Borchert v. Borchert

132 Wis. 593 | Wis. | 1907

Marshall, J.

Tbe question presented for decision is this: If a person under contract, in form, with another obtains such other’s personal property of considerable value and converts tbe same into money, and in that form retains tbe same, threatening, however, to place it beyond tbe reach of judicial remedies, and such other by reason of insanity or other cause is wholly incompetent to enter into the transaction and dies without regaining capacity to assert and vindicate his rights, and in the meantime such person renders some service and incurs some expense for such other, but in the aggregate not sufficient to constitute any adequate compensation for the property, does a right of action accrue to such other for a rescission of such contract and an accounting for and restitution of the property in its converted form, or if that cannot be had for its equivalent in' money, which survives to his personal representative ?

The real purpose of the action seems to have been misconceived by the learned counsel for appellants, resulting in a contention before this court that the complaint is insufficient under sec. 3832, Stats. (1898)', providing that an administrator may recover property transferred by his intestate in fraud of creditors, because of want of any allegation in the com-' plaint of there being any creditors affected by the fraud, Ecklor v. Wolcott, 115 Wis. 19, 90 N. W. 1081, being relied on. The statute, as will be noted, only contemplates the redress of wrongs to creditors by debtors after the decease of the latter. The wrong complained of here is one not committed by a debtor subsequently deceased, but one committed by a person still in esse against a person deceased and to the prejudice of his heirs.

Nothing further need to be said on this branch of the case if it were not for Ecklor v. Wolcott, supra, where it was substantially held that an administrator cannot by action legitimately redress a wrong to the deceased in respect to' property fraudulently obtained from the latter. It seems the distinction was overlooked between a mere personal claim, as one for damages, not aimed at a recovery of property in specie or the avails thereof, — a claim remediable by an action ex delicto^ — and one of the other character. So- far as that case is out of harmony with the decision now made it must be regarded as overruled.

The next suggestion of counsel for appellants is predicated on a misconception. It is said that the action is one to recover damages for a fraud and that a right in that regard is not assignable and, hence, does not survive upon the death of the owner to his personal representative.

This, as before indicated, is not an action for fraud of the kind which is purely personal, contemplating a recovery of damages, strictly so called, as distinct from pecuniary loss growing out of injuries to, or deprivation of, property, but one to rescind a contract claimed to be void for fraud under which property was wrongfully obtained of the deceased to the enrichment of the defendants and to recover the proceeds of such property, which by reason of the invalidity of the contract never ceased to be the property of the person from whom the same was obtained and so passed upon his death to his personal representative. The distinction between the two classes of eases is very marked and has been frequently clearly pointed out in the decisions of courts. John V. Farwell Co. v. Wolf, 96 Wis. 10, 70 N. W. 289, 71 N. W. 109; Smith v. Thompson, 94 Mich. 381, 54 N. W. 168. In the latter case a cause of action for damages for the fraud and one to recover the value of property obtained through the fraud were joined. The former was held to be purely personal and so not assignable, while the contrary was held as to the latter.

It may be stated generally that when the property of a person is wrongfully obtained by another and retained by him wrongfully either in specie or in its converted form, or to his enrichment, a cause of action to redress the wrong accrues to such person against such other, which is assignable and which survives by the rule of the common law.

A mere fraud or cheat by which one sustains a pecuniary loss is not a deprivation of the property of one to the enrichment of another and so does not give rise to a cause of action which survives by the rule of the common law, or by our statutory extension thereof, to causes of action for “damages ... to personal estate,” but a right to recover in some form on account of property wrongfully obtained and detained or converted survives to the personal representative of the wronged person by the rule of the common law. Wood v. Howell, 17 Ga. 495. That is extended to the ordinary remedies by our statute. Sec. 4253, Stats. (1898).

The right to sue for the rescission of a contract secured through fraud and to recover property obtained under such contract, or the proceeds thereof, survives,' on principle, as the authorities abundantly show. Coon v. Dennis, 111 Mich. 450, 69 N. W. 666; Sharon v. Terry, 36 Fed. 337. The following language from the opinion in the first case cited seems to fully cover the question in hand:

“Undue influence is recognized by all authorities as a species of fraud, and fraud, inducing a transfer of personal property or a chose in action, renders such transfer voidable, and one of the remedies of the party defrauded, or his executors, is a rescission of the transfer.”

The point is made that the pleader intended to state a cause of action to establish a constructive trust and for an accounting, and that the facts alleged are not sufficient, in that it appears that the subject of the trust no longer exists, therefore a personal action only will lie. There are three answers to that proposition. One. The primary purpose of the action is to rescind the alleged fraudulent contract. The other' matters are germane thereto and so may properly be litigated as incidental to a vindication of the primary right. Two. An action lies to establish a constructive trust and to recover the subject thereof where the property wrongfully obtained in specie, or in its converted form, still remains in the possession of the wrongdoer. Three. In case of a constructive trust an action lies in equity for its establishment and for an accounting, even though the property wrongfully obtained is personal and, in specie or in some new form into which it can he definitely traced, is within the reach of a plain remedy at law, where it is necessary in order to obtain complete justice for equity jurisdiction to deal with the situation. 3 Pom. Eq. Jur. (3d ed.) § 1053. This court quite recently held that the better rule is that the cestui que trust may always sue in equity for an accounting. Harrigan v. Gilchrist, 121 Wis. 127, 252, 99 N. W. 909. lie may certainly do so where there are special circumstances which in the judgment of the court render equity jurisdiction competent to afford a more efficient remedy than can be obtained at law.

As before said, the dominant purpose of this action is to obtain a-judicial cancellation of the alleged fraudulent and void contract through which appellants obtained the property of the deceased. That of itself does not, under all circumstances, warrant the exercise of equity jurisdiction. Respondent did not need the aid of a court of equity to rescind. He could have done that, in any event, by a mere demand for a delivery of the property to him as part of the estate of Wilhelmine Borchert, or upon the theory that she was wholly incompetent, to the knowledge of appellants, to make the contract, he might have sued at law for redress without any previous act disaffirming the contract. If there were not at least a voidable agreement there was nothing to rescind. However, in case of an outstanding contract, either void or voidable, for fraud, it is a proper subject for equitable cognizance to judicially declare it void, and incidentally to obtain complete redress for all wrongs done in the name thereof, in case of special circumstances which, in the judgment of the court, render equity jurisdiction competent to more efficiently deal with the matter than a court of law. Johnson v. Swamke, 128 Wis. 68, 107 N. W. 481.

It seems that there are special circumstances in this ease. The conditions shown are such that appellant may be entitled to reimbursement for such services as he performed and money lie expended for the benefit of the old people. Such an equity, if there be one, should be dealt with in connection with the vindication of respondent’s right and the whole matter be settled by a single judgment. To do that the field of equity jurisdiction would necessarily have to be entered. On the whole it seems that the cause of action set forth in the complaint is clearly one for equitable cognizance.

It may be stated as a rule that when an outstanding written contract, in form, is sought to be rescinded for fraud and such contract on its face evidences title to personal property, and the effect of such decision would be to judicially establish a constructive trust rendering the trustee liable to account for such property in some form, or its equivalent in money, and it is clear that the property in some converted form is in the hands of the trustee and can be judicially reached, or it appears that there are or may be equities in favor of the wrongdoer to be considered, diminishing that which he would otherwise be required to respond for, a proper situation for the exercise of equity jurisdiction exists.

The foregoing covers all matters discussed in the brief of counsel for appellants. The conclusion reached is that the complaint states a good cause of action in favor of the respondent as the personal representative of the deceased, Wil-helmine Borchert, for a rescission of the contract mentioned in the complaint, and for such further relief as will equitably redress the wrong done to the deceased by reason of her having been wrongfully, as alleged, deprived of her property.

By the Gowrt. — The order of the circuit court is affirmed.