Opinion
October 11, 1955 —
November 8, 1955.
APPEAL from an order and judgment of the circuit court for Sauk county: BRUCE F. BEILFUSS, Circuit Judge, Presiding. Affirmed.
For the appellant there was a brief and oral argument by Harlan W. Kelley of Baraboo, attorney, and Wayne W. Martin of Madison of counsel.
For the respondents there was a brief by Langer Cross of Baraboo, and oral argument by Clyde C. Cross.
Action begun by Ivor E. Gunnison and Vivian F. Gunnison against S. J. Kaufman to recover from the defendant amounts due on a contract entered into by and between him and the plaintiffs.
The original complaint in effect charged that defendant had agreed, in consideration of the transfer to him by the plaintiffs and certain stockholders in Baraboo Manufacturing, Inc., controlled by Ivor E. Gunnison of all of their interest in the corporation, that he (the defendant) would pay certain obligations of the corporation amounting to $20,000 on a secured note and $7,000 on an unsecured note held by the Reedsburg Bank upon which plaintiffs were personally liable. It was alleged that the corporation was turned over to defendant in reliance upon that promise; that defendant failed to pay those obligations, all to the damage of plaintiffs.
The answer of the defendant denied, among other things, his indebtedness and liability to the plaintiffs so charged.
Between the time of the original complaint and answer and the time of the trial, Kaufman made final payment of the $20,000 secured note. The then existing situation was discussed by the attorneys, and it was understood between them that they would stipulate that "this obligation had been paid and was out of the case."
It also appears from the record that a check was drawn on the First National Bank of Baraboo by Baraboo Manufacturing, Inc., on May 6, 1953, and that the bank gave Gunnison a receipt for $1,000 paid on the $7,000 unsecured note. The record shows further than $87.50 interest was paid to the bank by someone other than Gunnison. Kaufman refused to make any further payments, and Gunnison, at the insistence of the bank, subsequently paid the balance of the $7,000 note, with interest.
An amended complaint showing the payments brought down to date was served on the defendant just before the trial the defendant made a motion for a continuance in order that he might have time to prepare a motion for summary judgment. His motion was denied by the court. The plaintiff then offered his amended complaint to the court. Counsel for defendant thereupon renewed a demand for continuance on the grounds that under sec. 263.10, Stats., he had the right to have twenty days to reply to the amended complaint. The amended complaint was permitted to stand, the court considered its allegations denied, the motion for continuance was denied, and the case went to trial to court and jury. At the close of the testimony there was a motion by defendant for a directed verdict. This was joined in by plaintiff. The court, having discharged the jury, made the following findings of fact
"1. That on, and prior to, November 6, 1952, the plaintiffs owned 444 shares of $100 par value common stock in the Baraboo Manufacturing, Inc., a Wisconsin corporation, located at Baraboo, Wisconsin; and that at the same time the plaintiffs also were creditors of the said corporation, which was then indebted to them in the total sum of at least $16,250, for money previously loaned and materials and assets supplied to it by plaintiffs from time to time.
"2. That on, and prior to, November 6, 1952, the plaintiffs were individually obligated to the Reedsburg Bank, at Reedsburg, Wisconsin, by reason of funds previously loaned by the said bank which were used for the business purposes of the predecessor organizations to the Baraboo Manufacturing, Inc., upon the following obligations:
"(a) A note dated October 3, 1952, due December 2, 1952, for $7,000, with interest thereon at five per cent.
"(b) A note dated October 6, 1949, due October 6, 1954, secured by a first real-estate mortgage on the premises of the said Baraboo Manufacturing, Inc., and other real estate owned by the plaintiffs, individually; with balance on principal then due thereon in the amount of $20,000, with interest thereon at four per cent.
"3. That on November 6, 1952, the defendant specifically promised the plaintiff Ivor Gunnison that if the plaintiff's would sell and transfer to him all of their interest in the said Baraboo Manufacturing, Inc., both as a stockholder and as a creditor, in payment therefor, and in consideration thereof, the defendant would personally assume the responsibility and liability of the said obligations, and also make certain other payments to plaintiff's.
"4. That on November 6, 1952, the defendant did also make the promise to pay the said obligations at the Reedsburg Bank, and relieve the plaintiffs of their responsibility therefor, to other stockholders of the said corporation as an inducement to such other stockholders to assign their respective interest in the said corporation, as stockholders and as creditors, to the defendant. And that several other stockholders did assign their entire interest in the corporation to the defendant for a nominal payment, because of, and in consideration of, the said promise of the defendant to pay the said obligations at the Reedsburg Bank, and relieve the plaintiffs herein from their responsibility therefor.
"5. That defendant further made the said promise to pay the obligations at the Reedsburg Bank to plaintiff Vivian Gunnison as an inducement to her to transfer her interest in said corporation to defendant.
"6. That in consideration of the defendant's said promise to pay the existing obligations at the Reedsburg Bank as aforesaid, the plaintiffs did subsequently transfer to the defendant their 444 shares of stock in the said corporation, and also assigned to the defendant their said claims against the corporation for its indebtedness to them, in an amount in excess of $16,250; and the defendant did thereupon assume and exercise ownership of all of the said stock and claims formerly held by the plaintiff's.
"7. That the said Reedsburg Bank was not a party to this transaction between the parties; and the said bank did not release the plaintiffs from their prior existing obligations to it, as aforesaid, but refused to do so and insisted that it would continue to look to the plaintiffs for the payment of the said obligations.
"8. That the defendant paid, or caused to be paid, the aforesaid secured note, described in paragraph 2 (b) above, at a date subsequent to the commencement of this action; and all of the obligations of all of the parties thereunder have been fully satisfied and discharged.
"9. That the defendant did not pay the said $7,000 obligation to the Reedsburg Bank, described in paragraph 2 (a) above, except for the sum of $1,000 which was paid upon the principal of the said note on May 6, 1953, by a check drawn upon the account of the said Baraboo Manufacturing, Inc., which check was delivered to the said bank by the defendant. That in addition the sum of $87.50 was paid on the interest due on the said $7,000 note on April 3, 1953, by someone other than the plaintiffs.
"10. That the Reedsburg Bank did demand and insist that the plaintiff remain responsible for and pay the balance of the said $7,000 note, and pursuant to the demands and insistence of the bank, the plaintiffs herein did, from time to time subsequent to November 6, 1952, make renewals of the said note; and plaintiffs did make payments on the said renewal notes from time to time, during the period commencing July 7, 1953, and ending November 27, 1954, on which date the said obligation to the Reedsburg Bank was fully paid and wholly discharged.
"11. That the defendant did pay the Reedsburg Bank during said period July 7, 1953, — November 27, 1954, the total sum of $6,271.88, principal and interest, on the balance due on the said obligation referred to in paragraph 2 (a) above.
"12. That the plaintiffs have not been reimbursed by the defendant for any of the said amount of $6,271.88, so paid by them to the Reedsburg Bank on the said obligation."
The court concluded as follows:
"1. That on and after November 6, 1952, it was the personal obligation of the defendant to the plaintiffs to pay the balances due on the said obligations at the Reedsburg Bank in the respective amounts of $7,000 and $20,000, and all interest secured thereon.
"2. That the defendant is liable to the plaintiffs for the total sums of $6,271.88 paid by the plaintiffs to the Reedsburg Bank on the said unsecured obligation, together with interest thereon from the time of each such payment by plaintiffs to the time of entry of judgment herein, and for the costs and disbursements herein."
From the judgment accordingly entered and from the order denying a continuance for the purpose of filing an amended answer, defendant appeals.
On November 6, 1952, at the time appellant S. J. Kaufman agreed to take over the corporation and pay certain obligations of Gunnison to the Reedsburg Bank, Gunnison was obligated to that bank on the following notes:
(1) An unsecured judgment note dated October 6, 1952, due December 2, 1952, for $7,000, with interest thereon at five per cent.
(2) A note dated October 6, 1949, due October 6, 1954, secured by a first real-estate mortgage on the premises of the said corporation and other real estate owned by plaintiff Ivor Gunnison and his wife individually, with balance of the principal then due of $20,000 with interest thereon at four per cent.
At the time of the original complaint appellant had paid $2,000 and interest on the secured note, and $1,000 on the unsecured note. During the interim between the time of the original complaint and the time of the trial, appellant had made final payment of the $20,000 secured note. Also during that interim, respondents, at the insistence of the bank, had paid the balance of the principal due on the unsecured note plus interest. As a result of the payments so made, there was a change in the amount owed by appellant to respondents. Appellant's counsel suggested the advisability of amending the complaint in order to bring the figures up to date. It appears to have been understood between counsel that the obligation on the secured note for $20,000 "had been paid and was out of the case." The case then before the court was upon pleadings showing that amount paid. The judgment sought by respondents in their amended complaint was for $6,271.88, the amount paid by them on the balance of the unsecured note plus interest, with interest from the date of payment.
At the time of the trial a motion for continuance was made by appellant on the grounds that sec. 263.10, Stats., allowed him twenty days in which to answer the amended complaint. The court denied appellant's motion, and appellant contends that such denial precluded him from forming a defense based on the amended complaint, and that therefore the denial was an abuse of discretion by the court.
A continuance delaying a trial is not a matter of course. A standard of requirements to warrant an adjournment is found in reported cases. "`Such an application is always addressed to the sound discretion of the trial court, and prejudice must be made to appear in order to set aside its ruling thereon.'" Estate of Hatten (1940), 233 Wis. 256, 289 N.W. 630; Rahles v. J. Thompson Sons Mfg. Co. (1909), 137 Wis. 506, 118 N.W. 350, 119 N.W. 289; Kleimenhagen v. Dixon (1904), 122 Wis. 526, 100 N.W. 826; Druska v. Western Wisconsin Tel. Co. (1922), 177 Wis. 621, 189 N.W. 152, and the decisions cited therein. The complaint was properly amended and served upon appellant's counsel. No substantial change to his disadvantage confronted the appellant because of the amended complaint, and no new issues arose because of any new facts introduced. The question of the existence of the contract was still the issue, and the amended complaint reflected the claimed obligations brought up to date. The case of Erickson v. Westfield Milling Electric Light Co. (1953), 263 Wis. 580, 58 N.W.2d 437, relied upon by appellant, is not applicable here. In that case there was a wide change of issues, resulting from the amended complaint, and a counterclaim was filed. The record before us discloses a situation where the trial court was well warranted in denying appellant's motion. Sec. 270.145, Stats.
The second question before us whether there was a valid contract under which Kaufman agreed to pay the $7,000 unsecured note. Appellant claims that the $7,000 unsecured note was a personal liability of Gunnison, that he (Kaufman) did not promise to pay that note, and that the alleged promise to pay it is void under the statute of frauds as being a promise, not in writing, to answer for the debt, default, or miscarriage of a third person. With respect to the application of the statute of frauds: The alleged promise which Kaufman made to get Gunnison "off the hook" and personally take care of the two obligations at the Reedsburg Bank was not a promise to answer for the debt of Gunnison to the bank. It was a promise made as part of a purchase deal in which Kaufman, the purchaser, and Gunnison, the seller, agreed that Kaufman's undertaking to pay those existing obligations was to be part of the purchase price for the property he (Kaufman) received. In other words, the promise merely specified the method by which the promisor (Kaufman) was to pay off his own obligations to the promisee (Gunnison) for the transfer of the corporation property to him (Kaufman). The statute of frauds clearly does not apply to such a situation. The rule is plainly stated in Fosha v. O'Donnell (1904), 120 Wis. 336, 97 N.W. 924, where the holder of the notes brought action directly against the defendant purchasers on the basis of his oral promise to the seller and original obligor. At page 340 it was there said:
"Such an agreement it is held is not in effect an undertaking in the nature of a `special promise to answer for the debt, miscarriage, or default of other persons,' though it is collateral to the liability of the original debtor to pay the same debts. The agreement is not a mere promise to answer for another's liability contemplated by the statutes requiring such agreements to be in writing, expressing the consideration, and signed by the party sought to be charged. It is an agreement that the defendant O'Donnell will pay his debt to Prosser in a particular manner, by discharging these notes held by plaintiff, based upon the consideration between him and Prosser at the time the agreement was made."
The evidence accepted as controlling is that in 1948 or 1949 respondent Gunnison and one Earl Schilling entered into the business of manufacturing cultivators as partners. For the purpose of constructing a factory, they borrowed $26,000 on a secured judgment note from the Reedsburg Bank. On an unsecured note they borrowed from the same bank an additional $30,000 for materials and cash to enable the company to operate. They later incorporated as Schilling and Gunnison, and Schilling and his wife and Gunnison and his wife, between them, owned all the stock. The mortgages given to the bank were on the factory and the homes of the stockholders. Later Gunnison bought out Schilling with money obtained also from the Reedsburg Bank, and the corporation became known as the Baraboo Manufacturing, Inc., and additional stock was sold to other persons. Payment of the money with which Gunnison bought out Schilling was guaranteed up to $25,000 by a note signed by one L. C. Welch, who retained as security 225 shares of stock formerly owned by Ivor Gunnison. In addition to the money thus borrowed, Gunnison personally put into the corporation some $16,000 of his own to keep the business running.
The venture was unsuccessful, and in August, 1952, S. J. Kaufman, an officer in the Industrial Spring Corporation of Chicago, a creditor of Baraboo Manufacturing, Inc., after conferences in Chicago and Baraboo, agreed to take over the business and compromise its debts. On November 6, 1952, a meeting was held in Baraboo at which Kaufman and all the stockholders were present. At this meeting it was first suggested by Kaufman to the stockholders that they cancel any obligations the corporation had to them and turn all their stock over to him without compensation. That proposition was not accepted. Mr. Kaufman then left the room and there was a discussion among the stockholders. When he returned he made a second proposal, namely, that the stockholders assign their claims against the corporation and turn over all of their stock for a nominal price. It was at that time that the alleged promise of Kaufman was made "to get Ivor Gunnison off the hook" and personally pay the two obligations at the Reedsburg Bank. The following agreement was dictated by Kaufman and later put in writing and signed by the stockholders
"We the undersigned agree to assign to Martin S. Gordon (attorney at law) the corporation stock of Baraboo Manufacturing, Inc., plus all loans made from the undersigned to Baraboo Manufacturing, Inc., for X numbers of dollars, and agree to assign all loans due us from Baraboo Manufacturing, Inc., to Martin S. Gordon (attorney at law) for X number of dollars."
The agreement between Kaufman and Gunnison under which Kaufman was to pay the two notes at the Reedsburg Bank was not put in writing. However, there was testimony to the effect that some discussion was had about putting into the written agreement details about the payment of the $7,000 note and mortgage, but Kaufman said that it would not be necessary because everyone understood about it, and that he was a gentleman of his word and would live up to his promise. Further, the testimony shows that the written agreement set forth above was signed by the stockholders in full reliance upon the oral promise of Kaufman to take care of all creditors and the bank notes. One witness testified: "He [Kaufman] said we had nothing to lose — everything was gone, and that Ivor was the only one to lose anything. If he got all of our stock he would assume all obligations so Ivor would not have to lose his home and business. He told us that before we signed anything." Gunnison and other stockholder witnesses testified to the same effect.
The two loans made by the Reedsburg Bank for a building and for material and cash were made in 1948 or 1949, when Ivor Gunnison and Earl Schilling were partners. When the business was later incorporated, the Reedsburg Bank refused to transfer those obligations to the corporation, but insisted that the original partners remain personally liable to it. Both loans were used in carrying on the business of the partnership and corporation. The original obligations were gradually reduced by payments to the bank made from earnings of the business, and the notes were renewed from time to time. There is no doubt that the obligations of the two notes were carried on the books of the corporation and treated as company debts to the bank. When Kaufman became interested in Baraboo Manufacturing, Inc., he sent his own auditors from Chicago to audit the corporation. In the audit report, which they submitted to him, both the $20,000 secured note and the $7,000 unsecured note were listed as obligations of the corporation owed to the Reedsburg Bank. An earlier audit report prepared by C. P. A. John Hoppe, also listed those obligations as company liabilities. Therefore, when Kaufman, on November 6, 1952, agreed to assume the obligations of the corporation to the bank, he was well aware that the $7,000 unsecured note was a part of the obligations he was assuming. Furthermore, on May 6, 1953, $1,000 was paid to the Reedsburg Bank with a check drawn on the First National Bank of Baraboo by Baraboo Manufacturing, Inc. That $1,000 was applied to the $7,000 unsecured note, and the bank gave Gunnison a receipt for the same. It is undisputed that after selling the building of the corporation, Kaufman paid the $20,000 mortgage note. Thus part performance of the contract is clearly in evidence. A week or two after Kaufman paid the $1,000, he informed Gunnison that he was not going to make any further payments on the $7,000 note. Gunnison subsequently paid the balance of that note to the bank.
Appellant contends that he is not bound by the alleged promise because the transfer of the stock and assignment of claims was made before November 6, 1952. It is true that all of the stock of Baraboo Manufacturing, Inc., except the 225 shares referred to above, was indorsed in blank and sent to Chicago by mail on October 31, 1952, to Kaufman's attorney, by Gunnison, with the promise that Kaufman would have the 225 remaining shares "on Monday morning." An accompanying letter contained resignations of all of the officers. And on November 4, 1952, Gunnison assigned to Kaufman for $10 all claims by him on Baraboo Manufacturing, Inc. However, the record reveals that the checks given by Kaufman to Gunnison for his assignment to Kaufman of claims against the corporation amounting to some $16,000 were made payable on January 6, 1953; and the two notes given by Kaufman to Gunnison as a part of the deal were both executed on November 6, 1952, and due January 6, 1953. Appellant's own testimony on adverse examination, admitted by appellant, was that "The agreement of November 6, 1952, was merely an agreement of intent or willingness to consummate this deal." He was asked, "And in what fashion was it actually consummated in January, what do you have reference to there as consummating it?" and he answered, "The turning over of the stock and signing of the stock." Furthermore, a letter dated March 2, 1953, contains the statement by Kaufman to the effect that he had bought both the 444 shares of stock and the loans by Gunnison to Baraboo Manufacturing, Inc., from Gunnison and his wife on January 6, 1953. This evidence corroborates the testimony of Gunnison that the stock certificates sent to Kaufman's attorney in October, 1952, were sent merely for the purpose of examination.
From the foregoing it is plain that respondents transferred to appellant 444 shares of stock in Baraboo Manufacturing, Inc., and also assigned to appellant their claims amounting to some $16,000 against the corporation for its indebtedness to them. In exchange for the transfer of stock and assignment of claims, the Gunnisons received, in addition to the Kaufman promise to pay the two notes at the bank, a note for $519.80, the amount necessary to get Gunnison's stock released from the lien held by the estate of L. C. Welch, and $15, and two checks for $10. The contention of appellant that the agreement is void for lack of consideration cannot be sustained.
It is unnecessary, it seems to us, to further repeat or analyze the testimony. The findings of fact are supported by the evidence. Appellant is liable to respondents for the amount of $6,271.88 which they paid on the balance of the $7,000 note subsequent to the payment by Baraboo Manufacturing, Inc., of $1,000, with interest from the time of payment.
By the Court. — Order and judgment affirmed.