Zwietusch v. Luehring

• Decision Date: 09 December 1913
• Citation: 156 Wis. 96,144 N.W. 257
• Parties: ZWIETUSCH ET AL. v. LUEHRING ET AL.
• Court: Wisconsin Supreme Court

156 Wis. 96

144 N.W. 257

ZWIETUSCH ET AL.

v.LUEHRING ET AL.

Supreme Court of Wisconsin.

Dec. 9, 1913.

Appeal from Circuit Court, Milwaukee County; O. T. Williams, Judge.

Action by Florence G. Zwietusch and others against George F. Luehring and others. Judgment for plaintiffs, and defendants appeal. Affirmed.

This action was brought to recover rent alleged to have accrued from and after August 14, 1908, to the amount of $9,000. A verdict was directed for the plaintiffs, and from a judgment entered thereon defendants appeal.

The lease was made between plaintiffs' predecessors in title and one Richard C. Kann, on November 15, 1904, for a period of ten years, at an annual rental of $4,000. The lease provided that the lessee might assign it, provided the assignee should at the time of the assignment execute and deliver to the lessor a written instrument agreeing to pay the rent reserved in the lease and to perform all the conditions, covenants, and agreements thereof. It further provided that such assignment should not release the lessee, but that he should remain personally liable in the event of an assignment. It also recited that any subsequent assignment should be made only on the same terms and subject to the same conditions as were provided for in reference to the first assignment. It further provided that the leased premises should be used for an amusement park, and that the lessee should expend in buildings and improvements thereon the sum of $75,000 before opening it to the public. The lessee was given 90 days after the expiration of the term in which to remove the improvements placed thereon; but it was provided that in case there was any default in the payment of the rent or taxes agreed to be paid, or a failure to otherwise comply with the terms of the lease, the lessor might enter upon the premises and sell the improvements thereon and apply the proceeds to the payment of the amount due the lessor, the overplus, if any, to be paid to the lessee. The covenants and conditions of the lease were made binding on the parties, their legal representatives and assigns; but such provision was not to be construed as permitting an assignment of the lease or a subletting of the premises, except in the manner provided for in the lease.

On December 6, 1904, the lease was assigned by Kann to the International Construction Company, a corporation which was organized for the purpose of operating an amusement park on the leased premises. This corporation agreed with Kann to assume all of the obligations imposed on him by the lease and entered into possession of the premises and remained in possession thereof until about November, 1907. All of the defendants in this action, except Luehring, were stockholders in the corporation. Bonds to the extent of $100,000 were issued by the corporation and were largely subscribed for by its stockholders. In the fall of 1907 the company was financially embarrassed and its stockholders held a series of meetings to devise means for financing the enterprise. These meetings, or some of them, were attended by Oscar B. Zwietusch, who was then a stockholder in the corporation. He was also one of the lessors, having, with his brother Edward O., inherited the leased premises from his father who died in 1903. It was finally decided to make an assessment against the stockholders of an amount sufficient to pay debts and to place the corporation in a position where it could continue the amusement business during the year 1908, and a written agreement was entered into whereby the stockholders agreed to ratably contribute the necessary funds; the amount of the assessment being limited to 50 per cent. of the face value of the stock held. The agreement recited that it was necessary to reorganize the corporation and a plan of reorganization was outlined. In brief, it was proposed to issue paid-up stock in the corporation to be formed to the amount of the bonds held by the stockholders in the existing corporation and also to the amount advanced on the assessment to take care of present and future obligations. George F. Luehring was named as trustee to collect the assessment and to settle and compromise the outstanding claims. He also signed the contract representing that he was the holder of ten shares of stock in the company. It seems, however, that this stock was in fact owned by the Hilty Lumber Company, of which he was secretary. Luehring collected $12,000 or $13,000, with which he settled with substantially all of the creditors. In the meantime one Scholl commenced an action against the corporation and recovered a judgment, of which a transcript was filed in the circuit court, and sequestration proceedings were brought in behalf of the plaintiff. The defendants, excepting Kann, procured an assignment of this judgment, and had their own attorney substituted for the attorneys who represented the plaintiff, and the defendants then apparently proceeded to conduct the reorganization proceedings through the receivership. It was decided by the stock and bond holders to sell the property of the corporation and that Luehring should buy it in for the signers of the agreement. On petition the court ordered a sale to be made, and it was made to Luehring and confirmed by the court. This sale specifically covered the leasehold interest of the corporation in the premises.

Among other things, the order of the court directing the sale of the property of the International Construction Company directed that all of the property of said corporation be sold, including “its interest as lessee in the property described in said lease upon which said Wonderland Amusement Park * * * is situated, and convey the same to the purchaser or purchasers free of all liens and incumbrances thereon, * * * excepting the lien of said lease under which the defendant company holds possession of the premises upon which its said amusement park is located, upon confirmation of said sale by this court and upon said purchaser executing an agreement with the receiver herein, to be ratified and confirmed by this court, binding such purchaser to assume and pay the rent for said amusement park due and to become due and to assume all the obligations of said lease in accordance with its terms, conditions and limitations, together with an acceptance of said undertaking or agreement by the lessors of said premises.”

This order was dated February 6, 1909. The provision therein requiring the purchaser of the leasehold interest to enter into an agreement to assume and pay the rent, and all the obligations of the lease were inserted at the instigation of the attorney who then represented the lessors. The property was sold to the defendant Luehring on February 20th for his benefit and the benefit of his codefendants, for the sum of $500. The notice of sale recited that the “interest and liability” of the corporation in the lease would be sold. On February 21st, the receiver made his report, reciting the sale and the fact that he had conveyed all of the property of the corporation to the defendant Luehring “free of all liens and incumbrances thereon * * * excepting the lien of said lease under which the defendant company holds possession of the premises upon which its said amusement park is located.” The report specifically recited that the interest of the corporation in the lease had been sold. On the same day an order was entered confirming the sale, which also recited that all of the property of the corporation was sold to the defendant Luehring “free and clear of all liens and incumbrances thereon, * * * excepting only the lien created by the terms and conditions of the lease.” It further recited that the sale had been made in conformity with the terms and conditions of the order of sale. The receiver's report did not recite that the leasehold interest had been sold subject to the condition that the purchaser should execute an agreement with the lessor binding such purchaser to assume and pay the rent due and to become due and to assume other obligations of the lease. Neither did the order of confirmation contain any such requirement. The order of confirmation was made ex parte and was not submitted to the lessors' attorneys.

Oscar B. Zwietusch appeared at the sale and stated that he did not want to interpose any objection to it, but wanted it understood that the lease was a prior lien on all the buildings in the park, and that such buildings were part of the park itself, a part of the real estate, and that the lessors held a lien thereon and that whoever bought the property would buy it subject to that lien, and that they would not let any one into possession that would hurt “our claim in any way that we hold against the International Construction Company and the stockholders.” Oscar B. Zwietusch died in July, 1910.

Mr. Durant, the attorney for the defendants, testified that Zwietusch took the position that the lessors had a valid enforceable claim against the stockholders of the International Construction Company for the rent stipulated in the lease, and that the lessor would do no act or make no contract that would tend to weaken such claim. This contention on the part of Mr. Zwietusch was apparently based on the fact that the stock in the corporation had been illegally issued, and that because of such illegal issue there was a personal liability on the part of the stockholders to the lessors. Mr. Durant further testified that Mr. Zwietusch refused to accept an agreement from Mr. Luehring to be bound by the lease, and that it was for this reason that the order of confirmation did not follow the order of sale by directing the execution of such agreement. This evidence was stricken out.

The receiver executed to Luehring a bill of sale conveying the property of the International Construction Company, and also executed an assignment of the lease to said Luehring. This assignment was not produced at the time of the trial, but the...