Opinion
September 10, 1958 —
October 7, 1958.
APPEAL from an order of the circuit court for Milwaukee county: HARVEY L. NEELEN, Circuit Judge. Affirmed.
For the appellants there was a brief and oral argument by Clyde M. Paust of Milwaukee.
For the respondent there was a brief and oral argument by Joseph E. Tierney of Milwaukee.
Action by the plaintiff against the defendants Betz and Snyder for an accounting and against all of the defendants to require an examination of the books and records of the named corporations. The body of the complaint embraces three alleged causes of action.
The complaint alleges that in 1942 the plaintiff and the defendants Betz and Snyder associated together in the construction business; that they incorporated as the Stone Construction Company, Inc., in which the three held a controlling stock interest; that the business expanded and developed and the three other defendant corporations were formed and in all of them the plaintiff, together with Betz and Snyder, owned the controlling stock interest; that the defendant Snyder at the time was the business agent for a labor union in Milwaukee and Betz was made the managing officer of each of the corporations, and the three associates were on the board of directors of each corporation; that in January, 1956, the defendant Snyder left his position as business agent for the union and Betz and Snyder thereafter united their votes in the control of all of said corporations; that plaintiff became dissatisfied with the arrangement and expressed a desire to sell his interest in said corporations; that no satisfactory arrangement could be made and thereafter Betz informed the plaintiff that if he did not accept the offer he, Betz, was going to make a shell out of the corporations and greatly diminish the value of plaintiff's stock; that in September, 1956, while negotiations were being carried on for the purchase of plaintiff's stock, the defendants Betz and Snyder changed the locks on all of the doors in the offices of the corporations, thereby excluding plaintiff from all access thereto; that on October 5, 1956, plaintiff was advised by a letter signed by Betz that his connections and duties as an employee of all of the corporations were terminated; that on October 23, 1956, at a special meeting of stockholders of all of the corporations plaintiff was removed as an officer and director thereof; that since said time he has been excluded from the offices of the companies and denied knowledge and information concerning the condition of the businesses thereof; that Betz and Snyder agreed that plaintiff could, through an accountant, make an audit of the books and records of the corporations for the purpose of determining the value of plaintiff's stock in said companies; that after approximately three days of work the auditors were notified that they could not proceed further; that formal demand was made in May, 1956, for an examination of the books and records of said corporations but such demand was refused by a letter received from the attorney representing Betz and Snyder.
In that part of the complaint delineated as a second cause of action the plaintiff realleged most of the allegations of the first cause of action. Plaintiff then alleged on information and belief that the defendants Betz and Snyder have been manipulating various pieces of contracting equipment by trades and purchases of new equipment which ultimately become the property of a copartnership formed by Betz and Snyder and another corporation formed by them; that equipment of the defendant corporations is rented to corporations and partnerships owned and controlled by Betz and Snyder at low prices which has resulted in loss to the defendant corporations; on information and belief that the defendant Betz has frequently made statements that he was going to make a shell out of the defendant corporations so that the stock would be made worthless and plaintiff would thereby suffer loss and damage; that Betz and Snyder, by reason of their control of the defendant corporations, have refused to pay the profits to the stockholders as dividends although substantial profits have been made, and have instead paid to themselves large bonuses; that said continued unlawful practices will dissipate the assets of the several corporations and will result in the insolvency of said corporations because of the desire of Betz and Snyder to destroy the corporations and plaintiff's interest therein; that the action is brought for and on behalf of said corporations; that no relief is sought against the other individual defendants who are directors and officers of the corporations but they are joined so that they may be subject to the jurisdiction of the court and bound by any orders or judgments made.
In the portion of the complaint delineated as the third cause of action plaintiff realleged some of the allegations first appearing in the complaint. In addition thereto plaintiff alleged that in the year 1944 the defendants Betz and Snyder, together with the plaintiff, organized a partnership for the purpose of buying, selling, and renting various kinds of construction equipment; that in said copartnership the plaintiff, Betz, and Snyder each owned a one-third interest; that said partnership did business under the name and style of Kuehn Equipment Supply Company; that the defendants Betz and Snyder have manipulated various pieces of contracting equipment by trades and purchases of new equipment which ultimately become the property of a copartnership formed by Betz and Snyder and a new corporation formed by them; that the equipment of the Kuehn Equipment Supply Company is being rented to concerns and persons engaged in the contracting business at low prices, which results in loss to the said Kuehn Equipment Supply Company; that instead of distributing the profits of said Kuehn Equipment Supply Company to the partnership, Betz and Snyder have paid the profits to themselves to the exclusion of the plaintiff; on information and belief that Betz has made the same statements as to making a shell out of said copartnership that he had made with reference to the defendant corporations, and that the continued unlawful practices of Betz and Snyder will dissipate the assets of said partnership and plaintiff's interest therein will be destroyed.
In the prayer for relief plaintiff asks for judgment (1) that the respective officers of the defendant corporations be ordered and directed to produce for examination by plaintiff's accountant all the books and records of said corporations at such time and place as the court shall direct; (2) to compel said officers to account for their official conduct in the management and disposition of the funds and property committed to their charge; (3) to order and compel payment by said officers to the corporations all sums of money and the value of all property which they have themselves acquired or transferred to others or have lost or wasted by any violation of their duties as such officers, and that the defendants Betz and Snyder be required to disclose to the court the names of all corporations organized by them and the names of all stockholders and members of the board of directors and officers of said corporations; (4) to suspend any director, trustee, or other officer from exercising his respective office whenever it shall appear that he has abused his trust; (5) to set aside all alienations of property made by the directors or other officers of said corporations contrary to the provisions of law; (6) to compel the distribution of net earnings and surplus of said corporations and partnership which may be disclosed from a complete audit of the books and records thereof; (7) that the said defendants Betz and Snyder be ordered and required to account for all transactions concerning the property and income of the Kuehn Equipment Supply Company to the plaintiff; and (8) that plaintiff and the defendant corporations have such other and further relief as may be just and equitable in the premises.
The defendants all appeared by the same attorney and demurred to the complaint on the ground that it appears upon the face of said complaint that several causes of action have been improperly united. The trial court, on December 11, 1957, entered an order overruling the demurrer and the defendants appealed from said order.
The defendants rely upon sec. 263.04, Stats., which reads as follows:
UNITING CAUSES OF ACTION. 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."
This section must be considered in connection with sec. 260.10 and sec. 260.12, Stats., as amended by Supreme Court Rule effective September 1, 1956, 271 Wis. p. vi.
Defendants cite De Witte v. Kearney Trecker Corp. 265 Wis. 132, 60 N.W.2d 748, in which the action was dismissed because of a misjoinder of parties plaintiff. Since the amendment of the Supreme Court Rules mentioned above, the De Witte Case can no longer be used as a precedent.
Two articles in the 1955 Wisconsin Law Review, one on page 458 and one on page 91, give some indication of the expansion of the joinder rule since the days of common-law pleading and in the early days of the code. Of interest in showing the transition from the narrow to the more-liberal rules of pleading where the joinder of causes of action are objected to are Simon v. Weaver, 143 Wis. 330, 127 N.W. 950, and McArthur v. Moffet, 143 Wis. 564, 128 N.W. 445. Perhaps the Wisconsin case most nearly in point is Usow v. Usow, 213 Wis. 395, 251 N.W. 458.
In general, the statutes provide that the joining of several causes of action in the same complaint is permitted when the following appears: The causes (1) must affect all the parties to the action; (2) must not require different places of trial; (3) must be separately stated. Where the actions are equitable in nature, courts will now take into consideration the entire subject matter and retain such jurisdiction until all matters involved in the litigation and connected with the subject matter are finally disposed of. In that connection we call attention to sec. 263.46, Stats., which reads as follows:
"PROCEEDINGS ON DECISION OF DEMURRER. After the decision of a demurrer the court may, in its discretion, if it appear that the demurrer was interposed in good faith, allow the party to plead over or to withdraw the demurrer on such terms as may be just. If a demurrer to a complaint be sustained upon the ground that several causes of action have been improperly united the court may, in its discretion and upon such terms as may be just, order the action to be divided into as many actions as may be necessary to the proper determination of the causes of action therein mentioned."
Under that section of the statutes, if the demurrer had been sustained, the trial court would undoubtedly have divided the action into as many as were necessary to the proper determination of the causes. Then under modern practice the cases would be consolidated for trial. As was stated in the Usow Case, supra (pp. 401, 402):
"If a liberal construction of the complaint reasonably permits of the conclusion that it contains an equitable cause of action affecting all of the parties but in which different kinds of relief are demanded which fairly may be said to be incidental, germane, and auxiliary to that cause of action, then defendants' contentions would seem to be not well founded. . . .
"It seems to be fairly established that where an equitable cause of action is asserted many different kinds of relief may be demanded even though the different kinds of relief do not affect all of the parties to the action, so long as the relief is incidental, auxiliary, or germane to the principal controversy, promotes the administration of justice and a complete determination of the controversy. . . .
"`The test of whether there is more than one cause of action stated or attempted to be stated in a complaint is not whether there are different kinds of relief or objects sought, but whether there is more than one primary right sought to be enforced or one subject of controversy presented for adjudication.'"
Looking to the substance of the complaint rather than to the form it might be determined that the complaint sets up but one cause of action. The plaintiff asserts but one primary right or purpose, viz., to seek an accounting from his business associates. The other relief sought is incidental, auxiliary, and germane to the principal controversy. Under the liberal rules of pleading now in effect the administration of justice will be best promoted by trying in one action the issues presented in the complaint.
By the Court. — Order affirmed. The defendants shall have twenty days from the remittitur of the record within which to serve an answer or answers to the complaint.
MARTIN, C.J., took no part.