Zwietusch v. Luehring

— 107 — The following opinion was filed December 9, 1913: Baiiites, J. The appellants insist that the judgment is erroneous for the following reasons: (1) No liability upon the covenants of the lease was ever imposed on the defendants. (2) If any such liability was imposed, it ceased when the lease was assigned to the Wonderland Amusement Oompany. (3) The lessors exercised their choice between two inconsistent remedies, by electing to hold only the International Oonstruction Oompany and its stockholders. (4) The lessors by their acts and conduct have estopped themselves from claiming any liability against the defendants. (5) By their acts and declarations the lessors have waived any claim against the defendants. (6) This action is a collateral attack on a final order of the court in the receivership proceedings, and therefore cannot be maintained. (7) The court erred in receiving certain testimony. (8) The court erred in rejecting certain evidence offered.- (9) The court should have submitted to the jury the questions: (a) Did defendants surrender possession of the premises to plaintiffs, and, if so, when? (b) Was there a re-entry by the plaintiffs, and the date thereof ? No claim is made that there was any other jury question in the case. 1, 2, and 6. The first, second, and sixth questions will be treated together. The order directing the receiver to sell the leasehold interest and other property of the International Construction Company provided in substance that upon the sale being made and confirmed the purchaser should execute a contract assuming the obligations of the lease and agreeing to pay the rent reserved therein. The provision was inserted in the order because the lessors’ attorneys insisted that it should be. The notice of sale recited that the "interest and liability as lessee'” of the Construction Oompany. would be sold. The plan (of certain stockholders of the Construction Company — 108 — was that its property should be sold to one of their members and a new corporation organized to take over the property ■ and carry .on the business. All of the defendants except Kann were parties to this agreement. The receivership proceedings were carried on by the attorney for these parties. Presumably he drew the order of sale and the notice of sale. In any event he knew their contents, and the clients whom he represented were chargeable with like knowledge. It fairly appears from the evidence that the notice of sale was read before the property was offered. It is perfectly obvious that the lease, coupled with the liability of the International Construction Company thereunder, was what was offered for sale and what Luehring actually purchased. It is conceded that the Construction Company was liable for the rent reserved in the lease for the period covered by it. The order of confirmation recites that the proceedings of the receiver had been carefully examined, and that the court after such examination was satisfied that the sale. “had in all respects been made in conformity with its order made herein February 6, 1908,” being the order of sale. The receiver’s report of sale which was confirmed recited that it had conveyed the property sold free and clear of all incumbrances, excepting the lien of the lease under which the corporation held possession, “as directed in the order of sale” Luehring took possession of the property and in a few days conveyed the same to the new corporation (the Wonderland Amusement Company), and presumably stock was issued to the signers of the agreement referred to in the manner provided for, although Luehring testified that he was not a stockholder. He in any event was elected secretary and treasurer of the new corporation. This corporation then went into possession of the property and remained in possession until the fall of 1908, when it became insolvent. How did Luehring and his associates escape the liability which he and they unquestionably as109 snmed when the purchase was made ? Not by virtue of the order of confirmation, because that order confirms the sale made, after reciting that it was made in conformity with the order of .sale. There is no conflict in the two orders in this regard. The agreement provided for by the order of sale was not to be executed before the sale was confirmed. There was no necessity for repeating in the order of confirmation the requirements of the order of sale. This order stood until it was modified by some subsequent order, and all that can be claimed here is that the order of confirmation is silent as to a positive requirement of the order of sale. If it had been shown that the receiver ignored the order of sale and sold the property on conditions other than those required by the order, a different question would be presented. But such is not the fact. It is true the-receiver reported the giving of a deed of the property before confirmation, and that this act was contrary .to the order of sale and was confirmed by the court. But we think it is just as true that the confirmation order did not relieve the purchaser at the sale from assuming the obligations in regard to rent which he undertook to assume when he made his purchase. The order of confirmation carefully refrains from reciting that the premature giving of the deed was in conformity with the order of sale. The fact that the purchaser got the deed into his possession before he executed the contract provided for could not operate to relieve him from the performance of that duty or the assumption of the obligation thereof. And where he went into possession of the property and took the benefits of the sale, he could not escape the burdens assumed when the purchase was made, by refusing to do the things which he ought to have done and which he was bound to do. There was a legal duty imposed by the order to assume the rent and to agree in writing to do so. He could not escape the obligation to pay which was imposed by refusing to undertake it in writing, and at the same — 110 — time avail himself of all tbe advantages acquired by the purchase. The statute of frauds has no application to this situation. But it is argued that the lessors refused to consent to the sale or transfer of the lease to Luehring and refused to recognize the validity of such transfer, and therefore the obligation to assume liability for the rent did not become effective. There are two answers to this contention. In the first place it was not essential that the lessors should give such assent, and in the second place the evidence fails to show that they withheld it. By its terms this lease was not assignable without the consent of the lessors in writing, and this no doubt was the reason why the order of sale provided for consent on the part of -the lessors. But, notwithstanding this provision in the lease, it was assignable by operation of law whether the lessors gave their consent or not. See 18 Am. & Eng. Ency. of Law (2'd ed.) 661, where many of the cases so holding are collected. If the lessors thought they could prevent the purchaser at the sale from taking the benefit of his purchase by refusing assent thereto, they were simply mistaken as to what their legal rights were. If the purchaser desired to avail himself of such benefit it was his duty to do the things which he was required to do, regardless of the attitude of the other party, and so long as he did them his rights would be protected regardless of the position taken by the lessors. The law settled the rights and obligations of the parties, and protests on the part of either party would not be of much avail. The lessors might protest against the validity of the assignment, but so long as the assignees took possession of and used what they bought, such protestations did not change the legal status of the parties. In the next’ place, we hardly think that there was more than a mere scintilla of evidence to show that the lessors wotild re — 111 — fuse to approve of the agreement provided for in tlie order of sale, and it is certain that they were not giveh any opportunity to do so and that the purchaser did not propose to run the risk of giving any such opportunity so long as he got the benefit of his purchase and could .avoid doing so. It is undisputed that the lessors were in consultation with an able attorney and that it was at his suggestion that the order of sale was so worded that the purchaser thereat would become bound by the covenants of the lease. One of the lessors appeared at the sale and stated in substance that he had no objection thereto, but would do nothing that would jeopardize a claim they were making against the stockholders of the International'Construction Company. It has not been, suggested that such consent could affect such claim, and we fail to see how it could. The persons who would become liable beyond any question for future rent, if the agreement provided for in the order of sale was carried out, were the very persons whom Zwietusch desired to hold on their stockholders’ liability because they were solvent and able to pay, although the evidence does not show that Zwietusch was aware that any one except Luehring would be liable. There was every reason why the lessors should, after they had time to ascertain what their legal rights were, consent to the transfer by the receiver which was so manifestly to their advantage, and no conceivable reason why they should not, or why they should reject the provisions inserted in the order of sale for their benefit and because their attorneys insisted on it. Mr. Zwie-tusch died before this action was commenced, and we have no line on his mental caliber, further than that the lease was carefully prepared to conserve and protect the rights of the lessors and that they employed attorneys to advise them when the Construction Company stranded. How the only evidence tending to show that the lessors would not assent to a contract such as that provided for in the order of sale is that given by Mr. Durant, in which he undertook to detail some conversa — 112 — tions Rad with Zwietuscli after the sale took place. The substance of these conversations as summed up by Mr. Durant was that Zwietusch had no objection to the sale so long as he did nothing to waive his claim against the stockholders of the International Construction Company. This certainly was not a declination to assent to the contract provided for when it was tendered for approval. It was also testified by Mr. Durant that Zwietusch said that he (Durant) must think him a fool if he would accept an agreement from Luehring to be bound by the sale of the lease, as he had an opinion from his attorney that George P. Mayer and Washington Becker and other wealthy men were liable for the rent. If this statement was made, it was of course made in ignorance of the fact that Luehring made the purchase for himself and these ■same men who would be bound equally with him, for the performance of the agreement, and it must also have been made under the unfounded belief that the acceptance of the agreement might waive an existing claim for rent. The lease very carefully provided that the lessee and each assignee should be liable for all rent reserved therein. There was no advance refusal to assent to the transfer of the lease to the defendants, and defendants carefully refrained from giving the opportunity to consent. It is not claimed that Luehring’s codefendants, except Kann, were not bound under their contract with him for the obligations which he assumed in purchasing the lease. It is clear that they were. Kirschbon v. Bonzel, 67 Wis. 178, 29 N. W. 907; Woolsey v. Henke, 125 Wis. 134, 103 N. W. 267; Hodges v. Nalty, 104 Wis. 464, 80 N. W. 726; Northern Nat. Bank v. Lewis, 78 Wis. 475, 47 N. W. 834. We think that Luehring and his associates became obligated to perform the covenants of the lease under the transfer to them, by operation of law. Such being the case, the subsequent assignment of it to the Wonderland Amusement Company did not relieve them of the obligation to pay rent accru — 113 — ing after the assignment was made, unless tbe lessors in some way lost the right which accrued to them upon the assignment being made to Luehring. This question has been discussed at considerable length because it was the one.argued at greatest length at the bar and because the case is an important one. The foregoing view renders it unnecessary to decide whether in any event, where there is a transfer of such a lease as is here involved by operation of law, the purchaser does not assume the covenants of the lease. Construing the order of confirmation as we do, there is no merit in the contention that this action is a collateral attack ■on a final order of the court. 3. There was no election between inconsistent remedies by the lessors. The remedy against the stockholders of the Construction Company was not inconsistent with holding subsequent assignees or purchasers of the lease. Every transfer made in the manner provided for by the lease furnished added security for the rent still to become due, and released none of those already Hable. 4. Neither was there any estoppel in pais. The record fails to show that the lessors ever did any act or thing which misled the defendants or induced them to do anything to their disadvantage which they would not otherwise have done. A change of position by one in reliance upon the conduct of another is essential to create an estoppel in pais. Somers v. Germania Nat. Bank, 152 Wis. 210, 219, 138 N. W. 713; Ady v. Barnett, 142 Wis. 18, 23, 124 N. W. 1061; Mabie v. Matteson, 17 Wis. 1, 12; Norton v. Kearney, 10 Wis. 443; Chynoweth v. Tenney, 10 Wis. 397; Racine Co. Bank v. Lathrop, 12 Wis. 466. 5. The question of waiver is perhaps the one on which the most stress was laid, aside from that first discussed. It is .about as difficult to lay down any hard-and-fast rule as to what constitutes waiver as it is in reference to what constitutes negligence. We have definitions of both terms, but it is often — 114 — hard to determine what cases fall within the definition and what without. Each case must be decided on the facts peculiar to it. Waiver is the intentional relinquishment of a known right, benefit, or advantage. Swedish Am. Nat. Bank v. Koebernick, 136 Wis. 473, 479, 480, 117 N. W. 1020, and cases cited; Voss v. Northwestern Nat. L. Ins. Co. 137 Wis. 492, 118 N. W. 212; Pabst B. Co. v. Milwaukee, 126 Wis. 110, 105 N. W. 563; Fraser v. Ætna L. Ins. Co. 114 Wis. 510, 523, 90 N. W. 476. There is no dispute about the facts which it is claimed constitute the waiver, and counsel on both sides insist that the evidence did not present a jury question. It is said in Swedish Am. Nat. Bank v. Koebernick, 136 Wis. 473, 480, 117 N. W. 1020, that “where the facts and circumstances relating to the subject are admitted or clearly established, waiver becomes a question of law.” But if different inferences may be drawn from the evidence, a question of fact is presented “to be determined by court or jury, according as parties see fit to submit the controversy for decision.” Fraser v. Ætna L. Ins. Co. 114 Wis. 510, 524, 90 N. W. 476. The matters relied on to show waiver are the following: (1) Statements made by Oscar B. Zwietusch at the time of the receiver’s sale and thereafter, to the effect that he would not consent to any assignment or transfer of the lease that would jeopardize his claim against the stockholders of the International Construction'Company. (2) Insistence by Zwie-tusch that receipts evidencing payments of rent after the receiver’s sale run to the International Construction Company. (3) Refusal by the lessors to file a claim for rent against the Wonderland Amusement Company after it became bankrupt. (4) An answer filed by the lessors in the receivership proceedings arising out of the failure of the Wonderland Amusement Company, in which it was stated that George F. Luehring did not comply with the terms of the order of sale by accepting the lease in the manner therein provided, and that he did — 115 — not thereafter by a written instrument assume or agreeto pay the rent and to perform the other conditions of the lease. It was further recited in said answer that the lessors did not consent to the assignment, transfer, or sale by the receiver to Luehring. (5) In an action brought by the lessors against the incorporators of the International Construction Company, it was alleged that Luehrmg, with the knowledge and consent of the .defendants in that action, entered into possession of the premises and continued in possession, and paid the rent reserved in the lease to August 14, 1908, and plaintiff on information and belief stated that the lessors named in the lease did not consent in writing to the assignment of said lease to said George F, Luehring. (6) The making of a lease of part of the premises in 1909 to Mrs. Hopkins and others. (Y) The giving of an option to the city of Milwaukee in 1911 to buy the property, coupled with a form of contract which the lessors agreed to execute if the option was accepted, which proposed contract recited that the property would be conveyed free and clear of all liens and incumbrances. (8) The delay in commencing this action. This looks like a rather formidable list, and at first blush it might be thought that an inference of waiver might be drawn from the facts and that the jury was the proper party to draw such inference if it saw fit, although the parties to the action apparently did not desire to have the question submitted. We might discuss the evidence in detail pertaining •to these various questions and show that none of them had much force, and most of them none whatever. There is one vital proposition that extends to all of them in so far as they tend to show waiver: We are unable to find any evidence in the record tending to show that the lessors or their predecessors in title, prior to the time this action was commenced, knew of the agreement under which Luehring*s codefendants, except. Harm, were in fact parties to the purchase at the receiver’s sale and would be liable for the rent reserved in- the — 116 — lease. It is very evident that Oscar B. Zwietusch did not know of the existence of .the agreement between the defendants when he told Durant that he would do nothing that would waive a claim against the responsible stockholders in the Construction Company like Becker and Mayer. These were the men who would be liable if the terms of the order of sale in reference to making a contract had been carried out. Surely he would be willing to accept this express contract to do what he proposed to force them to do by a proceeding the result of which was at least somewhat doubtful. There is no evidence that he was informed of the agreement up to the time of his death, or that any of the other lessors were so informed. We entertain no doubt that had these parties presented a contract to the lessors by which they agreed to assume the covenants of the lease, it would have been entirely satisfactory. What the lessors did’ not know, as far as the record discloses, is that they had a claim against these defendants by virtue of the Luehring purchase, because they did not know that any one but Luehring was responsible for the fulfilment of the obligation assumed by him when he purchased the lease. It is true that Zwietusch was a stockholder in the Construction Company and attended some of its meetings. But he was not a party to the reorganization scheme, and it does not appear that the final arrangement entered into between those who were was brought to his notice, or even that he knew of the existence of the contract of November 19, 1901. The defendants relied on the defense of waiver, and the burden was on them to show it. Unless a known right was relinquished there was' no waiver. The lessors might object to Luehring taking an assignment of the lease and assuming liability for its covenants, and at the same time be entirely willing that he and his codefendants should do so. The right acquired by the lessors under the sale and transfer of the receiver was a valuable one. , By virtue of it solvent — 117 — lessees succeeded an insolvent one. The lessors wanted the stipulated rent, not the possession of the premises. Men ordinarily do not throw away valuable and secure rights in order that they may pursue uncertain ones, and it is only in very rare cases that valuable and certain rights are wantonly thrown away when there is no necessity for doing so in order to preserve other existing rights. 7. It is urged that the court erred in admitting evidence (a) tending to show the negotiations between the defendants which led up to the purchase made by. Luehring at the receiver’s sale; (b) tending to show the formation of the Wonderland Amusement Company and the assignment and transfer to it by Luehring of the property bought at the receiver’s sale and its subsequent use of the property; and (c) in receiving in evidence the proceedings had in the case of Scholl v. International Construction Company, and particularly the order of sale made therein. The evidence was competent. The most important facts that it tended to show, namely, that Luehring acted as the agent and representative of the other defendants, except Kann, in making the purchase and subsequent transfer, and that they were liable for any obligation which he assumed in making the purchase, are practically admitted by the pleadings. It was proper to get the whole transaction before the court and jury. The evidence does not show that there was anything meretricious about the arrangement of the defendants to secure the property and finance and carry on the undertaking. But the carrying out of a reorganization scheme may bring on unanticipated troubles, as will be seen by a reference to Northern Pac. R. Co. v. Boyd, 228 U. S. 482, 33 Sup. Ct. 554. 8. There are a number of errors assigned on the exclusion of evidence which have been considered and which need not be treated in detail. The most important arise out of the refusal of the court to permit the witness Luehring to testify — 118 — (a) to conversations with Oscar B. Zwietusch, deceased; (b) to declarations of the same person; (c) to a conversation with Mr. Hoyt, the attorney for Zwietusch, had in the presence of the latter, and (d) a conversation between Durant and Judge TaeRant relative to the order of confirmation. (a) The first class of questions were, we think, properly excluded under sec. 4069, Stats. Luehring, it is true, testified that he was not a stockholder in the International Construction Company and that he was simply representing the Hilty Lumber Company, a corporation of which he was secretary, which company held stock in the International Construction Company. It is none the less true that he was apparently the most active of those who formulated and carried out the reorganization plan. It is also true that as a stockholder in the Ililty Lumber Company he would have to share in its losses, and that when the agreement of November 19, 1907, was entered into he signed the same, representing that he was the owner of ten shares of the capital stock of the International Construction Company, and further, that he was elected secretary and treasurer of the Wonderland Amusement Company. The witness is here a party to the action, which was not the case in Hanf v. Northwestern M. A. Asso. 76 Wis. 450, 452, 45 N. W. 315, or Laack v. Runge, 104 Wis. 59, 60, 80 N. W. 61, and we do not think it can be said that he is a mere nominal party, because he has a financial interest in the controversy. It would also seem that if he were only a mere agent of his codefendants, having purchased the lease in his own name and transferred it pursuant to their direction, he is a person through or under whom the persons offering his testimony derive their title or sustain their liability within the meaning of sec. 4069. (b) There was no prejudicial error in refusing to permit Luehring to testify to the declaration made by Zwietusch at the time of the sale, if there was any error in doing so. This declaration was proven by two other witnesses called by — 119 — defendants, one of them being theix attorney, and such evidence is undisputed and fox the purposes of this appeal assumed to be true. (c) Luehring testified that he was advised by his attorney during the fall of 1907 that it was-necessary to determine the relations that would exist between the lessors and himself and the other defendants or any other person who might take over the park, and that he had a conference in reference to this matter with Mr. IToyt and Mr. Zwietusch. He was then asked to relate the conversation had with Mr. Hoyt. Objection was made and sustained to this as incompetent and irrelevant and as coming within the statute. This ruling is said to be proper under the decision of this court in Holway v. Sanborn, 145 Wis. 151, 130 N. W. 95. That case does not so decide. It involved the question of whether, where the deceased and another carried on a conversation in the presence of a third party who did not participate therein, such third party might testify to what the deceased said. Here the question called for what Mr. Hoyt said, and he was very much alive at the time of the trial.. Mr. Hoyt’s statement made in the presence of his client would not cut much figure if it was not concurred in by the client, and this fact could not be shown. We are not advised what it was intended to show by the witness, and it is not apparent how it could affect the liability assumed long thereafter by .reason of the purchase at the receiver’s sale. Under sec. 3072m, Stats., we may not reverse for error unless it affirmatively appears that the error not only harmed the appellants, but harmed them so materially that the result might probably have been different had the error not occurred. Koepp v. Nat. E. & S. Co. 151 Wis. 302, 139 N. W. 179; Adams v. Bucyrus Co. 155 Wis. 70, 143 N. W. 1027. There is no such showing of prejudicial error here. (d) Any conversation which Mr. Durant had with the late Judge TaeeaNt in reference to the order of confirmation — 120 — could not be material on the issues before tbe court. Tbe order speaks for itself. If Mr. Durant bad been called on to explain bis conduct in tbe matter, tbe evidence might be proper enough. However, no one was attacking bis conduct and be was not on trial, and tbe evidence excluded was clearly incompetent. 9. On November 15, 1909, tbe plaintiffs leased tbe premises in question, or part of them, to one Mrs. Hopkins and her associates. It is argued that an actual surrender of possession by tbe lessee and tbe leasing of tbe premises by tbe lessors to a third party amount to a surrender of tbe lease and a re-entry by tbe lessors, and that if this result did not follow as a matter of law, tbe evidence at least presented suf•ficient facts to warrant a jury in finding a voluntary surrender and acceptance thereof and a re-entry by tbe lessors. This question affects to some extent tbe amount of damages recoverable in this action. We think tbe trial court was right in tbe conclusion which it reached. Manifestly it was for tbe advantage of tbe defendants that this lease be made, as their grantee bad become insolvent and bad abandoned tbe premises, and any amount received for rent would mitigate tbe damages that might otherwise be recoverable. Before this lease was made, tbe matter of making it was submitted to tbe defendants, and a written agreement wTas entered into between them and tbe lessors, in which tbe defendants agreed that tbe lessors might lease tbe land in question at an annual rental of at least $2,000, and in which they further agreed that tbe making of such lease should not “prejudice or affect in any way the rights or claims of tbe lessors against any of the parties liable upon or under said original lease,” if any liability existed thereunder. This agreement recited that tbe signers were stockholders in the International Construction Company. But they were the defendants in this action and expressly agreed that tbe making of tbe lease should not prejudice the rights of the lessors against any of the parties who — 121 — were liable Tinder tbe original lease* Tbis contract is very plain in its terms and we tbink tbe defendants should be bound by it. It is also claimed tbat it should be held that there was a re-entry by virtue of tbe option which was given to tbe city of Milwaukee to purchase tbe premises in 1911. Tbe nature of tbis option is set forth in tbe statement of facts. Tbe option was never accepted and never became a binding contract to sell, and we do not think tbe evidence would warrant a jury in finding tbat tbe giving of it constituted a re-entry so as to relieve tbe defendants from tbe further payment of tbe rent. By the Oourt. — Judgment affirmed.' A motion by tbe appellants for- a rehearing was denied, with $25 costs, on February 24, 1914. .