28 Wis. 2d 12 | Wis. | 1965
The appellants attack the sufficiency of the credible evidence to support the finding the plaintiff entered into a contract with the management corporation. It is not seriously contended a contract was not entered into on behalf of the defendant insurance corporation. So far as it is material to this appeal, it is sufficient to state the insurance corporation was organized to engage in the business of insurance
The directors and those interested in promoting the insurance and the management corporations were not experienced insurance executives nor skilled in the sale of insurance stock. Early in October, 1961, Harry Walsh, president of the insurance corporation, contacted Zane Mann, the plaintiffs vice-president with the view of securing the plaintiff's services in the promotion and sale of the stock. After conferences between Mann and the board of directors a general understanding was arrived at which was later confirmed by letter. The agreed remuneration for the plaintiff acting as a financial consultant and adviser was $20,000 contingent upon the successful selling of the public issue.
During the plaintiffs employment a sales organization was set up for the insurance corporation, and it started to sell its stock in January of 1962. By July, 1962, only some $300,000 of stock had been sold, but the insurance company was then entitled to engage in business. About that time new officers had obtained control of the insurance and management corporations. They were dissatisfied with the plaintiffs services and terminated the contract by the discharge of Mann. The sale of the 650,000 shares of stock was completed by the insurance corporation in November of 1963.
The evidence is in conflict whether the management corporation as well as the insurance corporation entered into the
Defendants contend that in any event the judgment against the insurance corporation must be limited to $40.47 because of the application of sec. 201.10, Stats. Although this law in one form or another has been in existence over fifty years, it has not been interpreted by this court. This section
It is contended by the defendants that since the stock subscriptions amounted to $975,000, the promotional expenses could not exceed 15 percent thereof, or $146,250, and since during the years 1962 and 1963 a total of $146,209.53 was expended, only $40.47 was available for the plaintiff. This contention would add to the express sanctions of the section a third, that of the unenforceability of a contract or that part of a contract which exceeds the 15 percent prohibition. We do not read the statute as voiding or rendering unenforceable contracts which taken together with other contracts and expenses of promotion exceed 15 percent of the proceeds of the sale of stock. If the contracts for such expenditures were void or unenforceable, it would be impossible for promoters to violate the statute and they could thus immunize themselves from the criminal penalties of the section while securing the benefits of their acts. We think the remedies granted by the statute in creating the prohibition against the promoters are exclusive and the statute is not a defense to an otherwise enforceable contract which constitutes an expense of promoting or organizing the corporation or the sale of its stock. See Burke v. Madison (1962), 17 Wis. (2d) 623, 117 N. W. (2d) 580, 118 N. W. (2d) 898; Waisbren v. Blink (1932), 207 Wis. 619, 242 N. W. 169; Clancy v. Fire and Police Comm. (1912), 150 Wis. 630, 138 N. W. 109. Generally persons dealing with the promoters have no way to control the promoters or see that they comply with the statute. The statute is aimed at promoters, not the voiding of contracts with innocent persons.
No doubt the Wisconsin department of securities can suspend registration of securities upon discovery that a company is violating this section and its counterpart, the rule of the
We have found only three cases construing somewhat similar statutes. In Colorado Life Co. v. Madden (1923), 73 Colo. 504, 216 Pac. 551, suit was brought for a 20 percent commission on the sale of stock. The statute prohibited the use of more than 20 percent of the proceeds for organizational expenses. It was held the plaintiff could not be charged with knowledge of other organizational expenses and recovery was allowed. However, in Anchor Life & Accident Ins. Co. v. Taylor (1928), 29 Ohio App. 428, 163 N. E. 631, which was a suit in quantum meruit for services in selling the defendant’s insurance stock, a defense that the defendant had expended and reached the 15 percent limitation for promotional expenses was stricken by the trial court. On appeal the defense was allowed on the theory it was beyond the corporation’s power to contract for expenses in excess of the 15 percent limitation. In McCormick v. Life Ins. Corp. of America (1957), 6 Utah (2d) 170, 308 Pac. (2d) 949, which was a suit to recover a 20 percent commission for the sale of stock in converting a mutual insurance company into a stock company, the statute provided a 15 percent limitation. The plaintiff had been paid 20 percent on some sales and was suing for commissions on the balance. The court held the plaintiff could only recover 15 percent on the total sales and the amount of the contract in excess thereof was unenforceable. However, the court stated it was not concerned whether the 15 percent in fact exceeded together with other expenses 15 percent of the proceeds. Under this decision recovery may in fact result in expenses exceeding the prohibition of the statute.
These cases do not command an interpretation of our statute but they are enlightening. From these cases it does not appear the statutes involved provided any remedy for its violation. The remedies provided by sec. 201.10 (7) and
The defendants assign as error the instruction of the court relating to what constitutes a legal justification for breach of contract. The verdict inquired whether the plaintiff breached any duty under the contract of employment and if so whether such breach constituted a justifiable ground for discharging Mr. Mann without compensation. In respect to the latter inquiry, the court instructed that a breach of the contract was not a legal justification for the discharge “unless the breach evidences moral turpitude or conduct that is manifestly injurious to the employer’s interest.” Whether this is a correct statement of the law involving a right to terminate a contract involving personal services because of a breach, we need not decide because the jury found the plaintiff did not breach its contract. Consequently, the jury never reached the inquiry involving justification for the defendants’ termination of the contract. Assuming the instruction to be erroneous, we find no evidence it affected the answers to the other questions.
On its petition for review the plaintiff argues it is entitled to interest oh the judgment from the day the defendants wrongfully terminated the contract. We find no motion requesting such interest or order denying such interest in
In the present case the contract provided the plaintiff’s fee was not to be paid until the issue was sold which did not occur until November, 1963, a year and a half after the contract with the plaintiff was breached by the defendants. The defendants’ breach did not accelerate the time of payment. At most, this would be the earliest date for the commencement of interest since the fee which is being sued for was not payable prior to that time. This issue, however, is not before us because the record does not disclose it was properly presented to the trial court and preserved for appeal.
By the Court. — Judgment affirmed.
“201.10 Stock companies; promotion; funds; commissions; literature; contracts. (1) No person shall, for the purpose of organizing or promoting any insurance corporation, domestic or foreign, or promoting the sale of stock of such corporation by it as principal or agent, sell or agree or attempt to sell within this state any stock in such insurance corporation, unless the contract shall be in writing and contain a provision in the following language: ‘No sum shall be used for commission, promotion and organization ex
“(3) Every contract within subsection (1) shall give the names of the organizers (or trustees as the case may be) and their residences, the par value of the shares, and the prices at which shares have been, are, or are to be sold, the number of shares at each price, the total number of shares, and be filled in with the percentage or amount which may be used for commission, promotion or organization expenses, which together shall not exceed fifteen per cent of the amount actually paid upon separate subscriptions for such stock.
“(7) Any person violating this section shall be punished by a fine of not less than twenty-five dollars nor more than one thousand dollars, or by imprisonment in the county jail not exceeding six months, or by both such fine and imprisonment.
“(8) A contract for subscription to or the purchase of stock in any insurance corporation not conforming to the provisions of this section shall be valid and enforcible in favor of the subscriber or purchaser, but shall not be valid or enforcible in favor of the corporation or any person selling such stock, either as principal or agent.”