 all moneys paid to Home Service by any homeowner for improvements constituted a trust fund in the hands of Home Service, Inc., for the amounts of all claims owed for labor and materials used for such improvements. The plaintiff also alleges that Home Service, Inc., did not segregate such receipts and instead used part of them to pay operating expenses and thus the defendants were responsible for conversion of the sum of $41,940.74, including $31,560.96 2 due the plaintiff for materials.

The defendants contend that the plaintiff is not entitled to review of the trial court's judgment because it did not first move for review of the judgment in the trial court.

In Wells v. Dairyland Mut. Ins. Co. (1957), 274 Wis. 505, 518, 80 N.W.2d 380, 387, this court stated that in a trial to the jury 'no error of the court should be reviewable as a matter of right on appeal without first moving in the trial court for a new trial bottomed on such error, if the error is of a category that a trial court could correct by granting a new trial.'

The Wells' rule specifically applies to cases tried to a jury. Since Wells this court has, on several occasions, considered the application of the Wells' rule to nonjury civil and criminal cases.

In Fringer v. Venema (1965), 26 Wis.2d 366, 375--376, 132 N.W.2d 565, 571, 133 N.W.2d 809, this court stated:

'We deem this statute (sec. 269.46(3)) sufficently broad to allow a motion to review the findings of fact entered by the trial court and commend its use to afford the trial court an opportunity to correct its findings of fact, conclusions of law and judgment, or award a new trial in appropriate instances. * * * While we approved and commend the practice, we do not at this time declare it to be mandatory but reserve this question for subsequent opinion or court rule.' See also Finger v. State (1968), 40 Wis.2d 103, 108, 161 N.W.2d 272.

We now determine that this question can best be resolved by court rule adopted pursuant to the provisions of sec. 251.18, Stats.

One of the grounds on which the trial court dismissed the actions was that the plaintiff had no standing to sue.

An examination of the record reflects that he plaintiff neither affirmatively established that he qualified for or accepted the appointment as trustee, nor did he submit proof of his authority to sue. It could have been a relatively simple matter to offer such proof, in which event this issue would not be the subject of an appeal, nor would it have confronted the trial court in arriving at its decision.

9 Am.Jur.2d, Bankruptcy, p. 865, sec. 1162 (1963), states:

'Inasmuch as a trustee in bankruptcy is expressly vested with power to collect and reduce to money the property of the estate, an order of the bankruptcy court granting leave to sue is not a prerequisite to a suit by him. That the trustee is to act under the direction of the court does not mean that an order granting leave to sue is essential to a suit by him.

'Although an order granting leave to sue is not an absolute prerequisite to a suit by the trustee, it is desirable to keep the court advised of any action contemplated by the trustee, and the obtaining of leave for suit is undoubtedly in accordance with the practice of careful counsel.'

An examination of the record leads us to conclude that there is sufficient evidence to establish the plaintiff's standing to sue and that it is not essential to the cause of the plaintiff that he submit proof of his authority to sue. The record does contain a certified copy of the 'Notice to Trustee of His Appointment and Notice of Time Fixed for Filing Objections to Discharge.' Also, one of the exhibits in the record is a transcript of a proceeding, prior to commencement of the instant action, before the referee in bankruptcy: 'In the Matter of: CONTRACTOR'S SERVICE, INC., DEBTOR.' The first page of the transcript of that proceeding lists under appearances, 'TRUSTEE: A. E. SIMONSON, ATTORNEY.'

The trial court also determined that the trustee of Contractors Service, Inc., was not a proper party plaintiff. The trial court correctly stated that the trustee in bankruptcy of Home Service, Inc., would speak for all the creditors of Home Service, Inc., (including Contractors Service, Inc.,); however, such trustee would not speak for all the creditors of Contractors Service, Inc., the real beneficiaries of this action. The plaintiff, representing the creditors of Contractors Service, Inc., as beneficiaries of the alleged trust in the hands of Home Service, Inc., created by sec. 289.02(4), Stats. (1963), we a proper party to bring suit.

The trial court determined that the plaintiff did not submit proof from which a money judgment could be determined. The trial court's finding is not contrary to the great weight and clear preponderance of the evidence and is therefore sustained on appeal.

In Wisconsin it is well established that when trust funds are commingled with other funds, the trust may be enforced against any part of the commingled fund which can be traced into the hands of a trustee (defendants here). In order to sustain a recovery, it is essential that the funds be traced. Murphy v. National Paving Co. (1938), 229 Wis. 100, 281 N.W. 705; Henika v. Heinemann (1895)...

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  • State ex rel. Ins. Com'R v. Bcbs
    • United States
    • West Virginia Supreme Court
    • October 5, 2006
    ...779 (Va.1934); Westview Invs., Ltd. v. U.S. Bank Nat'l Ass'n, 133 Wash.App. 835, 138 P.3d 638, 644 (2006); Simonson v. McInvaille, 42 Wis.2d 346, 166 N.W.2d 155, 159 (Wis.1969); City of Casper v. Joyce, 54 Wyo. 198, 88 P.2d 467, 470 D. The Trust Fund Can Be Traced The Receiver indicated in ......
  • Paulsen Lumber, Inc. v. Anderson
    • United States
    • Wisconsin Supreme Court
    • December 4, 1979
    ...contractor have been discussed by this court in Weather-Tite Co. v. Lepper, 25 Wis.2d 70, 130 N.W.2d 198 (1964), Simonson v. McInvaille, 42 Wis.2d 346, 166 N.W.2d 155 (1969), and Burmeister Woodwork Co. v. Friedel, 65 Wis.2d 293, 222 N.W.2d 647 (1974). On each of these elements the plaintif......
  • Matter of Thomas
    • United States
    • U.S. Bankruptcy Court — Eastern District of Wisconsin
    • June 30, 1982
    ...against any part of the commingled trust funds which are able to be traced but the trust is not invalidated. Simonson v. McInvaille, 42 Wis.2d 346, 166 N.W.2d 155 (1969). This Court is cognizant of a recent decision rendered by its colleague, Judge Ihlenfeldt, in the case of In re Lotto, 81......
  • Oliver v. Heritage Mut. Ins. Co.
    • United States
    • Wisconsin Court of Appeals
    • August 25, 1993
    ...$25,000. A bankruptcy trustee has the right to pursue litigation regarding the bankruptcy estate. See Simonson v. McInvaille, 42 Wis.2d 346, 351, 166 N.W.2d 155, 158 (1969) (trustee in bankruptcy is expressly vested with power to collect and reduce to money the property of the estate). Any ......
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