Sauerhering v. Rueping

119 N.W. 184, 137 Wis. 407, 1909 Wisc. LEXIS 18

• Court: Wisconsin Supreme Court
• Decided: January 5, 1909
• Status: Published

Opinions

FjgewiN, J.

Tbe jury found that tbe parties agreed November 29, 1905, that the defendants would sell and transfer a half interest in tbe Wisconsin Health & Accident Company to tbe plaintiff and effect tbe removal of tbe principal office of such company to Wausau, Wisconsin, in consideration of $2,000 paid by plaintiff to defendants. Tbe evidence shows without substantial dispute that tbe defendants agreed to transfer their claims against tbe company for services performed and money expended in tbe organization of tbe company, and that they would also secure tbe removal of tbe principal office of such company from Fond du Lac to Wau-sau, Wisconsin, and malee certain changes in tbe officers of such company by procuring tbe resignation of directors and tbe election of others in their stead; that this scheme was carried out to tbe extent of causing four directors to resign and tbe election, or attempted election, of four others named by tbe plaintiff in their respective places; that tbe general management of tbe company was turned over to tbe plaintiff, whose place of business was Wausau, Wisconsin, be being a practicing physician there and desirous of operating said Wisconsin Health & Accident Company in connection with his hospital work at Wausau and for his own personal interest; that he advertised the company at Wausau, Wisconsin, and manipulated it in his own interest from the time of the-agreement, November 29, 1905, down to about the time of the commencement of this action, a period of more than two-months. 'It is further established by the evidence that on January 6,1906, the parties met in furtherance of the scheme, and the plaintiff, in addition to the $2,000 paid November 29, 1905, executed and delivered to the defendants his promissory note for $1,000 payable in ten days from date as part consideration on his part for an interest in or control of the company and transfer of the principal office to Wausau. This note was not paid when it became due, the plaintiff claiming that the defendants had not promptly complied with their, contract in the removal of directors and election of others and change of the principal office in accordance with the agreement, and the defendants claiming that the plaintiff was at. fault in not paying the note when it fell due.

The Wisconsin Health & Accident Company was a mutual indemnity insurance company organized under .the laws of Wisconsin, without capital stock, and authorized to do business on the assessment plan. The defendants, therefore, could not sell a half interest or any interest therein, which was well known to the plaintiff when the agreement of November 29, 1905, was made, and particularly when the note was given, January 6, 1906. No claim is made that any fraud or deception was used by the defendants, but, on the contrary, the plaintiff was given access to the books, records, and business of the company and fully examined them.

The evidence further establishes that at the time the agreement was made the defendants had expended considerable money and performed services in the organization of the ■company, and bad become liable at tbe bank by indorsements for money tbns expended, and were desirous of being relieved from sucb liability and disposing of their claims against tbe company. So it appears from tbe evidence that the interest which plaintiff expected to get by the purchase was the defendants’ claims against the company and the right to manipulate the company in his own interest by getting control of the directors and officers by the removal of some and the election of others of his own choosing, and thus secure the change of the principal office to Wausau, Wisconsin. It was' talked at the time the agreement was made that 'the best way to control the company was to keep it indebted to the party who desired the control. Tbe purchase of control was tbe main object, and this was to be accomplished through purchase of claims, change .of officers, and vote to move the location of the principal office to Wausau. The defendant Rueping was president and defendant Schmidt vice-president.

Under the statutes the change of location could be made ■only by a vote of at least one half of the members of the ■company at a meeting regularly called. In pursuance of the alleged agreement the resignations of the defendant. Schmidt and four directors were téndered and accepted, and the management and control of the company by such and other manipulations turned over, or attempted to be turned over, to plaintiff. Such an agreement, upon well-established principles, is illegal and contrary to public policy and good morals. The defendants could not use their position of trust and confidence as officers of the company to forward their'own private interest or the interest of plaintiff. Forbes v. McDonald, 54 Cal. 98; Meacham v. Dow, 32 Vt. 721. If the contract weré binding the defendants would be bound as officers of the company to secure its removal to Wausau, regardless of whether such removal was for the interest of the members or not. It is manifest that such an agreement is illegal and in conflict witb tbe duty which the defendants owed to the members of the company, who were entitled to the judgment and discretion vested in the defendants as officers. Any agreement which might in any manner hamper or interfere with the free exercise of such discretion is illegal. Jackson v. Bowman, 39 Miss. 671. The defendants had nothing which was the subject, of sale, except, perhaps, their claims for services and money expended in the company’s behalf. But the defendants’ influence as officers and members in securing the removal of the location of the principal office to Wausau was. what the plaintiff wanted. This was not the subject of barter or sale, and the agreement to exercise such influence was illegal. The agreement placed the defendants in a position where their duties as officers were, or might be, antagonistic to their duties to plaintiff under the contract; hence the contract was void. Greenhood, Public Policy, 292, 293, 294; Bliss v. Matteson, 45 N. Y. 22. The agreement involved illegality from the nature of the transaction and was therefore contra bonos mores. Greenhood, Public Policy, 338, 336, 337, 306, 156; Waldo v. Martin, 4 B. & C. 319 ; Noel v. Drake, 28 Kan. 265; Parsons v. Thompson, 1 H. Blackst. 322; Morse v. Ryan, 26 Wis. 356. It is clear from the foregoing cases and many others which may be found that the alleged agreement entered into between the plaintiff and defendants was illegal, contrary to the principles of public policy,, and should not be enforced, nor should the court re- ' lieve the parties from the consequences of their illegal acts.

It is insisted, however, as a basis of recovery on the part of.the plaintiff that the parties were not in pari delicto. This contention cannot be sustained under the evidence. The plaintiff was in possession of all the facts, knew the company was a mutual assessment company without capital stock, and had knowledge of all the facts which rendered the agreement illegal. Under such circumstances the law will not afford him relief. 9 Cyc. 546, 548; Miller v. Larson, 19 Wis. ; Melchoir v. McCarty, 31 Wis. 252; Clarke v. Lincoln L. Co. 59 Wis. 655, 18 N. W. 492; Cohn v. Heimbauch, 86 Wis. 176, 56 N. W. 638. It is claimed, however, by plaintiff that recovery should be had on the principle of right of rescission and recovery of the money paid where the contract remains executory; but the difficulty with that argument is that in the case before us the alleged contract was performed, in part at least, on both sides, and where there is part performance the court will not lend its aid to either party. Miller v. Larson, supra. It follows that neither party is entitled to recovery; the plaintiff cannot recover the $2,000 paid, nor the defendants on the $1,000 set up in the counterclaim.

By the Court. — The judgment of the court below is reversed, and the action remanded with directions to enter judgment dismissing the complaint and counterclaim.