Sheboygan v. Finnegan , 245 Wis. 349 ( 1944 )

Action commenced by the city of Sheboygan November 2, 1942, against Charles W. Finnegan and the Charles Finnegan Company for the recovery of $38,500. From an order overruling demurrers, defendants appeal.

The complaint alleges that the defendant company procured options to purchase certain lands at an aggregate price of $71,500; that about August 31, 1942, defendant Charles Finnegan as agent of the company, entered into a verbal agreement with the chairman of the committee on finance of the common council by which it was agreed that defendant company would convey to the city of Sheboygan the land covered by said options at a purchase price of $82,000; that the land was to be used by the city as an airport; that on September 1, 1942, at 10 p. m., payment to Finnegan of $10,000 of the purchase price in cash was made secretly and in haste and a written receipt was given by Finnegan reciting that "it is understood and agreed that the city will pay the remainder of $72,000 on purchase price of real estate . . . when deeds to said lands are delivered to the said city;" that subsequently warranty deeds were delivered to one of the city officials by the owners of the land covered by the options and the checks for the purchase price were issued directly to the owners; that this was payment of a portion of the balance of the consideration; that the common council of the city of Sheboygan has never adopted any resolution or taken any legal action to purchase lands for the airport under sec. 62.22 (1), Stats., except by a resolution adopted without having been referred to any committee as required by sec. 2.09 (3) of the municipal code of the city and with less than three fourths of the council members voting to suspend the rules as required by sec. 2.10 of the municipal code; that said resolution for other reasons specifically set forth in the complaint did not grant the authority to enter into the agreement with defendant corporation. The complaint further alleges that no acceptance of the deeds nor ratification of the illegal payments or purported agreement have been made by the city council and that the defendant, Finnegan, knew that the payments made from the funds of the city to him were illegal. Plaintiff asks for judgment in the sum of $38,500 and, in default of such payment, that the deeds be canceled and lands sold at public auction and proceeds applied to the payment of the amount of said judgment.

Charles Finnegan Company demurred on the ground of defect of parties because the grantors of the option were not joined as defendants, and the defendant Charles W. Finnegan interposed a separate demurrer alleging that the complaint fails to state facts sufficient to constitute a cause of action against him. From an order overruling the demurrers, this appeal is taken. It appears from the complaint that certain officials of the respondent city attempted to agree to buy real estate controlled by the appellant company. Part of the consideration was to be the payment of the purchase price of the real estate to the owners of the land.

Some payments were made and warranty deeds given to the city. The city is seeking no relief against the grantors of the options. It is not attempting to recover the purchase price from them. The cause of action is for the recovery of moneys illegally paid to an agent and by him delivered to his principal. The title to the land is of no importance here except in connection with the enforcement of the money judgments. Therefore, as the grantors of the option are not necessary party defendants, the demurrer on that ground was properly overruled. The complaint alleges delivery of the deeds to the officers of the city, payment to the owners, and the execution of quitclaim deeds by the mayor and city clerk conveying the lands to the appellant company, such deeds to be held by the clerk of court and delivered to appellant upon payment of the judgment. These allegations are sufficient for the purpose of presenting the issue. The allegation that the city and common council "have never accepted the conveyances of lands . . . nor has the city made any use of the lands," when considered in its context is not an allegation of lack of title but of the lack of any act which could be construed as ratification or acceptance of the transaction between the appellant and certain officers of the city.

Charles W. Finnegan has interposed a demurrer to the complaint on the grounds that it does not state facts sufficient to state a cause of action against Finnegan, personally. The complaint alleges that the agreement was made by Finnegan as officer and agent of the corporation; that the cash was paid to him at a late hour and under circumstances suggesting haste and secrecy; and that Finnegan knew that the payments were illegal. These are allegations of fact showing a cause of action against Finnegan. The allegation that Finnegan knew the payments were illegal amounts to an allegation that he was aware of all the facts and circumstances surrounding the transaction. This, under the matters set forth, is a conclusion of fact and admitted on demurrer.

If Finnegan so acted that he must be held to know the facts surrounding the irregularity of the passage of the resolution and the lack of authority of the officers of the city to deal with him, he is a proper defendant in this action and is liable as an agent of the corporation. An agent, who knows that his principal is not entitled to funds received by him for such principal from a third person, is under a duty to return them to the one rightfully entitled thereto. 2 Am.Jur. p. 264, sec. 336. See also Kiel v. Frank Shoe Mfg. Co.240 Wis. 594, 4 N.W.2d 117.

By the Court. — Order affirmed.