Sherlock v. Bradley Polytechnic Institute , 184 Wis. 425 ( 1924 )

The following opinion was filed May 6, 1924:

Vinje, C. J.

The ultimate question in this case concerns the liability of the defendant the Bradley Polytechnic Institute. It is the only defendant that appeared and defended. Numerous exceptions in its behalf are made to the findings of fact. All, however, merge more or less in the determination of whether or not the evidence supports this finding of the court:

“The said contract was entered into by the defendant Institute for the purpose and with the intent of securing the services of said Erbes, who was a real-estate agent in the business of selling farm lands, in effecting sales of said lands, and with the purpose and intent thereby to avoid responsibility for fraudulent representations made or claimed to be made b}r said Erbes to purchasers in effecting sales thereof. And it was contemplated by said Institute and by said Erbes that the said lands should be sold to farmers as and for farm lands adapted to general farming purposes as farming was generally carried on in the vicinity .of their location, at prices far in excess of their actual value for such purposes, and with knowledge, on the part of said Institute, that they were in fact not adapted to general farming purposes and were of less actual value than they were listed at by said contract; and it was contemplated, in lieu of regular commissions for selling said lands, said Erbes should have all that he might be able to procure over and above the amount of payriients specified in said contract to be made by said Erbes to said Institute. And it was contemplated by said parties that none of said lands should actually be taken by said Erbes except such as he should first succeed in selling to purchasers, and that all payments by Erbes to the Institute should be made from the payments made to Erbes by purchasers upon completion of sales.”

The evidence supporting such finding is not, as might be expected, positive and direct but circumstantial. It rests to a large extent upon the following facts which the court could find the evidence established: The Institute was thoroughly familiar with the quality of the soil of the lands sold and knew that for agricultural purposes its value, as the court found, was not to exceed one half the price put upon it in the contract. It knew that Erbes, in order to get pay for his services, must ask a price higher than the listed one. It therefore knew a sale could not be made, if made upon representations at all, except upon fraudulent ones. It had previously sold lands through Erbes and had had to take them back because of fraudulent representations. It was constantly informed of the progress and status of sales made, and knew, as the court found, that no sales would be made to Erbes until he had resold.

The above are some of the salient facts from which the court found that the Institute entered into the contract with Erbes with.the intent and knowledge that the prospective purchasers from Erbes were to be induced to buy the lands through fraudulent representations by Erbes or his agents at prices over twice the value of the land. We therefore arrive at the conclusion that the trial court was warranted in finding from the evidence that a fraudulent scheme to sell the lands was entered into by the Institute and Erbes to the prospective profit of both. This being so-, the liability of the Institute follows as a matter of course.

The contract between the Institute and Erbes is an option contract for the purchase of land, and there is nothing within its four corners that spells fraud or that by its terms attaches liability to the Institute for the representations of Erbes. On the contrary, the contract provides there shall be no such liability. But the contract does not tell the whole story. It is only an apparently innocent and lawful link in a fraudulent scheme, and it is the purpose and effect of the scheme that governs, and not the language of an agreement which is only a part of the scheme. Fraud delights in choosing innocent and lawful carriers for its execution. When it does so, parol evidence* is admissible to show that a writing innocent and valid on its face is part of a fraudulent scheme. Miller v. Anderson, 183 Wis. 163, 196 N. W. 869.

It seemed to be the view of counsel for the Institute that if the contract in question was not on its face a contract of hire there would be no liability on the part of the Institute. Such view was faulty in that it did not recognize that fraud might be spelled from the transactions taken as a whole, though it could not be spelled from the contract alone. Such a contract of an option to sell is not a contract of hire, and from it alone no liability on the part of the “owner” for representations made by the “buyer” would follow. But when it is shown, as it was here, that the contract is only one link in a fraudulent scheme, liability on the part of the “owner” may follow in spite of the contract.

We think the trial court correctly held that there was liability on the part of the Institute for the fraudulent representations made by Erbes and Tillia.

By the Court. — Judgment in each case is affirmed.

A motion for a rehearing was denied, without costs, on October 14, 1924.