Limited Investment Ass'n v. Glendale Investment Ass'n

Bardeen, J. The laiv bearing upon the rights, duties, and obligations of promoters of corporations has been so-fully covered and exhaustively discussed in the recent cases of Fountain Spring Park Go. v. Roberts, 92 Wis. 345; Franey v. Warner, 96 Wis. 222; Hebgen v. Koeffier, 97 Wis. 313, as to render it unnecessary at this time to do more than to refer to those cases. In this case, the facts as found by the jury, and which are-fully supported by the evidence, are substantially that the58 ■Glendale Investment Association was the owner of a certain tract of land, which it authorized Clayton to sell for $2,700 per acre, and upon which it was to pay a commission of $200 per acre. Clayton, with full knowledge of the company, associated himself with Griffin and Pollock in the capacity of promoters, for the purpose of organizing a corporation to purchase this land. The plaintiff corporation was formed, Clayton and Griffin were elected directors and officers, and the land was purchased at $2,700 per acre; Griffin and Clayton carefully withholding any information from most of the ■subscribers for stock that they wei’e to receive a rebate of $200 per acre for their mutual benefit. The defendant Glendale Investment Association, knowing of the organization and purpose of the corporation, and of the relation Clayton sustained to it, helped on the deal, but, in order to clear its •skirts, makes its contract to Clayton, and advises the assignment of it to the corporation. It then receives the money •of the corporation, and forthwith returns to Clayton some $1,000 in alleged commissions. That this was a fraud upon plaintiff seems too clear for argument. As soon as these facts came to the surface, plaintiff tendered back what it received, and demanded its money. Upon the refusal to pay, plaintiff made its election to recover back the consideration paid. It might have chosen other remedies, as are pointed out in the Franey Oase; but, having elected to stand upon a rescission of the contract, it is bound thereby. An inspection of the complaint and the proceedings upon the trial lead at once to the conclusion that this action is based upon implied assumpsit, and is really an action for ■money had and received. Such being the case, it becomes important to inquire whether the recovery against the defendant Griffin can be maintained. The rule is quite elementary that, to enable a person to maintain an action for ' money, had and received, it is necessary for him to establish 'that the persons sought to be charged have received money [59] •belonging to him or to which he is entitled. That is the fundamental fact upon which the right of action depends. National Trust Co. v. Gleason, 77 N. Y. 400. The purpose of such an action is not to recover damages, but to make the party disgorge; and the recovery must necessarily be limited by the party’s enrichment from the alleged transaction. Evidence of crooked dealing or fraudulent practices is only important in determining the plaintiff’s right to secure the fund. While it may be admitted that all the defendants were joint tortfeasors, to the extent that they-would be jointly liable for all damages the plaintiff has sustained by reason of their fraud, yet, when it is sought to render them liable on g'tiasicontract, a different rule prevails. The basis of recovery in the latter case being a loss on one side and a consequent enrichment on the other, liability can only exist in so far as these elements concur. There is no implied promise to pay damages. The promise •that the law implies is that the guilty party will restore that Avhich he has received, and which the other has shown himself entitled to. To the extent, therefore, which it is shown that the one party has suffered loss and the other gained profit, can the recovery in this form be sustained. The law does not imply a promise to pay for something the party has not-received, while in the case of the tort it casts upon him an obligation to pay all damage done, regardless of a promise. Applying these observations to the facts before us, we find that every dollar of the money sought to be recovered in this action was paid to the defendant Glendale Investment Association by the plaintiff. Not one cent was paid to Griffin, or came to his pocket, except as it came through the Glendale Company to Clayton, and then to him. The amount received by Griffin was but a small fraction of the money paid by plaintiff to the Glendale Company. Plaintiff, suing as for a rescission of its contract, and upon the im [60] plied promise to restore that which has been taken from it, is bound to look to the one to whom it paid the money. Cases may and do occur where the money sought to be recovered was received by one for the benefit of others, and where all interested in the fund would be jointly liable. But this is not such a case. The money paid by plaintiff to the Glendale Company was not paid for or on behalf of Griffin. It was paid on the contract, and as part of the purchase money of the land conveyed. There was no'contract between plaintiff and Griffin to rescind, and hence no implied obligation can arise between them. The entry of judgment against Griffin for the full amount paid on the contract by plaintiff was manifestly wrong, and must be reversed. As bearing upon the questions hereinbefore discussed, we cite Barndt v. Frederick, 78 Wis. 1; Keener, Quasi-Cont. 200-202; Alger, Promoters & Promotion, § 99. Counsel for the Glendale Investment Association argue earnestly that the judgment 'as to it should be reversed, because there was no finding that there was a conspiracy or confederation among the defendants to defraud the plaintiff. Such a finding was not essential to the recovery. The special verdict, as we read it, substantially covers thq facts necessarily involved in the case; and, if a conclusion that a conspiracy was essential to a recovery was needful, it was but a legal conclusion the court might draw from the facts found. Perhaps a better answer to this contention is found in the fact that this defendant did not request any such finding, and has failed to preserve any exception to the failure of the court to submit the question on that line, requested by the defendant Griffim. The criticism of the charge of the court on this branch of the case is somewhat hypercritical. That portion to which especial exception is made is as follows: “And, to enable yon to answer these questions correctly, you may take into consideration the allegation made in the complaint that [61] there was an agreement,” etc. Read in connection with the entire charge, it is perfectly evident that what the court intended was- that the jury might take the allegations of the ■complaint into consideration in determining in what manner it was charged that such an agreement or combination had been made, not that it tended in any manner to establish the fact. "We have carefully compared the charge given the jury with the requests submitted by the Glendale Company, and are well satisfied that the defendant has suffered no wrong. The facts proven tend to establish the justice of the conclusion arrived at, and leave the defendant without any just cause of complaint. The real basis of recovery rests upon the dealings between Clayton, the agent of said defendant, ■and at the same time a promoter and an officer of plaintiff, and the defendant corporation, through its secretary and general manager, Meyers. It is idle to say that this defendant or its secretary had no reason to believe that Clayton was not giving the actual purchaser the benefit of the commission allowed him. The fact is undisputed that the contract was for the full selling price of $2,100 per acre, and that the commission was not allowed to plaintiff in rebate of the contract price. It is also undisputed that the Glendale Company gave its checks from time to time to Clayton individually for the commission, and charged the amounts to its commission account. These facts, taken in connection with the situation and relations of the parties, speak loudly in favor of the conclusion arrived at. The true situation is fairly outlined by the verdict, and it ought not to be disturbed. By the Court. — The judgment of the superior court of Milwaukee county, as to the defendant Griffin, is reversed; and, as to the defendant Glendale Investment Association, the judgment is affirmed.