Bischoff v. Hustisford State Bank

218 N.W. 353, 195 Wis. 312, 1928 Wisc. LEXIS 121

• Court: Wisconsin Supreme Court
• Decided: March 6, 1928
• Status: Published

Opinion

Rosenberry, J.

The complaint in this action is as follows :

“The above named plaintiff, by Hoyt, Bender, McIntyre - & Hoyt, his attorneys, complains of the above named defendants and for his cause of action alleges:

“1. That at all of the times hereinafter mentioned the above named defendant Hustisford State Bank was and is a Wisconsin corporation, engaged in the general banking business in the village of Hustisford, Wisconsin, and as such had the transactions as hereinafter set forth.

“2. That, as plaintiff is informed and believes, the above named defendants, prior to the times hereinafter set forth, entered into a conspiracy to defraud this plaintiff and others through the sale of certain preferred stock of Wisconsin Land Holding Company, a corporation, owned by them.

“3. That acting pursuant to said conspiracy said defendant Richard Roll, upon his own behalf and as. the agent of said Hustisford State Bank, on or about the 3d day of November, 1922, falsely and fraudulently represented to said plaintiff that the said preferred stock of said Wisconsin Land Plolding Company was first class and a safe investment; that said Wisconsin Land Holding Company was in good financial condition and was doing a good and profitable business; that said Wisconsin Land Holding Company had in the past always paid dividends of at least seven per cent. (7 % ) on said preferred stock, and that the financial condition of said Wisconsin Land Holding Company was such that said stock was absolutely a safe investment.

“4. That the said representations were false and were known to be false at said time by said defendants and were made by said defendant Richard Roll with intent to deceive and defraud said plaintiff, and, as plaintiff is informed and believes, with the knowledge and acquiescence of said defendant Hustisford State Bank.

“5. That said plaintiff believed said representations to be true and relied thereon, and in so relying thereon purchased three hundred (300) shares of said preferred stock of said company for the sum of three thousand dollars ($3,000).

“6. That after said plaintiff discovered the falsity of said representations he promptly tendered said stock to said defendants and demanded the return of the consideration paid therefor.

“7. That said stock was not a good investment, but is in fact worthless, and that said plaintiff has suffered damage in the sum of three thousand dollars ($3,000), with interest from the 3d day of November, 1922.

“And as a second and alternative cause of action against said defendants plaintiff alleges that at all of the times hereinafter mentioned, defendant Hustisford State Bank was and is a Wisconsin corporation, engaged in the general banking business in the village of Hustisford, Wisconsin, and as such had the transactions as hereinafter set forth.

“That on or about the 3d day of November, 1922, plaintiff purchased from the said defendants'three hundred (300) shares of preferred stock of the Wisconsin Land Holding Company, a Wisconsin corporation, for the sum of three thousand dollars ($3,000) ; that as a condition of such purchase and as a part of the agreement between the parties therefor said defendants promised and agreed that they would repurchase said stock from said plaintiff at any time upon the giving of thirty days’ (30) notice; that pursuant to said agreement said plaintiff paid to said defendants the sum of three thousand dollars ($3,000) and received in exchange therefor two certificates for three hundred (300) shares of said preferred stock of said company.

“That subsequent thereto said plaintiff demanded of said defendants that they repurchase said stock from him in accordance with the terms of their agreement, but that defendants have refused and failed and neglected to comply with the terms of said contract, or to repay this plaintiff for the amount so paid for said stock.

“That defendants are thereby indebted to said plaintiff in the sum of three thousand dollars ($3,000), with interest from the 3d day of November; 1922.

“Wherefore plaintiff demands judgment against said defendants in the sum of three thousand dollars ($3,000), together with costs and disbursements of this action.

“Hoyt, Bender, McIntyre & Hoyt,

“Attorneys for Plaintiff.”

It is apparent from the allegations of the complaint that the cause or causes of action, whatever they may be, arose out of a single transaction, to wit, the sale of certain stock by the defendants» td the plaintiff. The plaintiff’s right to relief depends upon a determination of the facts in controversy. If the making of the contract was induced by fraudulent representations, the plaintiff, having tendered back the stock, is entitled to recover the amount he paid therefor in an action for damages. This is sometimes spoken of as a rescission at law or informal rescission. 1 Page, Contracts, § 342 and cases cited. The plaintiff on that aspect of the case neither needs nor seeks the aid of a court of equity. If it be found that there was no fraud in the inducement as alleged in the first cause of action, then the plaintiff claims that he is- entitled to recover under the terms of the contract the füll amount of the purchase price under the agreement of the defendants t'o repurchase on thirty days’ notice.

It is argued logically and forcefully that the causes of action, even though each of them is a cause of action at law, are inconsistent and mutually exclusive and therefore cannot be- joined. In the first cause of action the plaintiff alleges that the contract is void for fraud and seeks to recover back the consideration with -which he parted. In the second cause of action it is alleged that there is a valid contract; that by the terms of the contract the defendants agreed to repurchase the stock; that demand for the repurchase has been made, which demand has been refused, and that by reason of the refusal the defendants are liable to the plaintiff for the amount agreed to be paid by the defendants on repurchase. It is claimed by the plaintiff that both causes of action are for a rescission. We regard this ground as wholly untenable. By the allegations of the complaint constituting the second cause of action, it appears that collateral to the contract of sale the sellers agreed that they would, upon thirty days’ notice, repurchase the stock. This is not a provision for rescission but an independent covenant, for breach of which plaintiff seeks to maintain his action. It cannot be denied, therefore, that the causes of action are inconsistent.

The question is therefore: May inconsistent causes of action be united in a complaint ? It was held that they could not be in McLennan v. Prentice (1893), 85 Wis. 427, 55 N. W. 764. See 14 Standard Proc. 684 and cases cited. McLennan v. Prentice was decided when sec. 2647, Stats., was in force. The provisions of that section were as follows :

“The plaintiff may unite in the same complaint several causes of action, whether they be such as were formerly denominated legal or equitable, or both, where they arise out of:

“1. The same transaction or transactions connected with the same subject of action; or

“2. Contract, express or implied; or

“3. Injuries, with or without force, to person or property or either; or

“4. Injuries to character; or

“5. Claims to recover real property, with or without damages for the withholding thereof, and the rents and profits of the same; or

“6. Claims to recover personal property, with or without damages for the withholding thereof; or

“7. Claims against a trustee by virtue of a contract or by operation of law.

“But the causes of action so united must all belong to one of these classes and must affect all the parties to the action, and not require different places of trial, and must be stated separately.”'

The meaning of the words “transaction,” “cause of action,” and “subject of action” received exhaustive treatment in McArthur v. Moffet (1910), 143 Wis. 564, 128 N. W. 445.

In 1915 sec. 2647, now sec. 263.04, Stats., was amended to read as follows:

“The plaintiff may unite in the same complaint several causes of action, whether they be such as were formerly denominated legal or equitable or both. But the causes of action so united must affect all the parties to the action and not require different places of trial, and must be stated separately.”

The precise question raised here has not been considered since the amendment of the statute. The rule that a litigant may not blow hot and cold is often stated in different forms and applied to many different situations arising in the course of legal proceedings. Under the Code in New York state the statute required pleadings to be consistent, and under that provision it was held that causes of action could not be set out in the same complaint where one was exclusive of the other. No such provision is found in our statute. While sec. 263.04, although in language as broad as it is possible to use, might be construed as requiring a litigant to come into court with consistent causes of action and not allege in one part of a pleading that a certain state of facts exists and in the same pleading seek recovery on the theory that the facts first alleged do not exist, it is considered that it was the legislative intent and purpose that after the adoption of the amendment litigants might state as many causes of action in a pleading as they had, even though they were inconsistent in the sense that, if one was found to exist, the existence of the other was by that finding excluded. The case of Astin v. C., M. & St. P. R. Co. (1910) 143 Wis. 477, 128 N. W. 265, decided before the amendment, looks that way, although it is clearly distinguishable from the case at bar. There the pleader combined in a complaint a cause of action for ordinary negligence and one for gross negligence arising out of the samé state of facts. While under our law a finding of gross negligence excludes the existence of ordinary negligence, nevertheless the pleader does not deny the existence of negligence in one cause of action and assert its existence in the other cause of action. In this case the pleader denies that there is a contract, and yet in the second cause of action seeks recovery upon it. In that respect the two cases are clearly distinguishable.

We are well aware that permitting a plaintiff to join inconsistent causes of action in a complaint throws upon trial courts a considerable responsibility and added burden. Where a cause of action in equity is joined with an action •at law, as in Cameron v. White, 74 Wis. 425, 43 N. W. 155, it will usually be necessary to dispose of the equitable issue first, because in one case the parties are not entitled to a jury trial while they are in the other. Where only equitable issues are presented the court riiay proceed to a trial and disposition of the issues in such manner as in its discretion will seem most likely to promote speedy justice. Where two inconsistent actions at law are joined, the circumstances may be such that both issues may be presented to a jury in a single trial without detriment to the rights of either party. It may so happen that a question may be involved in the second cause of action, the trial of which would involve large expense, which would be excluded entirely if the plaintiff were to prevail as to the first cause of action. Under such circumstances the court may direct the first issue to be disposed of before entering upon the trial of the second. In other cases the facts may be identical except as to one or two dependent issues, as for instance the question of damages. In such case the court may determine that separate trials are not necessary and that all issues may be submitted to the jury in alternative form. We deem this case to be such a one. If the jury finds that the contract was induced by fraud, the rights of the parties are fixed. If the jury finds that there was no fraud and finds that there was an agreement to repurchase, that issue might be determined upon the trial without injustice to either party. So far as the record discloses, the question of damages in this case is very simple. It would be in the interest of both parties to have the matter disposed of in a single trial. If as a matter of fact a trial on the question of damages under the repurchase clause would require the expenditure of a large amount of time and money, the court may direct that a trial be had as to the first cause of action, not requiring the parties to prepare for trial on the question of damages until the first cause of action is disposed of. The court separated the issues in this case apparently for the reason that it was thought the first cause of action involved an equitable issue. If the court separated the issues in order to avoid the expense of preparation for trial on the question of damages, if the plaintiff prevailed as to the -first cause of action, the order should stand.

The rule that under the statute inconsistent causes of action may be properly joined cannot operate so as to impair the rule that a party cannot pursue inconsistent remedies. In this case if there was fraud in the inducement the plaintiff had the right to elect whether he would disaffirm the contract and recover the consideration or affirm the contract and sue for damages on account of the fraud. He could not do both. Smeesters v. Schroeder, 123 Wis. 116, 101 N. W. 363. If Jhe plaintiff had set forth in his complaint the first cause of action and had gone to trial thereon and had been defeated, he would not thereby have been barred from suing on the contract for breach. Rowell v. Smith, 123 Wis. 510, 102 N. W. 1. The second action would not have been an attempt to relitigate the issues presented in the first cause of action. He would have sought recovery in the second cause of action upon an entirely different ground than the recovery sought in the first cause of action. It has been said that the doctrine of election of remedies is a harsh and now largely obsolete rule, the scope of which should not be extended. Friederichsen v. Renard, 247 U. S. 207, 38 Sup. Ct. 450. While the causes of action joined in this case would, as already pointed out, rest upon an inconsistent state of facts, the remedy sought in one is no substitute for the remedy sought in the other. A suit in the first instance upon the contract for damages for breach would no doubt be an affirmance of it, which would preclude an action for rescission, but the reverse is not true. The pleader seeks relief in the alternative, that is, if rescission be denied in the first cause of action then that he have recovery under the contract thus established in the second cause of action.

In the first instance the whole matter is largely within the control of the pleader. He may unite inconsistent causes of action in a complaint but he is not required to do so. If he elects to unite causes of action which are inconsistent, some of which require jury trials and some of which do not, the whole matter of the manner in which the issue as presented shall be disposed of lies within the discretion of the trial court, and the trial court’s determination with respect thereto will not be interfered with except in a clear case of abuse. Certain it is that parties ought not to be permitted to set traps for the court and found an allegation of error upon a record oi their own making. See Chandler v. Childs, 42 Mich. 128, 3 N. W. 297. Regarding the whole matter as a question of policy, we are in doubt as to whether the rule will do more good than harm. Our doubts, however, ought not to deprive litigants of an opportunity to present an entire controversy to the court in order that a speedy and final determination may be reached, even though in some cases considerable difficulties may be presented.

By what we have said we have not intended to foreclose the trial court from exercising its discretion if a further showing shall be made as to whether or not the issues in this case should be tried together or separated. Upon the record as presented to us we see no reason for separating the issues in this case.

Upon the appeal of the defendants that part of the order appealed from is reversed. Upon plaintiff’s appeal the order sustaining the demurrer to the complaint is reversed. The cause is remanded with directions to overrule the demurrer and for the disposition of the case by the trial court as indicated in this opinion; no costs to be taxed by either party, the appellants to pay the clerk’s fees in this court.

By the Court. — It is so ordered.