Heckendorn v. Romadka

Siebecker, J. The purpose of respondent’s examination under sec. 4096, Stats. (Supp. 1906), is to enable plaintiff to frame his complaint. To entitle plaintiff to such an examination before issue joined, the notice thereof must be “accompanied by an affidavit of the party, his agent or attorney, stating the general nature and object of the action” and “the points upon which such discovery is desired.” The plaintiff attempted to fulfil these demands of the statute by the service of an affidavit stating that plaintiff seeks reimbursement for the damages he claims to have suffered through the alleged fraudulent scheme of the defendant El Globo Mining [421] and Milling Company and tbe defendant Charles P. Romadka, by wbicb he was induced to purchase and pay for stock of the corporation, and that plaintiff seeks a rescission and cancellation of such stock subscription and purchase. This remedial statute has repeatedly been declared to be a highly beneficial one, and one to be liberally construed. See Schmidt v. Menasha W. W. Co. 92 Wis. 529, 66 N. W. 695, and cases cited. If the facts stated in the affidavit charge that plaintiff may be entitled to recover against the defendants, then he has a right to a discovery, whether or not the imputations of fraud are well founded. Id. The requirements of the affidavit upon which such application is based were considered in the recent case of Gratz v. Parker, 137 Wis. 104, 118 N. W. 637, and it was there declared: “It does not require that facts sufficient to constitute a. cause of action shall be set forth therein. ... It is not even necessary that the plaintiff should know that a cause of action existed.” This it seems must necessarily be the interpretation of this statute, for its very purpose is to enable a plaintiff to secure information that he may properly state his cause of action. As stated in the Schmidt Case: “It may be that upon examination of the defendants the plaintiff will find that there is no ground for charging the defendants with fault, and expensive litigation may thus be avoided.” It is however contended by the defendant Romadka that the plaintiff’s statement in the affidavit for discovery, namely, “that the general nature and object of. the action is for the rescission and cancellation of the subscription and purchase by the plaintiff of five (5) shares'of capital stock of the defendant company, . . . issued by such company to the plaintiff on the 30th day of November, 1906, and for the recovery of the money paid therefor by the plaintiff,” is an election that his cause of action shall be for a rescission and cancellation, and that since, under the facts and circumstances stated, no [422] cause of action does or can exist against the defendant Ro-madha because it appears be is not in possession of any of the proceeds, bis examination should not be permitted. Madison v. Madison G. & E. Co. 129 Wis. 249, 108 N. W. 65; State v. Milwaukee E. R. & L. Co. 136 Wis. 179, 116 N. W. 900. Tbis contention challenges the plaintiff’s right to proceed upon the ground that be has chosen to remedy bis wrong by a rescission of bis subscription to the stock of the defendant corporation and the recovery as damages of an amount equal to the money paid therefor. The argument is that the statement in b\s affidavit amounts to an election of remedy and restricts him to an action based upon impliéd assumpsit as for money bad and received. The correctness of tbis claim must be ascertained from the facts now before the court and the-remedies afforded by the law under such circumstances. It is in effect stated in the affidavit that the plaintiff made-the purchase of the stock of the defendant company; that be paid and the defendant company received cash in payment of' the transfer; that the defendant Romadka was an officer of the company and-owned a controlling interest therein; that be and the officers and representatives of the company managed the corporate affairs and property, .and as such fraudulently misrepresented its actual financial condition, the value of its property and its productiveness, and that be finally through fraud secured the title and possession of all the company’s property and assets. These statements are ample to-show the general nature of the wrong of which the plaintiff complains, namely, a fraudulent scheme and purpose, wherein the respondent and the defendant company joined and whereby the plaintiff was injured and damaged. It is apparent from these facts that the defendant Romadka, as a stockholder of the defendant company and as an officer in charge and management of its affairs, secured a benefit through the corporation, which had obtained money for the-stock sold to the plaintiff, and by ultimately gaining posses [423] sion of its property, thus through fraudulent manipulation obtaining the title to the company’s property and retaining it against the right of the plaintiff and others similarly situated. Milbrath v. State, ante, p. 354, 120 N. W. 252. The facts and circumstances stated fully sustain plaintiff’s contention to the effect that he' has a cause of action against the defendants for fraud committed by them jointly. That the plaintiff, under such circumstances, has the right to seek relief for the fraud so perpetrated upon him by the defendant company and by Bomadka as its officer and agent, we deem well sustained by the following cases: Pittsburg M. Co. v. Spooner, 74 Wis. 307, 42 N. W. 259; Zinc C. Co. v. First Nat. Bank, 103 Wis. 125, 79 N. W. 229; Hebgen v. Koeffler, 97 Wis. 313, 72 N. W. 745; Franey v. Warner, 96 Wis. 222, 71 N. W. 81. The doctrine of these cases is that the injured party may demand that he be made good by those who have united in the wrong resulting in his injury; and in seeking this relief he is not necessarily compelled to pursue the joint wrongdoers separately or to seek relief against those into whose hands he can trace the funds. Liability attaches upon the-ground that when such a fraud is committed by several acting-in concert and they reap a benefit therefrom, then they are-all jointly and severally liable, and no participant can escape-liability because he did not share in a pecuniary benefit of the wrong. The benefit so secured by any one of the parties is deemed to have been for the benefit of all, and each is individually liable for the whole injury. Harrigan v. Gilchrist, 121 Wis. 127, 280, 281, 99 N. W. 909; Mack v. Latta, 178 N. Y. 525, 71 N. E. 97. The corporation is properly included as a party under the charge made in the affidavit. The allegations that defendants made fraudulent representations by which plaintiff was induced to purchase the stock and part with his money reasonably permit of the inference-that'its officers and agents acted authoritatively in the matter complained of, and, if sus424 taincd by proof, subjects it to liability. Zinc C. Co. v. First Nat. Bank, supra. Tbe situation thus presented invests plaintiff with tbe right to pursue one of several courses to remedy tbe wrong. He bad tbe right to restore the original situation, rescind tbe contract, and recover back bis money. Tie may offer to restore, and, by keeping such offer good, sue in equity for a rescission of tbe contract and for a recovery of bis money. Without restoring, be or all similarly interested joining may sue in equity to charge such person as a trustee of tbe profits fraudulently retained by him and for an .accounting. Or be may sue such person at law for tbe damages resulting from tbe fraud. True, plaintiff states tbe general nature and object of bis action to be for tbe rescission of tbe subscription contract and for tbe recovery of tbe money paid thereon. This, however, cannot be held to be an election of remedies so as to limit him in framing bis complaint to an action upon implied assumpsit as for money bad and received ¡after be shall learn tbe details of tbe transactions from respondent’s examination. It may well transpire that facts will be elicited according with tbe purpose so declared and upon which an action in equity either for a rescission of tbe contract and tbe recovery of tbe money, or, without a restoration of tbe stock, an action to charge defendants as trustees of tbe profits fraudulently retained by them and for an accounting may be framed as affording tbe most complete and efficient remedy. Tbe charge that tbe respondent, as stockholder ,and director, and through bis sons, who were also directors, controlled tbe corporate property and its affairs and so manipulated tbe same as to secure possession of tbe property and assets of tbe company, amply justifies tbe claim that be as well as tbe company may be found to have received tbe property of tbe plaintiff through their joint wrong, and may, under tbe doctrine of tbe foregoing cases, establish tbe relationship of a trustee as between him and tbe plaintiff. We are of opinion that tbe court erred in vacating and set [425] ting aside the proceeding to examine the respondent before issue joined under sec. 4096, Stats. (Supp. 1906), in enjoining plaintiff from proceeding further therein, and in dismissing the action as to the respondent. By the Oourt. — The order appealed from is reversed, and the cause remanded to the trial court for further proceedings according to law.