Kruschke v. Stefan

Pinney, J. 1. The complaint in this action is solely upon the ground that, in fraud of the agreement made between the plaintiff and defendant for the purchase of the premises in question, the purchase price for which was mainly paid by the plaintiff, the defendant, without the knowledge or'consent of the plaintiff, procured the title to the entire premises to be conveyed to himself, in fraud of the rights of the plaintiff, whereas it was understood and agreed that it was to be conveyed one half to the defendant and the other half to him in trust for the plaintiff, and that he now refuses to recognize the plaintiff’s right in or to the premises, or to convey him his half thereof; and it was claimed that a trust should be implied or held to result from these facts in favor of the plaintiff for an undivided half of the property so purchased, under the provisions of secs. 2077, 2079, R. S., which allow such a trust “ where the alienee named in the conveyance shall have taken the same as an absolute conveyance in his own name, without the knowledge or consent of the person paying the consideration.” And the complaint, in apt and proper language, states a cause of action in favor of the plaintiff under this statute. Lounsbury v. Purdy, 18 N. Y. 517, 520. While the plaintiff alleges in his complaint that he and the defendant were partners at the time in the furniture and undertaking and liquor business, it is alleged that “said real estate was and is in no way connected with the co-partnei’ship business.” The plaintiff produced evidence tending to support the allegations of his complaint, but it was clearly proved that at the time of the purchase the title to the property in question was taken in the name of the defendant with the knowledge and consent of the plaintiff, and the court so found, in substance. The com — 382 — plaint in the former action between these parties, brought to wind up and settle the affairs of their copartnership, which was verified by the oath of the plaintiff in this action, was a solemn admission on his part that the title to the property in question was taken in the name of defendant with the plaintiff’s knowledge and consent, and in it he alleged that the partnership was formed August 15, 1883, “ for the purpose of buying real estate, erecting buildings thereon to rent, and carrying on furniture business ” under the agreement therein set forth, and that, “ pursuant to said contract, the said partnership purchased ” the said real estate (describing it). This evidence, although objected to by the plaintiff, was admitted, and the plaintiff, as well as his counsel, insisted throughout the trial that the property in question was not partnership property, and had nothing to do with the partnership enterprise. The defendant testified that the title to the lots was taken in his name at the plaintiff’s request, and produced other evidence to support that contention, and the defendant’s counsel on the trial further admitted that the plaintiff and defendant owned the property as copartners, but the title was taken in the defendant’s name; so that the court found that it was agreed that the defendant should subsequently convey a one-half interest therein to the plaintiff. It was also found that the lots were treated as partnership property by the plaintiff and defendant, and it appeared that they had been largely improved by the money and funds of the copart-nership in erecting buildings thereon, in one of which they carried on business. The finding, it will be seen, negatived the entire ground for equitable relief upon which the complaint was founded, and found that the deed was taken upon an express parol trust, void under the statute (Rasdall's Adm'r v. Rasdall, 9 Wis. 379), unless it be held that the real estate in question was the partnership property of the firm. There was, — 383 — therefore, not a case of variance under secs. 2669, 2670, E. S., but a failure of proof under sec. 2671, “ where the cause of action to which it was directed was unproved, not in some particular or particulars only, but in its entire scope and meaning,” which the statute declares shall not be deemed a case of variance within those sections. The cause of action established by the finding, and upon which judgment was rendered, granting the plaintiff relief, was one not stated in the pleadings or in any manner included in the issue. The one set out in the complaint was founded on fraud and breach of confidence, and the other, upon which judgment was rendered, rested upon what must beseemed contractual relations between the parties; and the question is whether the judgment thus rendered, proof having been received without objection, ought to be sustained. There are cases which seem to, and some of which do, hold that in such case the judgment may be sustained if the evidence is not objected to at the trial. Many of these cases are cited in Forcy v. Leonard, 63 Wis. 361, but, on examination, some of them will be found to be cases of mere variance and not of failure of proof; and others, cases where, as it was said in Forcy v. Leonard, “the relief granted was consistent with the case made by the complaint.” Flanders v. Cottrell, 36 Wis. 564; Matthews v. Baraboo, 39 Wis. 674; Russell v. Loomis, 43 Wis. 545; Cordes v. Coates, 78 Wis. 642. In K- v. H-, 20 Wis. 239, and Eilert v. Oshkosh, 14 Wis. 586, and other cases, it was held that a party cannot recover on an entirely different cause of action from that set out in his complaint, and in other cases that an action founded in tort cannot, at the trial, be changed, into one founded on contract, and vice versa. Anderson v. Case, 28 Wis. 505; Kewaunee Co. v. Decker, 34 Wis. 378; De Graw v. Elmore, 50 N. Y. 1; Dudley v. Scranton, 57 N. Y. 424, 428; Barnes v. Quigley, 59 N. Y. 265, 267. This case affords a striking example of the impolicy, not — 384 — to say the impropriety, of the rule allowing a party to sustain a judgment on proof of facts not in any manner embraced in or consistent with the case made by the complaint, and not embraced within the issue. Here were several important issues tried without any reference by way of pleading to the facts out of which they arose in either complaint or answer: (1) Whether the property in question was partnership property, and conveyed to the defendant for partnership purposes; (2) whether the plaintiff had released to the defendant all claim to it; (3) whether this release was procured by undue influence and duress. Under such a practice the important objects of written pleadings are entirely lost sight of, namely, to apprise the parties respectively of the nature and ground of the cause of action and defense, and to show upon what grounds the final judgment was given, and what was adjudicated by it. The subject is considered in the recent case of Southwick v. First Nat. Bank. 84 N. Y. 428, where the court pointed out that the proof wholly failed to establish the cause of action alleged, and it was said: “ This is not a Case where the pleadings can, after the trial, be conformed to the proof, as such an amendment would change substantially the claim of the plaintiff as alleged. This is not a case of mere variance or mere defect (and it was pointed out at the trial), but a case of failure to prove the cause of action alleged in its entire scope. Pleadings and a distinct issue are essential in every system of jurisprudence, and there can be no orderly administration of justice without them. If a party can allege one cause of action, and then recover upon another, his complaint will serve no useful purpose, but rather to ensnare and mislead his adversary.” The case of Truesdell v. Sarles, 104 N. Y. 164, 167, is quite in point, where an equitable action was brought by creditors to set aside a conveyance by a husband through third persons to his wife as fraudulent, but it appeared that it was for a good con385 sicleration, and that there was no fraudulent intent; and it was held error to refuse to nonsuit the plaintiff, although, as to creditors, the conveyance might have been converted into a mortgage; and that such relief could only be given upon proper evidence in an action where it was consistent with the case.macle by the complaint, and embraced within the issue. For these reasons we must hold that' the judgment appealed from cannot be upheld, and that the defendant is entitled to judgment dismissing it, but without prejudice to such other action as the plaintiff may be advised should be brought. 2. The evidence shows, we think, that the lots in question were partnership property, used and treated as such by the parties, and improved out of partnership funds, the title thereto, by agreement, having been taken in the name of the defendant, really for the uses and purposes of the copartnership. The title was vested just as the parties intended it should be, and, although the property was realty, in the estimation of a court of equity it had been thus converted into personal estate for all partnership purposes, and, with other partnership effects, was held subject to the payment of firm debts and losses, and the return of the capital originally advanced by each of the partners, when the residue, if any, would be subject to division between'the partners, as profits; and if it consisted of real estate they would be entitled to hold the legal title as tenants in common. 1 Bates, Partn. § 282, and cases cited; Bird v. Morrison, 12 Wis. 138; Fowler v. Bailley, 14 Wis. 126; Roberts v. McCarty, 9 Ind. 16; Godfrey v. White, 43 Mich. 171, 178; Bopp v. Fox, 63 Ill. 540; Martin v. Morris, 62 Wis. 418; Foster's Appeal. 74 Pa. St. 391: Andrew's Heirs & Adm'rs v. Brown, 21 Ala. 437; Shanks v. Klein, 104 U. S. 18; Allen v. Withrow, 110 U. S. 119, 130. The plaintiff, therefore, had no right to call for a conveyance of his interest as a tenant in common of the lots until the — 386 — trust fastened upon them for partnership purposes had been fully satisfied. Until then the legal title must remain where the parties, by mutual consent, have vested it, and therefore the remedy of the plaintiff, if any, was only by action to dissolve the copartnership and for an accounting and proper application of its assets. 2 Bates, Partn. § 910. The general rule is that an action cannot be maintained by one partner against his copartner for a partial division of the assets of the firm, and this case does not fall within any recognized exception to the rule. It is contended in support of the judgment that, where the title to partnership property has been wrongfully or improperly vested in one copartner, the other may maintain an action to have the legal title vested in all the partners according to the true intent of the parties and its equitable ownership, without bringing an action for dissolution and winding up the affairs of the firm. The cases of Traphagen v. Burt, 61 N. Y. 30, and Davis v. Davis, 60 Miss. 615, are relied on. Both of these were cases where real property had been acquired with partnership funds and for partnership purposes, but the copartner conducting the transaction, without the knowledge or consent of the other partner, had procured the title to be conveyed to him which should have been conveyed to both, and in these cases it was held that the implied and resulting trust arising out of such breach of faith might be enforced without bringing a suit for dissolution and accounting. But these cases are clearly distinguishable from the present. Here there has been no violation of confidence or breach of faith by the defendant in taking the deed of the lots in question in his own name. The court finds that it was so taken in good faith, and was so taken for partnership purposes; and the lots became a part of the property and assets of the firm. This objection furnishes an additional, and, as it seems to us, an incontestable ground for holding that the — 387 — plaintiff’s complaint should be dismissed, but without prejudice to another action, should he elect to bring it. Learned v. Bishop, 42 Wis. 470. 3. The release given in evidence against the plaintiff’s objection is, on its face, full and complete, and conveyed to the defendant all the plaintiff’s right, title, and interest in and to any property theretofore or then owned by the firm of Stefan & Co., and released the defendant from all claims arising out of the partnership transactions, or for any other cause whatever. Where a release is offered in evidence without having been pleaded, the answer cannot be amended at the trial so that it can be received. Shernecker v. Thein, 11 Wis. 556. But where, as in this case, the court received evidence of the cause of action released, without its being set out in the complaint, without objection on the part of the defendant, and to which he had never had a chance to plead, it would seem to be just and proper to receive the release of such cause of action in evidence, for, as to the new cause of action, the defendant has had no opportunity to plead, and ought not to be held restricted in proof by his answer to a cause of action which the plaintiff has wholly failed to prove. 4. The plaintiff, in rebuttal, was allowed, against the defendant’s objection, to give evidence, the substance of which has been stated, to show that the release was procured by threats of arrest and imprisonment of the plaintiff, made by the defendant, and that it was because of duress that the plaintiff consented to the alleged settlement, fearing that if he did not, he would be deprived of his liberty, and that, therefore, the release is void; and the court found in favor of this defense. The evidence is not sufficient to sustain this finding, or to impeach the release in question. The statements of the plaintiff on this subject are wholly denied by the defendant, and his denial is strongly sustained by the testimony of Mr. Miles, who drew the release — 388 — and witnessed its execution, and by .testimony tending to show that the parties were brought together through the intervention of a Mr. Metzdorf, who told the defendant that the plaintiff would take $1,000 in full as a settlement; and the defendant, on meeting plaintiff, asked him if that was so, and he said he would sign a bill of sale for that sum, whereupon they proceeded to the office of Mr. Miles and arranged the matter, the plaintiff taking the defendant’s note for the amount. The alleged threats did not specify any cause known to the law for depriving the plaintiff of his liberty, or intimate that he had been guilty of any legal offense, and were not such as to have an undue influence on a mind of reasonable firmness, or to prevent the exercise of the plaintiff’s free will in making the settlement. Brown v. Peck, 2 Wis. 277, 278. The evidence furnishes no ground for holding that the plaintiff was unduly influenced, or his free will overpowered, by the alleged threats. For these reasons the judgment of the circuit court must be reversed, and the cause remanded with directions to dismiss the plaintiff’s complaint without prejudice to another action. By the Court. — The judgment of the circuit court is reversed, and the cause is remanded accordingly.