Opinion
April 6, 1959 —
May 5, 1959.
APPEAL from a judgment of the circuit court for Milwaukee county: ROBERT C. CANNON, Circuit Judge. Affirmed.
For the appellant there was a brief and oral argument by Paul Pike Pullen of Milwaukee.
For the respondents there was a brief and oral argument by William R. Gold of Milwaukee.
On March 4, 1958, James Maslowski brought action against Harvey R. Bitter and Elsabea Bitter, his wife, and another. The action has been dismissed with respect to the third defendant, and that dismissal is not involved upon this appeal.
Plaintiff's amended complaint set forth three alternative causes of action. In the first it was alleged that on January 8, 1957, plaintiff and Harvey Bitter entered into an agreement to buy and sell real estate in Wisconsin; that it was agreed that Bitter would provide the money necessary to purchase real estate and that plaintiff and Bitter would expend time and effort in finding suitable properties for purchase and in finding suitable buyers; that title to properties so purchased would be taken in the names of plaintiff and Bitter as tenants in common; and that the profits resulting from the sales, after deducting the cost of acquisition and sale, would be divided equally between them. The relationship of the parties was referred to as a partnership and the agreement as a partnership agreement. It was alleged that plaintiff expended time and effort in acquiring certain property; that Bitter wrongfully acquired title in his name alone and thereafter wrongfully made certain conveyances of the property with the intent of depriving plaintiff of his interest in the property and his right to partnership assets; that as a result of the wrongful acts Bitter received and would continue to collect money in excess of his due proportion of the partnership profits. In the second cause of action it was alleged that Bitter had from time to time applied sums of money from the receipts of the partnership enterprise to his own use greatly in excess of the proportion to which he was entitled. The third cause of action set forth the making, of the agreement as alleged in the other causes of action, but did not refer to it as a partnership agreement. It alleged that pursuant to the agreement, plaintiff expended time and effort in acquiring certain property; that at the time of closing, Bitter wrongfully took title in his sole name and has wrongfully retained title and money derived from the properties. The prayer for relief included a demand for judgment that the partnership be dissolved and that there be an accounting; that the property involved in the partnership be sold and the profits divided; that a receiver of the partnership money and effects be appointed; and that there be a money judgment for plaintiff's share of money paid to Mrs. Bitter on a particular land contract.
Mr. and Mrs. Bitter answered denying that plaintiff and Bitter entered into any agreement to buy and sell real estate; that at any time there was a partnership between them; and denying wrongful acquisition of property by Bitter. As an affirmative defense it was alleged that plaintiff's claims to an interest in lands were barred by the statute of frauds because Bitter had never in writing created any interest in plaintiff.
It appeared at the trial that Bitter was a real-estate broker. Plaintiff had been licensed as a real-estate salesman in 1950 and was associated with another broker before 1957. During 1957 he was associated with Bitter and his salesman's license was transferred to Bitter on the records of the real estate brokers' board. After the events involved in this action, the salesman's license was transferred to another broker with whom plaintiff was associated at the time of trial. While associated with Bitter, plaintiff was principally occupied in finding and purchasing land. The record does not show whether plaintiff received wages or commissions from Bitter or whether he claimed anything from him except under the agreement alleged in the complaint.
Plaintiff testified that in November, 1956, Bitter orally offered that plaintiff "go out and find property for me and use my money, and if we can sell it again at a profit, we'll split 50-50." Plaintiff testified that in December, 1956, he told Bitter he would accept and start right after the first of the year and that about January 8, 1957, he did start at Bitter's office; that originally Bitter offered to pay any losses that might occur but plaintiff said that if there were any losses plaintiff would share those 50-50 also. Plaintiff testified concerning several pieces of property which were acquired after negotiations in which he participated, including one tract which was later sold at a prof it and with respect to which he was given a check for a sum equal to one half the approximate profit. There was also testimony by another witness that in a conversation concerning the purchase of a tract of land, Bitter referred to plaintiff as Bitter's partner rather than by name. On cross-examination plaintiff testified that the partnership or joint venture was engaged in the business of selling real estate from January 8, 1957, through February of 1958; and that the partnership which he claimed between Bitter and himself never made any application for a broker's license.
Defendants moved to dismiss the complaint for the reason that plaintiff had established that the partnership was engaged in the business of selling real estate and that under sec. 136.11 of the statutes he may not maintain any action for compensation. Apparently it was agreed that defendants' motion should be argued and decided before further trial.
At the time of argument the plaintiff asked leave of the court to amend his pleadings to set forth a fourth alternative cause of action alleging the same agreement, but not referring to it as a partnership, alleging that a considerable amount of property was bought and sold and a profit derived therefrom and that by reason of these facts, $6,000 was due plaintiff from Bitter. The court denied leave to amend the complaint, stating that the amendment added nothing to the original causes of action except that a specific amount was set forth. The court then stated that the plaintiff acted as an active partner in the alleged brokerage business and, as such, it was necessary for him to have a license and in the absence of a license he was not entitled to an accounting of the profits. The court then ordered judgment dismissing the amended complaint upon its merits as against Mr. and Mrs. Bitter.
Judgment was so entered October 7, 1958, and plaintiff has appealed.
The theory of plaintiff's complaint and the substance of his proof upon the trial were that the agreement between Bitter and plaintiff made them partners. Not only did they agree, according to plaintiff, that profits were to be divided equally, but losses were to be shared equally and the properties acquired were to be owned in common. Plaintiff nowhere suggested that the agreement made him Bitter's employee, except to the extent that the fourth alternative cause of action offered after the defendants' motion to dismiss might be open to that interpretation.
If a partnership did exist, it could not lawfully do business without a broker's license. "No person shall engage in . . . the business . . . of . . . a real-estate broker . . . without a license." Sec. 136.02, Stats. "Person" includes a partnership. Sec. 990.01 (26). A "real-estate broker" is a person engaged in the business of selling real estate whether or not the real estate is owned by the person. Sec. 136.01 (2) (b). If a partnership be licensed, its license entitles one member of the partnership to act as a broker and for each other who desires to act as a broker, an additional license (broker's, not salesman's) shall be obtained. Sec. 136.07 (2). In 1957 the attorney general advised that if two licensed brokers formed a partnership, the partnership should obtain a separate license. 46 Op. Atty. Gen. 1.
Plaintiff was actively engaged in the business of the alleged partnership. He held a salesman's license which authorized him to act as an employee of a broker. Sec. 136.01 (3), Stats. As a licensed employee he would not be barred by sec. 136.11 from suing for compensation for his services as an employee. In this action, however, he is not suing for compensation for services rendered as an employee, but is seeking an accounting for the assets and profits of a partnership.
Because plaintiff claimed an agreement whereby he would share losses as well as profits and would own an interest in the property acquired, we cannot disregard his calling the relationship a partnership as his mere legal conclusion. His case must stand or fall upon the theory of partnership. If his proposed fourth alternative cause of action be interpreted as an attempt to recover on an employment theory, we do not find an abuse of discretion on the part of the circuit court in denying leave to amend after plaintiff had maintained the partnership theory through a substantial part of the trial.
If the agreement created a partnership, the business of the partnership was carried on in an unlawful manner because the partnership was unlicensed. Furthermore, as stated by the circuit court, plaintiff, as partner, was acting as a broker although he held a license which permitted him to act only as a broker's employee. The public has an interest and a right to hold one who acts as a real-estate broker to a higher standard of competence and responsibility than one who so acts only under supervision as an employee. A partner cannot compel an accounting where the partnership was organized for the purpose of conducting a lawful business in an unlawful manner. Brill v. Salzwedel (1940), 235 Wis. 551, 556, 292 N.W. 908; 40 Am. Jur., Partnership, p. 358, sec. 326.
We point out that the alleged agreement was not one merely to buy and sell a piece of real estate as an isolated joint venture. Plaintiff's testimony was that he and Bitter engaged in this course of business for over a year and that there were repeated transactions. As heretofore indicated, we do not view this as a situation where a licensed salesman and his broker employer agree that the employee's compensation is to be measured in whole or in part by a percentage of profits realized by the employer on certain transactions.
By the Court. — Judgment affirmed.