Wilgrube v. Nast

• Decision Date: 08 November 1922
• Citation: 178 Wis. 535,190 N.W. 451
• Parties: WILGRUBE v. NAST.
• Court: Wisconsin Supreme Court

178 Wis. 535

190 N.W. 451

WILGRUBE

v.NAST.

Supreme Court of Wisconsin.

Nov. 8, 1922.

Appeal from Circuit Court, Fond du Lac County; Chester A. Fowler, Judge.

Action by Walter F. Wilgrube against E. A. Nast. Judgment for plaintiff, and defendant appeals. Affirmed.

Action to recover the purchase price of certain shares of stock. The complaint alleged that the defendant sold and delivered to plaintiff 90 shares of the capital stock of the Romaine Motors Company for the sum of $8,000; that the par value of the stock was $100 per share; that to induce the sale defendant falsely and fraudulently represented that a number of new automobiles in the building then occupied by the company were the absolute property of the company, whereas in fact these automobiles were in possession of the company solely on consignment, and that 15 per cent. of the wholesale price had been paid; that defendant represented that the company had borrowed $15,000 at a local bank solely on its credit, whereas in fact the bank had demanded that the officers of the company personally indorse the note; that the defendant further represented that the inventory value of all the property of the company amounted to $76,000, whereas, in fact, the total inventory value did not exceed $40,000; and that defendant had represented that the company was making money, whereas, in fact, it was on the verge of bankruptcy. There were further charges of misrepresentation as to the amount of machinery located in a certain warehouse, as to the financial condition of a certain branch business of the company, and as to the value of a number of secondhand automobiles in possession of the company. The complaint further alleged that plaintiff had tendered back the stock and demanded the purchase price, and that defendant had refused to return the money. The relief demanded was that-- “the contract of sale so made between the parties be declared null and void, and that he have and recover of the defendant the sum of $8,000 so paid by him for said stock to the defendant, and that he have such other and further relief as to the court may seem just and equitable, and, further, that he recover his costs and disbursements herein.”

Defendant denied all the material allegations of the complaint. Plaintiff testified that he lived in Sun Prairie; that he saw the shares advertised for sale in a Milwaukee newspaper; that, after writing, he went to Fond du Lac to see defendant, was met at the station by a Mr. Westberg, and that they then went to the garage and met defendant. Concerning his visit to the garage he testified, in part:

“The defendant said that everything in the building belonged to the company, and everything that they had was paid for, except a few current bills, small bills, that had just come in a short time, or probably hadn't come in at all, but there was $15,000 borrowed at the bank. I asked them whether they had personally guaranteed payment of the note, and whether the company had borrowed it as a corporation, and he said that they hadn't guaranteed payment of the note, that the company had borrowed the money to pay for the cars in stock they had on hand. The next morning I asked him again about that note for $15,000, and asked him whether there was $50,000 worth of stock on hand; figuring $35,000 of stock being paid in and $15,000 borrowed, whether there was $50,000 worth of stock on hand. Mr. Westberg made the statement in Mr. Nast's presence that an inventory of stock on hand showed $76,000. Mr. Nast said this was correct. I asked the defendant again about the personal guaranty on the note, and he said he hadn't made any personal guaranty of payment. * * * Mr. Nast did not tell me I could get the facts about the company from the other officers. I did not go to the bank.”

It appears that plaintiff then returned to Sun Prairie, and came back to Fond du Lac on the 26th of April. On that date he paid for the stock. Concerning his actions thereafter he testified:

“At the directors' meeting I was elected president of the company. I didn't look into the affairs of the company right then. I believed the statements of Mr. Nast. I figured out it would probably be a good proposition to a certain extent, on the statements of Mr. Nast. * * * In the meantime I found out that all the new cars on the floor belonged to the General Motors Company; they were placed there on consignment, to be paid for as they were sold. I think there were eight cars, the same cars that Mr. Nast showed me and told me belonged to the company.”

Defendant testified:

“I introduced the plaintiff to Mr. Romaine, and told him that Romaine was secretary and treasurer, and he could find out everything about the business through Mr. Romaine. I introduced him to Mr. Seefeldt. He was vice president of the company. We walked together five or ten minutes. We walked downstairs, myself, the plaintiff, and Mr. Romaine. They stayed and talked together, and I went home. * * * I showed him a statement that was sent to the General Motors Company; it was made a little later than the 1st of January. That statement showed the assets of the company to be about $75,000. I did not know of any other statement showing the assets of the company, except this one that I showed him. He looked it over and said it was all right. I knew there was an indebtedness of $1,000 to Talheim, but nothing was said about it, because he was supposed to go to Romaine to find that out. * * * I knew there was a bill of $1,518 to the Firestone Tire Company; that was on the report. * * * I didn't know at that time what the indebtedness of the company was. I sent him to Romaine to find out.”

There was testimony by the officers of the company that defendant was aware of the poor financial condition of the company; that he had examined the books; that as president and general manager he had taken part in certain transactions resulting in some of the debts owed by the company; that they had been introduced to plaintiff, but had not been asked as to the affairs of the company; that they had not seen plaintiff examine any financial statements; that plaintiff had never been left alone with any of the directors; and that defendant, at one of the meetings of the directors, had said that the stock was not worth 28 cents on the dollar.

Judgment was entered in accordance with the prayer of the complaint.

Eschweiler, J., dissenting.

Reilly & O'Brien, of Fond du Lac, for appellant.

B. F. Borenson and R. L. Morse, both of Fond du Lac, for respondent.

JONES, J. (after stating the facts as above).

Although the trial was had before a jury, the court ruled that, in actions for rescission of sales on the ground of fraud, the jurisdiction of law and equity is concurrent; that the prayer that the sale of the stock be adjudged null and void, and that plaintiff have judgment for the return of the purchase price, paid, and for other relief, gave notice to the defendant that the suit was conceived in equity, and that equitable jurisdiction was invoked. It was also held that, by failing to raise the point that there was an adequate remedy at law by answer or demurrer, defendant had waived the objection that the case was not cognizable in equity. To this ruling defendant's counsel objected, claiming the right to a trial by jury.

The court dismissed the jury, and made findings of fact to the effect that, among other things, defendant had represented that the assets of the company were $76,000, and that the liabilities were $15,000 owed to a bank, $21,500 due on a land contract, and a few small bills; whereas, in fact, the assets were largely below the amount represented, and that there was owing, in addition to the amounts represented, approximately $11,000; that the cars represented to have been owned by the company were merely held by it on consignment; that the $15,000 note at the bank had been made on the personal security of the officers, and not on the credit of the company, as represented; that the plaintiff made no investigation to ascertain the truth of the representations, but relied on the statements of defendant; and that,...