Opinion
No. 222.
Argued November 29, 1971. —
Decided January 4, 1972.
APPEAL from a judgment of the county court of Wood county: FREDERICK A. FINK, Judge. Reversed and cause remanded with instructions.
For the appellants there was a brief by Potter, Wefel Nettesheim of Wisconsin Rapids, and oral argument by John M. Potter.
For the respondent there was a brief by Schmidt Thibodeau of Wisconsin Rapids, and oral argument by Leon S. Schmidt.
This is an action to recover $2,250 plus interest due upon a promissory note which represented the balance due on a $10,000 purchase price of a contract to purchase a credit-rating type of business. The defendant answered and counterclaimed alleging that there was a breach of warranty concerning prepaid subscriptions for the service, and that the defendant's damages were $5,000.
The plaintiffs-appellants Aron Schmidt and Elaine Gill were the owners of a credit reporting service named Win-Reports. Aron Schmidt bought the business on April 19, 1967. The service, sold on a prepaid subscription basis to banks and business houses, provided a listing of chattel mortgages, conditional sales contracts and other items that pertained to filings and records in the courthouses in 11 different counties. These credit reports were issued on a monthly and semimonthly basis to prescribed customers.
Also referred to as A. A. Schmidt and Aaron Schmidt.
On November 6, 1967, the defendant-respondent Shirley Mueller met Aron Schmidt in the hall of the building in which they both worked and asked him for a quote on a subscription to Win-Reports. On November 7th Aron Schmidt came to Shirley Mueller's office and quoted a price of $50 each for Marathon and Wood counties. At that time Schmidt stated that the business was for sale and that someone in Wausau was interested in buying it.
On November 9, 1967, Shirley Mueller and a friend and business adviser, Del Rowland, went to Aron Schmidt's office to "go over the books" of Win-Reports. On November 20, 1967, Schmidt and Gill sold "Win-Reports" to Mueller for $10,000. The contract provided for a down payment of $500, payment of $4,500 on or before December 1, 1967; a payment of $1,500 on or before December 31, 1967; a payment of $1,000 on or before November 20, 1968, evidenced by a promissory note; and a payment of $2,500 to be paid in installments of $150 per month, including interest of six and one-half percent per year, payments due on the 30th day of each month starting January 30, 1968.
The parties to the contract agreed to and signed the contract and an addendum on November 27, 1967.
The defendant Shirley Mueller operated the business thereafter and made the payments due under the contract until January 30, 1968. At that time she informed Schmidt that there had been many cancellations and that she could not make the $150 payment due on January 30, 1968. She paid a lesser sum and continued to pay lesser sums than $150 as monthly payments until April 15, 1969, when she ceased operating the business and making any payments whatsoever. On that date she had paid Schmidt $7,800. There was $2,250 plus interest due from October 1, 1968, under the contract.
Plaintiffs-appellants Schmidt and Gill brought this action for the $2,250 plus interest owing on the final promissory note. Defendant-respondent Mueller served an answer denying that she owed any amount. She also served a counterclaim alleging plaintiffs had breached the contract warranties, or had misrepresented the warranties. She asked for damages of $5,000. Plaintiffs moved that the answer be made more definite and certain. Defendant amended her counterclaim and alleged her cause of action to be as follows:
"2. That as and for an amendment to paragraph 6 of the counterclaim, the defendant alleges that subsequent to the purchase of the business identified above, the defendant became aware of the fact that there were certain breaches of the warranties as set forth in paragraph 8 of the contract and specifically paragraph 8, subsection (c) of Exhibit B, and the defendant alleges that there were, in fact, liabilities against said business which were not disclosed, which the plaintiffs knew existed and from which the plaintiffs did not hold the defendant harmless; such liabilities being prepaid subscriptions, which subscriptions caused the defendant to be deprived of incomes, profits and benefits, and further, the breach of said warranties and misrepresentations with relation thereto, caused the defendant financial loss and further voids the contract and makes the plaintiffs liable to the defendant for the loss she has sustained in the amount of $5,000.00."
She asked for $5,000 damages and for any other relief in law and equity that may have been just.
Paragraph 8 of the contract provides: "The sellers make the following warranties as a part of this agreement:"A. Sellers have not invoiced any customers since November 15, 1967, and will not invoice any customers; and cash receipts from and after 1:00 A. M., November 20, 1967, shall be the property of and shall be promptly delivered to buyer.
"B. That the gross receipts of said business during the 6 months preceding the date of this agreement have been approximately $6,000.00, and sellers have no personal knowledge, information or belief leading them to believe that gross receipts in the 12 month period beginning December 1, 1967, will be less than $12,000.00, barring conditions or circumstances not now known or foreseen.
"C. That there are no liabilities against said business contingent or otherwise, either arising out of contract or tort or otherwise as of the date of this agreement, of which the sellers have any knowledge, belief or suspicion; and sellers do hereby bind themselves to save the buyer harmless therefrom. Buyer shall have the right to set off any such liabilities if any may be asserted against her, against any accounts which buyer may at the time owe sellers upon this contract, if such liabilities are less than the balance due; if any such liabilities, greater than balance due sellers are asserted against buyer, she shall have the right to demand and sue for indemnification, and to join sellers by cross-complaint or otherwise in any action which may be brought against her arising out of any transaction pertaining to the business prior to the date of this contract.
"D. That sellers have been operating said reporting business in the following eleven Counties in Wisconsin:
"Wood Adams "Portage Marquette "Waushara Kewaunee "Marathon Waupaca "Columbia Taylor "Shawano and further warrant that the number of active customers or subscribers to the reporting service is 216, based upon all records and knowledge of sellers in good faith."The plaintiffs-appellants, Schmidt and Gill, answered the counterclaim by stating that the prepaid subscriptions in question had been disclosed to the defendant-respondent Mueller at the time the parties entered into the contract.
The plaintiffs moved that the court, as a matter of law, find that the defendant owed the plaintiffs $2,250 plus interest. The court so ruled. The plaintiffs also moved that the court, as a matter of law, find that there had been no representations that there were no prepaid subscriptions. The court denied the motion.
The case was tried to the court and a jury on September 1, 1970. The verdict was submitted upon the theory of intentional misrepresentation rather than breach of warranty.
The verdict submitted and returned was as follows:
"Question No. 1: At what sum of money do you assess the plaintiffs', A. A. Schmidts' and Elaine Gills', damages at?
"Answer: Answered by the Court `$2,250.00 Plus Interest' "Question No. 2: Did the plaintiff, A. A. Schmidt, make a representation of fact that the business that he was selling to the defendant did not have any liabilities against it, specifically in the form of prepaid subscriptions which the defendant would have to service without remuneration?
"Answer: Yes. "Question No. 3: If you have answered `Yes,' to Question No. 2, then answer this question: Was such representation untrue?
"Answer: Yes. "Question No. 4: If you have answered `Yes,' to both Questions No. 2 and No. 3, then answer this question: Did the plaintiff make a representation knowing it was untrue or reckless without caring whether it was true or untrue?
"Answer: Yes. "Question No. 5: If you have answered Question No. 4 `Yes,' then answer this question: Did the plaintiff make the representation with the intent to deceive and induce the defendant to act upon it?
"Answer: Yes. "Question No. 6: If you have answered all the preceding questions `Yes,' then answer this question. Did the defendant believe such representations to be true and justifiably rely on them to her pecuniary damage?
"Answer: Yes. "Question No. 7: If you have answered all the preceding questions `Yes,' then answer this question: What sum of money will fairly and reasonably compensate the defendant for her loss of the bargain?
"Answer: $8,500.00"
Plaintiff-appellants did not object to the verdict submitted to the jury, although after the verdict was returned they again moved that Question No. 2 be answered "No" as a matter of law by the court. The motion was denied.
The plaintiffs-appellants then moved for a new trial on these grounds:
1. The verdict was contrary to law and to evidence.
2. The damages were excessive.
3. In the interest of justice.
The motion was denied.
The court rendered judgment on October 29, 1970, for plaintiffs in the amount of $2,554.69. This amount was used to offset the $8,500 judgment rendered for defendant on her counterclaim. The ultimate net judgment was against plaintiffs in the amount of $5,945.31.
Plaintiffs appeal.
The plaintiffs-appellants contend that there is no credible evidence to sustain the jury's finding of a misrepresentation of fact and that the counterclaim should be dismissed upon that ground. They further contend that the court erred in entering judgment based upon a damage award to the defendant in excess of the ad damnum clause of the counterclaim and contrary to the evidence as to the amount of prepaid subscriptions.
The defendant-respondent's response is that there is credible evidence to support the verdict and that the plaintiffs-appellants, by not objecting, waived any failures as to amendment of the pleadings to conform to the proof and as to the form of the verdict.
Clearly, the amended counterclaim of the defendant alleges a breach of warranty and specifically refers to paragraph 8C of the contract, supra. The allegation, further, is that there were undisclosed liabilities in the form of prepaid subscriptions and that the loss to the defendant was $5,000.
The case was not tried upon the theory of breach of warranty as provided under the chapter on sales of the Uniform Commercial Code, which is a contract right, but rather on intentional misrepresentation which is a tort.
See ch. 401, Wis. Stats.
While the failure to object to the form of the verdict and the evidence in support thereof may legally justify the case being pleaded on one theory and tried on another, we still have the contention of the plaintiff that there is no credible evidence to support the verdict which the jury did return.
The rule often stated is if there is any credible evidence which yields a reasonable inference that supports the jury's finding, the court will not overturn the jury's findings even though another reasonable inference could have been drawn from the facts in the record. Repinski v. Clintonville Federal Savings Loan Asso. (1970), 49 Wis.2d 53, 181 N.W.2d 351; Jost v. Dairyland Power Cooperative (1969), 45 Wis.2d 164, 172 N.W.2d 647; Auster v. Zaspel (1955), 270 Wis. 368, 71 N.W.2d 417.
The jury found, in substance, that the plaintiffs intentionally or recklessly, with intent to deceive, did misrepresent to the defendant that there were no liabilities in the form of prepaid subscriptions.
Although the court has laboriously read the entire record, we will not herein review the evidence to determine whether there is that minute quantity and quality of evidence necessary to sustain the verdict. This is for the reason that upon our review of the whole record we are of the opinion that a new trial in the interest of justice must be awarded to plaintiffs as more fully hereinafter set forth.
It suffices here to state that we have grave doubts that the proof is sufficient to permit a finding of a fraudulent misrepresentation. We come to this conclusion because the business, by its very nature, was dependent upon prepaid subscriptions. Not only is that apparent, the defendant's testimony at the trial reveals she knew there were prepaid subscriptions. She testified, in part, as follows:
" Q. You also knew that certain people had subscribed prior to that time, didn't you?
" A. Yes, I had to assume that someone had subscribed or else it wouldn't be in business.
" Q. Right, and you knew that those people would have to have their contracts honored and receive the subscriptions, didn't you?
" A. I knew that they would have to be honored, but I didn't know how many or what amount or what it would cost me to do it.
"Q. But you knew it was your obligation, didn't you?
" A. I knew I had to fulfill the subscriptions.
". . .
" Q. Now I am going to show you what's been marked Exhibit 13 for identification purposes and ask you if you know what that is supposed to be or where it came from.
" A. This is a listing of the prepaid subscriptions that I had to fulfill when I bought the business. I got these off the cards by going through them hour after hour, very, very long time, length of time; and I have the handwork that went into that also, but this is just a summary; and it shows that there were $5,027.23 worth of subscriptions that had been previously paid for which I received no reimbursement but had to offer the service and get the reports out."
The defendant's counterclaim alleged and claimed damages of $5,000. The jury returned a verdict of $8,500.
We believe that the law permits the amount a jury awards to exceed the demand of the ad damnum clause in proper cases.
In Zelof v. Capital City Transfer, Inc. (1966), 29 Wis.2d 384, 391, 139 N.W.2d 1, this court stated:
". . . In addition when a verdict is supported by the evidence and is in excess of the ad damnum clause, there exists a variance between the pleading and the proof. Such a variance under sec. 263.28, Stats., is not deemed material unless it misleads the adverse party to its prejudice, and it must be proved to the satisfaction of the court that a party has been so misled and in what respect he has been misled. But even when a party is misled the court is not foreclosed from allowing an amendment but may order the pleading amended upon such terms as may be just. We see no reason why the statutes quoted should not apply full force to the ad damnum clause in a complaint as they do to other aspects of pleadings."
In this case the only finding of the jury as to misrepresentation dealt with prepaid subscriptions and the undisputed proof was that the entire prepaid subscription obligation at the time of the purchase was $5,027.23. There is not sufficient evidence in the record to justify any additional damage award because of prepaid subscriptions. Other damage evidence as to financial losses suffered by the defendant can hardly be attributed to prepaid subscriptions.
Sec. 251.09, Stats., the discretionary reversal statute, provides:
"In any action or proceeding brought to the supreme court by appeal or writ of error, if it shall appear to that court from the record, that the real controversy has not been fully tried, or that it is probable that justice has for any reason miscarried, the supreme court may in its discretion reverse the judgment or order appealed from, regardless of the question whether proper motions, objections, or exceptions appear in the record or not, and may also, in case of reversal, direct the entry of the proper judgment or remit the case to the trial court for a new trial, and direct the making of such amendments in the pleadings and the adoption of such procedure in that court, not inconsistent with the statutes governing legal procedure, as shall be deemed necessary to accomplish the ends of justice."
We have concluded that this is a proper case to invoke the discretionary reversal statute because of our opinion that the real controversy has not been fully tried and that justice has probably miscarried. This is not to say that we conclude that the defendant is not entitled to some recovery upon a new trial. The judgment should be reversed and set aside and a new trial ordered with the right of the parties to amend their pleading to reflect the real controversy, if they so desire, upon such terms as the trial court shall determine.
Ampex Corp. v. Sound Institute, Inc. (1969), 44 Wis.2d 674, 686, 172 N.W.2d 170; Lowe v. Cheese Makers Mut. Casualty Co. (1953), 265 Wis. 365, 61 N.W.2d 317.
By the Court. — Judgment reversed and cause remanded for further proceedings consistent with the opinion.