174 Wis. 233 | Wis. | 1921
Lead Opinion
The following opinion was filed July 3, 1920:
We wish to commend the careful, lawyer-like, and thorough manner in which this case has been prepared for presentation to this court by the attorneys on both sides. We are furnished with a printed case, the
We shall not attempt to treat in detail all of the questions raised and argued in briefs of counsel. We shall first dispose of the question raised as to whether or not the plaintiff was charged with the knowledge of Schenck, his agent, in respect to the transactions relating to the negotiation and execution of the lease in question. The trial court did not
The trial court found that the persons aforesaid, that is, McClure, Hyatt, Remeeus, and Schenck, merely produced the defendant H. Jay Hayes as a proposed lessee. We think this finding is clearly against the preponderance of the evidence. It appears practically without dispute that McClure and Harvey and their employee, Hyatt, came to Milwaukee for the purpose of looking up a lease, and throughout the entire negotiation, down to the point where they demanded a commission, represented an undisclosed principal and not themselves. When the negotiations had proceeded so far that the introduction of the proposed lessee was necessary, McClure and Harvey made a demand for the commission in question. It taxes human credulity to believe that under such circumstances Schenck did not know that McClure and Harvey represented the proposed lessee.
When Hayes and his associates came to Milwaukee they made no inquiry in regard to the property, no investigation of local conditions, but simply viewed the property and took a general survey of the city, and it is established beyond
The plaintiff being chargeable, therefore, with knowledge of the fact that McClure and Harvey were the agents of Hayes and his associates, what effect upon the contract did the payment of the $6,000 by the plaintiff have? It is argued that the circumstances here are within the principles referred to in Tasse v. Kindt, 145 Wis. 115, 128 N. W. 972. In that case it was held that a broker who undertakes merely to procure a customer for land at a price fixed by the seller is in reality only a middleman and is entitled to the agreed commission for such service, even though by an agreement unknown to the seller he is also to receive a commission from the purchase!-. In the present case the agents of the lessees were not agents to procure a long-time lease at a fixed price, but represented their principals in securing a location of the property, fixing the terms and conditions of the lease, upon which its value very largely depended, and throughout a long period of negotiation attempted to secure a contract which would be acceptable to their, clients and in the judgment of the agents a profitable investment. They were invested with large discretion in many respects. They cannot be said in any sense of the term to have been mere middlemen." The question cannot be regarded solely from the standpoint of the plaintiff, but in considering the effect upon the contract of the double agency the relationship of the double-dealing agents to both parties to the transaction must be considered.
It is the established law that the acceptance by an agent of a secret commission of compensation from the opposite
Absolute fidelity and loyalty to the interests of his principal is the first duty and the highest obligation of an agent. An opposite party negotiating a contract with an agent may not deprive the agent’s principal of the benefit of the agent’s skill and judgment by paying him a commission, without the full knowledge and consent of the principal, and if he does so it operates as a fraud, actual or constructive, upon the principal, and he may for that reason repudiate the transaction.
The perusal of the testimony of some of the witnesses in this case indicates that there is a very confused state of mind on the part of many real-estate agents as to their rights, duties, and responsibilities in transactions of this kind. The payment of compensation or a commission to the agent of the opposite party is in some states punishable as. an offense under the law. More and more the business world is compelled to rely upon the fidelity of agents in the transaction of business, and an agent who undertakes to negotiate a contract or transact business for a principal should be held strictly accountable for the faithful performance of his duty. An agent’s duties or responsibilities are not lessened or modified because he calls himself a broker, factor, or by some other name. The thing that fixes his duty and responsibility is the character of the service which he undertakes to perform and not the style or the name under which he does business. Usage or custom, however long continued, does not warrant unfaithful, disloyal conduct on the part of an agent. Such conduct is abhorrent to the letter and spirit of the law and cannot be justified under its forms.
It follows from what has been said that upon the discovery of the fraudulent conduct of their agent the lessees had a right to rescind and repudiate the contract, but the law requires, under such circumstances, that the lessees should act without unnecessary delay and with due promptness. This brings us to the most serious question in this case.
An application for the cancellation or rescission of a contract is addressed to the sound discretion of a court of equity. Stimpson v. Stimpson, 168 Wis. 146, 169 N. W. 295. The trial court found that, after having knowledge of the fraud, the lessees continued to exercise acts of ownership over the premises described in the lease and elected to retain the lease and waive their rights, if any they had, to cancellation. This finding of the trial court, more fully set out in the statement of facts, is a mixed conclusion of fact and law. We are not told at what time or times the lessees received such knowledge, or what act or acts upon their part constituted a waiver or election. As has been stated many times, this court will not overturn findings of the trial court unless they are against the clear preponderance or the great weight of the evidence. This rule, however, does not apply to findings which are general in their nature. Damman v. Damman, 145 Wis. 122, 128 N. W. 1062. See, also, Harrigan v. Gilchrist, 121 Wis. 127 (99 N. W. 909), at p. 312 et seq.; and McMillen v. Strange, 159 Wis. 271, 150 N. W. 434.
The question of whether or not there was a waiver or an election was put sharply in issue by the pleadings and was thoroughly litigated upon the trial. On behalf of the
On behalf of the plaintiff it is argued that late in 1913 or early in 1914 the attention of Carrow and Guy H. McFall was expressly called to the fact that the plaintiff had paid a commission to Harvey and McClure. Evidence as to this
It is claimed that the defendant Hayes should have been put upon inquiry by a remark made by Remeeus to Hayes in response to a suggestion made by Hayes that no one but Remeeus seemed to be taking any interest in the property. Remeeus is said to have replied, “The probable reason is that the other brokers received their commission; mine is still in jeopardy.” If this statement were taken at its face value it would not apprise the defendant of the real facts and circumstances connected with this transaction. It is to be remembered that Remeeus was at this time endeavoring to make an arrangement with Hayes so that the taxes would be paid, in order that Remeeus might collect the notes given by Weinhagen, which were conditioned upon payment of the taxes. It is not very probable that he would have made statements to Hayes which would have tended to arouse the suspicion of Hayes as to the legality of the entire transaction.
It is admitted that on July 28, 1916, Remeeus wrote to Carrow giving him full information as to the payment of the commission, and it further appears that a short time previous to the writing of this letter. Remeeus had a conversation with Carrow to the same effect.
After a careful examination of the evidence we are brought to the conclusion that the evidence does not sustain
There is evidence in the record which it is claimed sustains the finding to the contrary, such as an intimation in a letter, from McClure to Carrow, in which McClure says that his integrity has been questioned; but the correspondence shows that this complaint relates to McClure’s failure to carry out the terms of the contract by which Harvey and McClure were to look after, and care for. his property. There are also some statements made in the depositions which relate to time, but a reading of the testimony convinces us that the circumstances recited indicate that the witnesses were, as they subsequently claim, mistaken as to the time. The whole correspondence and course of dealing between the parties indicate very strongly and conclusively that the lessees did not have knowledge of the wrongful conduct of their agents until July, 1916. We shall not attempt to recite all of the circumstances which lead us to that conclusion.
It is argued very forcefully on behalf of the plaintiff that after receiving the letter of Remeeus in July, 1916, the lessees deliberately elected to continue as the owners of the leasehold estate, and thereby waived their right of rescission. In the letter of July 28, 1916, Remeeus wrote to one of the lessees:
“Right here let me state that this commission was paid as follows: Schenck received $3,000; Hyatt $2,000; Harvey-McClure Co. $2,000; myself and another Milwaukee broker the other $2,000.”
It seems that a broker by the name of Wheeler brought the parties together and was considered entitled to a part of the commission, but his conduct has no relation to the matters here involved.
On July 25th the plaintiff’s attorney had written a letter to Carrow. In reply to this letter Carrow states the fact
“We should judge from this offer that the impression has gained ground that it is owing to a lack of faith in the property rather than a lack of funds that we have allowed the taxes and other matters to go unpaid. This is absolutely not the case. . . . The reason these payments were not made was for lack of funds to meet them; neither have we any now.”
In the closing paragraph of the letter Carrozv says:
“While, of course, these particular things with which we have had to contend does not interest Mr. Weinhagen, it is simply in the way of explanation of the reason we have been unable to make these payments, and which puts us in a position at this time of not being able to consider Mr. Weinhagen’s offer, as we know no way in which these funds can at present be raised.”
This explanation of why they had not performed their contract cannot be construed into an election to waive the fraud and continue with the contract. There was some correspondence with Hayes, between Hayes and Harvey, in which Hayes referred to the commission, but we do not perceive what bearing this can have upon the question of an election by the lessees to waive the fraud of their agents.
There is evidence in the record tending to show also that they made efforts to dispose of the property. While of course this is a circumstance bearing upon the question of whether or not they intended to waive the fraud, standing by itself it is by no means conclusive. Smith, Fraud, § 136. Nothing further seems to have been done until after the commencement of this suit, which was begun November 25, 1916. After the commencement of the suit there were further efforts to find a purchaser, and Remeeus twice suggested prospective methods of financing the project.
The situation in which the defendants found themselves when they discovered the fraud of their agents had existed for. nearly five years. They had incurred large obligations outside of and beyond the contract obligations arising out of the lease; they had expended considerable sums of money; and those upon whom they had relied had betrayed their confidence; and they no doubt were at a loss to know where to turn or what to do. Their effort to find a purchaser and inability to do so was probably a natural factor in their final decision. A rescission of the contract would not place them in statu quo, and their failure to act more promptly under such circumstances cannot be held to constitute a waiver of their right of rescission. They delayed from about the middle of July until November, and did nothing which showed any intent on their, part either to waive the fraud or to rescind the contract, and unless they are barred by lapse of time, or unless their failure to act of itself amounts to a waiver, they had at the time the suit was begun the right of election. As was said in Swedish American Nat. Bank v. Koebernick, 136 Wis. 473, 479, 117 N. W. 1020:
“A waiver may be shown by a course of conduct signifying a purpose not to stand on a right, and leading, by a reasonable inference, to the conclusion that the right in question will not be insisted upon. And a person who does some positive act which, according to its natural import, is so inconsistent with the enforcement of the right in his favor as to induce a reasonable belief that such right has been dispensed with, will be deemed to have waived it.”
There being no positive affirmative act indicating that the defendants intended to waive their right of rescission during the period which intervened between their receiving actual notice in July and the commencement of this action, we are of the opinion that mere delay under such circumstances did not amount to an election or an affirmance of the contract or a waiver of the right of rescission. While we recognize the distinction between waiver and estoppel in pais and that we are here considering mere waiver, nevertheless the fact that the parties stand in exactly the same situation now as they would have stood had the defendants made their election the next day after receiving full information is a matter worthy of consideration. No circumstances arose which required them to choose, and they did not choose. Mere delay did not amount to a waiver of their rights. Ellis v. Southwestern L. Co. 102 Wis. 400, 78 N. W. 747; Knowlton v. Walker, 13 Wis. 264; Cedar Lake H. Co. v. Cedar Creek H. Co. 79 Wis. 297, 48 N. W. 371; 2 Black, Rescission and Cancellation, § 546, and cases cited.
It is further contended that the matter was concluded in the receivership proceedings and is no longer open to investigation. We do not regard this contention as sound. The validity of the contract or the defendants’ right of rescission was in no way drawn in question in that proceeding. In fact, the circumstances upon which the right of rescission is based were then unknown to the defendants.
The conclusion at which we have arrived makes it un
Our conclusion being that the lease should be canceled, it follows that the parties to the transaction should so far as possible be placed in statu c[uo, and to this relief the defendants are entitled under their, counterclaim or cross-complaint. There should be an accounting between the parties, but in this accounting the plaintiff should not be chargeable with any losses, expense, or diminution of receipts due to the defaults, negligence, or mismanagement of the defendants.
Neither are the defendants entitled to have or receive, upon a rescission of the contract, any part of the amount paid by the plaintiff as commissions. Having elected to rescind the contract and to be placed in statu quo, they can certainly have no claim upon the money paid by the plaintiff.
As a condition of this relief the defendants are of course required to place the plaintiff in statu quo as to the property, and they should therefore release or procure a release of all rights as against the property which exist in, by, through, or under them.
By the Court. — The judgment is reversed, and the cause remanded for. further proceedings according to law and in accordance with this opinion; the defendants to recover one bill of costs in this court.
The following opinion was filed August 5, 1920:
Dissenting Opinion
(dissenting). I cannot concur in the decision of the court. The record, in my opinion, sustains the trial- court in its finding to the effect that the appellants,
I am authorized to say that Mr.. Justice Vinje concurs in this dissent.
On November 16, 1920, a motion by the respondent for a rehearing was granted, and the cause was reargued on January 15, 1921.
The following opinion was filed May 31, 1921:
Mr. Chief Justice Winslow and Mr. Justice Kerwin took no part in the consideration of this case at the time it was submitted. The opinion of the court was filed July 3, 1920, three of the Justices concurring in the decision and two dissenting. A motion for a rehearing was made.' The motion was considered and a rehearing granted and the cause was again fully argued before the court, all Justices sitting. Before the matter was considered in conference Mr. Justice Kerwin died. When the case was taken up the court was equally divided upon the questions involved. The case being an important one by reason of the amount and legal principles involved, further consideration was postponed until such time as the vacancy created by the death of Mr. Justice Kerwin should be filled! Upon the appointment of Mr. Justice Doerfler the entire matter was again reconsidered by the whole court. Upon such reconsideration the court is of the opinion that the conclusion reached and announced in the opinion filed should not lie disturbed, largely for the reasons therein stated. The situ
Upon the rehearing two principal questions were considered. First, whether the plaintiff was chargeable with the knowledge which his agent, Schenck, had as to the material facts in relation to the negotiations and the parties thereto; and second, whether, the twelfth finding made by the trial court was sustained by the evidence, and, if so, whether or not. the subsequent conduct of the lessees amounted to a waiver of their right of rescission.
In connection with the first proposition some criticism is made of a statement contained in the opinion that “It taxes human credulity to believe that under such circumstances Schenck [the agent] did not know that McClure and Harvey represented the proposed lessee.” We have again examined the testimony of Mr. Schenck upon this point, and while it does not appear that he knew the names of those who subsequently became the lessees, he must have known, or at least is chargeable as a matter of law with knowledge of the fact, that they represented an undisclosed principal, for at no time did they pretend that they were negotiating in their own behalf. ‘ They must have been negotiating in behalf of some principal, and it may be, as contended, that Mr. Schenck did not have knowledge of the fact that the present lessees were the principals; but he is chargeable, as a matter of law, with knowledge of the fact that they were representing a third party. It is further contended that Schenck’s agency was of a very limited scope. In his reply to the cross-complaint the plaintiff alleged:
“That there was in the employ of this plaintiff a real-estate agent by the name of Otto J. Schenck, to generally look after said real estate, collect the rents therefrom, taking care of the same for this plaintiff, and that this plaintiff let it be known to the said Otto J. Schenck that he would entertain a proposition to lease said real estate upon long-term*254 lease, provided suitable and responsible parties could be found who would be willing to lease the same, and at such rental as this plaintiff would be willing to accept as a condition of entering into said lease.”
Plaintiff further alleged that:
“Accordingly, during the summer of 1911, certain persons, who were unknown to this plaintiff, approached the said Otto J. Schenck, who was at that time acting as the agent for this plaintiff, and informed the said Otto J. Schenck, as this plaintiff is informed and believes, that they, the said persons at that time unknown to this plaintiff, had a person who was ready and willing to lease said real estate so owned by the said plaintiff. . . . That this plaintiff did not personally conduct any of the negotiations with either of said persons, but that said negotiations were carried on by the said Otto J. Schenck as his agent, and that neither this plaintiff nor the said Otto J. Schenck had any knowledge or infonnation until shortly prior to the execution of said' lease that the said defendant H. J. Hayes was the person who was to become the lessee.”
These allegations of the plaintiff’s reply have not been withdrawn or modified, and the court is unanimously of the opinion that these allegations, taken in connection with the facts and circumstances shown by the evidence, conclusively establish that Schenck was the agent of the plaintiff, empowered to negotiate in respect to the terms of the lease, and furthermore, that Schenck had knowledge of the fact that the persons (Harvey and McClure) who approached him were representing third parties, and that .the plaintiff is therefore chargeable with knowledge of the facts which came to the attention of his agent, Schenck, in the course of the negotiations.
By the finding of fact numbered 12 the trial court found:
“That after having knowledge (before the commencement of this action) of the payment by the plaintiff of the moneys aforesaid to the defendants Harvey and McClure, and of the payment by said Harvey and McClure of a part*255 thereof to said Clark C. Hyatt, the defendants H. J. Hayes, H. P. Carrow, Guy H. McFall, and R. A. Bartholomew continued to exercise acts of ownership of said premises under and by virtue of the lease and elected to hold and assert the interest of the lessee therein, and have by their conduct since obtaining such knowledge waived their rights, if any they ever had, to have said lease or bond canceled, and have elected to retain said lease and the benefits thereof.”
In consideration of the question whether this finding is sustained by the evidence, the court, has given full effect to the established rule that a finding of the trial court upon questions of fact will not be reversed unless it is against the clear, preponderance or great weight of the evidence. It is conceded on both sides that on or about July 28, 1916, the lessees were fully informed in regard to the payment of a commission to their agents, Harvey, McClure, and Hyatt. The finding of the trial court to the effect that they had knowledge of such payment before the commencement of the action is therefore sustained. The question then arises whether or not they had knowledge of the payment of a commission to their agents prior to that time. It is claimed by the plaintiff that such knowledge was brought home to the lessees in October, 1911, and again late in 1913 or early in 1914. As pointed out in the original opinion, the finding of the court as to the time when knowledge was brought home to the plaintiff is a general finding, being to the effect that it was some time prior to the commencement of the suit. Such a finding may well rest wholly upon the undisputed fact that they had such knowledge in July, 1916. Whether or not they had such knowledge prior to that time, as now contended by the plaintiff, can only be ascertained by an examination of the evidence, unaided by any finding of the trial court in that respect. We have again carefully reviewed the evidence, and the court is of the opinion that it clearly preponderates against plaintiff’s contentions. If
There remains then the question, Did the lessees by their conduct after July, 1916, elect to retain the lease and the benefits thereof? The facts being undisputed, the question of whether their conduct after that date amounted to an election is a question of law. The real question is whether or. not, under the established facts, in the exercise of a sound discretion, a court of equity should grant relief to the lessees who were admittedly the victims of an insidious fraud. For the reasons stated in the original opinion, the court considers that such relief shotild be granted. The original mandate is approved.
• On July 13, 1921, the following order was entered by the court:
The motion herein on behalf of the respondent, filed June 8, 1921, while in terms a motion to modify the mandate, is in fact and substance a motion for a rehearing of a decision made on rehearing and cannot therefore be entertained. The motion papers are stricken from the files and the clerk is directed to remit the record forthwith.
