Court Opinion

ID: 4010506
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:12:20.700647+00
Date Added: 2024-06-11T07:44:43.085784
License: Public Domain

Defendant appeals from an interlocutory judgment which directed him to reconvey realty to plaintiff without profit or other compensation when plaintiff shall have repaid to defendant his disbursements in connection therewith and shall have procured the release of a note and mortgage on which defendant is liable.
Plaintiff, respondent here, was the purchaser of a dwelling upon land contract. He was in default, foreclosure had proceeded to judgment and the period of redemption on fore closure was running. $1,607.78 was necessary to redeem on foreclosure and there were other judgment, tax, and conditional sales liens of approximately $500 which were charges against the property. He was a janitor, elderly, not well versed in English, and without funds. He consulted the appellant, a younger, experienced businessman with whom he had been acquainted for some years. Appellant thought the equity worth saving and agreed to help but said it would be necessary to have title in appellant's name in order to refinance. *Page 591 
Appellant then took Berlin to his lawyer and had the following contract drawn, which the parties executed on August 20, 1940:
"It is hereby stipulated and agreed, by and between Arthur Ruehle, party of the first part, and Emil O. Berlin, party of the second part, as follows:
"Whereas said party of the second part is possessed of a contract interest in the real estate known and described as:
"The north thirty-three and thirty-five one-hundredths (33.35) feet of the north sixty-six and thirty-five one-hundredths (66.35) feet of that part of the north one (1) acre of the south nine (9) acres of the west twenty (20) acres of the northwest quarter (NW-1/4) of section numbered seventeen (17) town numbered seven (7) north of range numbered twenty-two (22) east, in the twenty-fifth ward of the city of Milwaukee,
and whereas judgment of foreclosure was entered therein on the 11th day of March, 1940, and an extension of period of redemption has been granted in said matter and whereas in order to save any equity in said property, it is necessary that the property be mortgaged and an additional amount be put in by said party of the first part to pay the amount of the judgment, unpaid taxes with interest and penalties, balance due on stoker, and adjust judgments entered against said party of the second part. Now therefore, it is hereby stipulated and agreed that the said Emil O. Berlin is to convey said property to Arthur Ruehle by quitclaim deed with the understanding that the said Arthur Ruehle will arrange for the financing of the property and will advance such amount of cash as may be necessary over and above the amount of the money to be secured by mortgage; and it is further agreed and understood that if after said conveyance said real estate is sold by the said Arthur Ruehle at any time within five years from the date hereof, one half of the net amount over and above the sum of twenty-five hundred dollars ($2,500) shall be paid by said Arthur Ruehle to the said Emil O. Berlin.
"The considerations for this agreement being that the said party of the first part shall arrange for the financing of the property, and in the event said property is sold at any time within five years from the date hereof by said party of the first *Page 592 
part, he agrees to pay one half of the net proceeds of the said sale over and above the sum of twenty-five hundred dollars ($2,500) to the said party of the second part.
"Dated at Milwaukee, Wisconsin, this 20th day of August, 1940.

                                        "/s/ Arthur Ruehle
                                        "/s/ Emil O. Berlin"

After this document was executed, Ruehle gave his personal note for $2,000 to a third party for cash. To this he added $500 of his own and then satisfied all claims against the premises. The land-contract seller gave a warranty deed to Berlin, Berlin gave a quitclaim deed to Ruehle, who mortgaged the property for $2,000 and redeemed his personal note. Ruehle then had legal title subject to the $2,000 mortgage and to plaintiff's equities. He still had the property at the time of trial. The rentals had paid interest, taxes, insurance, maintenance, $500 on the principal of the mortgage, and left a surplus of $275.02. (Defendant's Exhibit 11.) The trial court found that he did not make an effort in good faith to sell and that the highest value between 1941 and 1945 (when it might have been sold according to the terms of the agreement) was $6,900; that in 1946 and 1947 it was $8,500, and at the time of trial it was $8,200. In August, 1941, Berlin became impatient because he was receiving no money and employed a lawyer to write Ruehle that Berlin had consulted him concerning a claim against the realty. This produced no action. Berlin continued to press Ruehle for money and on December 1, 1941, Ruehle wrote out an agreement in his notebook which Berlin signed and which read:
"I, Emil Berlin, of Milwaukee, Wisc., hereby agree to accept $150 (one hundred fifty  no/100 dollars) in full of all demands for settlement in full of property deal at 2864 N. 12th street, Milwaukee, Wisconsin,  release all rights  further claims." *Page 593 
The $150 was not promptly paid but Berlin received it in driblets over the next year and a half. On August 14, 1943, appellant gave Berlin $25, completing the $150, and then stated that Berlin no longer had any right to or interest in the property. Berlin continued to inquire about a sale, but after 1945 he was unable to gain Ruehle's attention and on May 7, 1948, he commenced this action alleging fraud and deceit by defendant and asking equitable relief.
Defendant answered alleging that plaintiff's right of action, if any, had accrued in August, 1941, when he employed the lawyer and consequently it was barred by the statute of limitations, sec. 330.19 (7). He also pleaded the agreement of December 1, 1941, as settlement and release of all of plaintiff's claims and denied that he had practiced any fraud or deceit.
The trial court made findings of fact substantially as recited above, and upon them made conclusions of law that in this transaction plaintiff and defendant were joint adventurers; that defendant became a trustee holding title in his own name for expediency and, because of his superior physical and intellectual superiority and the confidence placed in him by plaintiff, he had the duty of a fiduciary which, by securing the settlement and release on December 1, 1941, he breached by overreaching in that the consideration of $150 was so grossly inadequate that defendant should not have joined or permitted plaintiff to join in such a sale of plaintiff's equity. The court further concluded that when on August 14, 1943, defendant informed plaintiff that plaintiff had then been paid in full and defendant had become sole owner, it was a repudiation of his trust and his conduct has constituted a constructive fraud upon the plaintiff, by which defendant forfeited any right to compensation out of the proceeds of any sale.
Judgment for plaintiff was entered April 9, 1949. It set aside plaintiff's deed to defendant, declared it null and void and ordered defendant to reconvey the realty to plaintiff when plaintiff should pay to him the exact amount which defendant *Page 594 
had put into the venture from his own funds, and should deliver to defendant a release and satisfaction of defendant's $2,000 mortgage. Defendant's personal investment was stipulated to be $1,992.22, and the mortgage had been reduced by principal payments to $1,500. Plaintiff was allowed his costs. Defendant has appealed asking that the judgment be reversed and the complaint dismissed or, at most, that plaintiff's relief be limited to a half interest in the property which should be ordered sold.
Other facts are stated in the opinion.
The principal dispute in this action arises from plaintiff's interpretation of the contract of August 20, 1940, that defendant was bound to sell within five years, and defendant's contention that the passage reading,
". . . and it is further agreed and understood that if after said conveyance said real estate is sold by the said Arthur Ruehle at any time within five years from the date hereof, one half of the net amount over and above the sum of twenty-five hundred dollars ($2,500) shall be paid by said Arthur Ruehle to the said Emil O. Berlin."
limited plaintiff's beneficial interest to a period of five years.
Appellant's position is thus stated in his brief:
"At that time [date of contract] the value of respondent's equity in the property was nominal; and the possibility of sharing —not the right to share — in a sale within five years was more than sufficient consideration to support the agreement and conveyance."
What the value of respondent's equity might have been at that time was not specifically found, but for $500 of his own *Page 595 
funds and $2,000 raised by mortgaging the premises to a commercial banker, appellant was able to redeem the property not only from the foreclosure judgment of $1,560.95 but from the other liens and charges affecting it, to pay the cost of refinancing and to pay Berlin's old income taxes. It is self-evident that commercial mortgages are not made up to the point where the value in excess of the loan is merely nominal. The court found the value of the premises at that time was $5,200. There was evidence to support the finding and it is consistent with the amount of the mortgage loan. This leaves an equity in respondent of $2,700. He was contributing at least as much in cash or value as did the appellant, even if credit of $2,000 is given appellant for his personal liability upon his note which was secured by the mortgage upon the property he had received from respondent. The trial court's conclusion that the parties were engaged in a joint venture is well supported.
In respect to appellant's contention that on December 1, 1941, respondent sold and released such rights as he may have had for $150, which incidentally he did not get in full till August 14, 1943, and was then told that his rights were ended, the trial court found the proof fell short of establishing an accord and satisfaction and that the effort by appellant to close out his coadventurer for a sum so grossly inadequate was a constructive fraud. Both the finding and the conclusion have support in the record and we approve the refusal to give effect to the purported settlement.
Appellant relies, further, upon an undisputed principle of law that where parties have made a contract for themselves a court should not change it or make another one for them. The trial court did neither of these objectionable things. The parties made a contract, as the court found and as the contract recites, to save and protect Berlin's equity. It contemplated liquidation of the real estate within five years. To accomplish the purpose, title was put in Ruehle. So far, so good. But if *Page 596 
the parties contemplated that a sale might not be made within five years, which we doubt, they neglected to state their respective rights and obligations in that situation and cannot now agree. It is a proper function of a court to determine, if it can, whether the contract covered this contingency and, if it did not, what disposition of the property and the rights of the parties therein may be equitable.
Appellant's interpretation is that respondent willingly and understandingly conveyed his property to appellant to have and keep as his own, forever, free from obligation unless within five years appellant might prefer to sell it, in which case he would divide the proceeds with respondent in the manner provided. That is, indeed, a novel way to protect an equity and the mere statement of the proposition demonstrates its incredibility. If we were held to an interpretation of the contract, prepared by appellant's lawyer and paid for by appellant, we could more reasonably find that it gave the appellant five years in which to liquidate the property, recover his $500 advance, take the first $2,000 for himself and thereafter share equally in any remaining proceeds; and if he failed or neglected to sell he would be bound to return respondent's title to him subject only to the mortgage placed upon it with respondent's consent.
The trial court concluded, as a matter of law, that under the agreement of August 20, 1940, which respondent had performed by transferring title to appellant, it was appellant's duty as a trustee to sell the property within five years. Of course the court was correct. Except by a sale there was no possibility that respondent would receive anything for his equity and if the agreement did not require such performance by appellant it would be simply a trick to cheat him out of his equity. But while the agreement imposed the obligation, appellant never recognized it. The statement repeatedly made in his brief that respondent had no right to insist on a sale amply demonstrates that appellant dealt with the property exclusively *Page 597 
in his own interest. He was not performing the contract at all, though respondent was not aware of appellant's claim of sole ownership until told so on August 14, 1943. It is, therefore, not necessary to determine the rights of the parties nor construe the contract as though the five years had elapsed without sale and without imputation of bad faith. Appellant's repudiation and breach of trust during the five-year period presents a different question. What are the rights of the parties when no contract has been or is being performed? The trial court returned respondent's property to him. It denied to appellant the compensation to which he would have been entitled if he had been faithful. It seems to us to be an entirely just and lawful exercise of the court's powers. ". . . a trustee, who neglects his duties or is guilty of bad faith or violates his obligations, forfeits his rights to compensation."Matter of Filardo (1936), 221 Wis. 589, 602, 267 N.W. 312. "Certainly the defendant, while denying the trust, and claiming all the property as her own, was in no position to charge the plaintiffs or the property with her services or the services of her agents and attorneys in respect to the same." Fuller v.Abbe (1900), 105 Wis. 235, 238, 81 N.W. 401. (Both cited in the opinion of the trial court.) To restore to appellant his out-of-pocket expense, protect him against liability on his mortgage note, but to deny him a profit, was within the sound discretion of the trial court and gives him no ground for complaint.
We further hold that the trial court was correct in determining that until August 14, 1943, when appellant asserted that respondent's rights had been terminated, nothing had occurred to warn respondent that appellant was making any claim inconsistent with his obligation of a joint adventurer or as a fiduciary, and until then the statute of limitations did not begin to run.
By the Court. — Judgment affirmed. *Page 598