First Nat. Bank of Appleton v. Bertschy

Citation52 Wis. 438,9 N.W. 534
PartiesFIRST NAT. BANK OF APPLETON v. BERTSCHY AND ANOTHER, IMPLEADED, ETC.
Decision Date04 June 1881
CourtUnited States State Supreme Court of Wisconsin

OPINION TEXT STARTS HERE

Appeal from circuit court, Outagamie county.

H. W. Tenney, for respondent.

W. H. Seaman and Foster, McIntosh & Foster, for appellants.

TAYLOR, J.

This is an action in the nature of a creditor's bill to set aside a conveyance from Leonard Bertschy to John Bertschy of certain real estate formerly owned by said Leonard Bertschy, and to subject the property so conveyed to the payment of the judgment against said Leonard Bertschy. The complaint alleges that the conveyance was without consideration, and made with intent on the part of the said Leonard Bertschy, and for the purpose, of hindering, delaying, and defrauding his creditors, and upon a secret trust known to the said John Bertschy. John Bertschy answers, denying all intent to defraud on his part, denies that the conveyance to him was made without consideration, alleges that the consideration paid by him therefor was $13,000, which was all the property was worth; and Leonard Bertschy answers, denying all intent to defraud his creditors by the conveyance of said property, and also alleges that the conveyance was for a full consideration. The action was tried by the court, and, after hearing the evidence, the court made and filed his findings of fact and conclusions of law.

The first, second, third, and fourth findings of fact relate to the judgment of the plaintiffs against the defendant Leonard Bertschy. The other findings of fact and the conclusions of law are as follows: (5) When the indebtedness was contracted the defendant Leonard Bertschy was the owner in fee of the premises described in the complaint, which were ‘of considerably more than the value of $13,000, and he continued to own the same up to the seventh of September, 1878.’ (6) That after contracting such debt said Leonard Bertschy made the note to John Bertschy, and with his wife executed the mortgage for $6,000, dated May 16, 1878, recorded May 24, 1878, as in the complaint described. (7) That on September 7, 1878, the said Leonard Bertschy and wife executed and delivered to said John Bertschy a warrantry deed of conveyance, conveying the real estate above described to the said John Bertschy for the pretended consideration therein expressed of $13,000, which deed was acknowledged and recorded, as alleged. The property thereby conveyed was all which said Leonard Bertschy then owned, and he was then largely indebted to many persons. The mortgages and notes remain unassigned, and the land has not been since conveyed. (8) That said mortgage and notes and the said deed to said John Bertschy were without any valuable or other consideration, and with the intent on the part of Leonard Bertschy, and for the purpose, of hindering and delaying and defrauding his creditors of their lawful actions, debts, and demands, and particularly this plaintiff, and upon a secret trust for his own benefit, all which facts above alleged the said John Bertschy well knew at the time he accepted said mortgage and conveyance respectively.”

And as conclusions of law--(1) That said mortgage and said conveyance so made to John Bertschy ‘are each of them fraudulent and void and of no effect as against the plaintiff herein;’ (2) that plaintiff's said judgment is and was ‘a valid lien upon said real estate, as the property of said Leonard Bertschy, to the same extent and with the same effect as if no conveyance of any interest therein had been made;’ (3) that plaintiff is entitled to judgment ‘vacating and annulling said mortgage and deed of conveyance to said defendant John Bertschy, and authorizing the sale of said real estate upon execution upon the judgment above mentioned, free and clear of all right or claim on account of said mortgage and deed, and for the costs of this action against said defendants, Leonard Bertschy and John Bertschy.’

Upon these findings of fact, to which the respondent took no exceptions, we think it must be held that the court based its judgment against the appellants solely upon the ground that both the mortgage and conveyance from Leonard to John Bertschy were without consideration, and for that reason fraudulent and void as to the creditors of the said Leonard.

There is certainly nothing in the findings of fact which charges John Bertschy with any intent to defraud the creditors of Leonard, except such intent as may be deduced as a conclusion of law from the fact that he took a conveyance of a valuable estate from Leonard without giving any consideration therefor, knowing that such estate was all the estate the said Leonard owned, and knowing that he was indebted to a considerable amount at the time the conveyance was made and accepted by him. We think it must be admitted that the evidence clearly establishes the following facts: That at the time Leonard Bertschy gave the mortgage for $6,000, and afterwards the deed to John Bertschy, John knew that Leonard was indebted, or had contracted liabilities for a considerable sum of money, which he might ultimately be compelled to pay; that the estate mortgaged and conveyed was the greater part of all the estate which said Leonard owned; and that unless this estate was subjected to the payment of such liabilities, the said Leonard would be wholly unable to pay said claims against him. We think there was sufficient evidence of fraud in fact to avoid the mortgage and deed in favor of the creditors, if the mortgage and deed were given without any consideration. The rule upon such a state of facts is very clearly stated in the opinion of Chief Justice Shaw in the case of Morden v. Babcock, 2 Metc. 99-104. He says: “In a voluntary absolute conveyance, the fact that no consideration is paid is, of course, known to both parties. If the grantor was in debt at the time, as such conveyance must necessarily tend to defeat the rights of creditors, and as all persons are presumed to contemplate and intend the natural and probable consequences of their own acts, the conclusion is irresistible that such conveyance was intended to defeat the creditors, and is therefore fraudulent.” The judgment in this case must be affirmed if the evidence sustains the finding of fact that the mortgage and deed “were without any valuable or other consideration.” If this finding is sustained by the evidence, then it is clear that the evidence shows they were fraudulent and void as to creditors.

It is said by the learned counsel for the appellants that the deed was not without consideration because the property conveyed was subject to a mortgage of $5,000, which John Bertschy assumed to pay. We do not think such assumption alone could sustain the deed. It is conceded on the part of the appellants that the property conveyed is of far more value than the mortgage which John Bertschy assumed to pay. The assumption of the mortgage, which is a charge upon the estate, and which the estate is amply sufficient to pay, cannot, as to creditors of the grantor, be deemed a sufficient consideration to sustain the conveyance. Such a transaction is nothing more or less than a conveyance of the interest of the mortgagor in the estate mortgaged, without any consideration therefor. The creditors of the mortgagor have the right to his interest in the mortgaged estate, and he has no more power to give that interest away to their prejudice than he has to give away a part of his estate not mortgaged.

We must, therefore, look into the evidence to determine whether there was any other consideration for the mortgage and deed. The only other consideration for the mortgage and deed grows out of the following state of facts: John Bertschy had loaned to Leonard Bertschy, March 19, 1874, $3,000, upon which he was to receive interest at 10 per cent.; in September, 1871, he loaned to Olly Hammond, a son-in-law of Leonard Bertschy, $1,000; to George Bertschy, in September, 1874, $500, and a few months after $400; and to Perry H. Bertschy, June 10, 1874, $2,000; and September 1, 1874, $1,000. George and Perry H. were sons of Leonard Bertschy. It is claimed by the learned counsel for the appellants that all these loans were made by the said John Bertschy with the understanding that Leonard Bertschy was to be ultimately liable for their repayment to him in case the sons and son-in-law failed to make payment, and that the mortgage in the first instance, and the deed subsequently, were given to secure the repayment of the several sums so loaned by the said John Bertschy to them.

As to the loan of $3,000 to Leonard Bertschy, there is no dispute as to its being a bona fide loan for the repayment of which said Leonard was both legally and equitably bound. The evidence shows that previous to the giving of the mortgage and deed in question Leonard had paid upon that loan the following sums: April 10, 1875, $300; May 16, 1876, $200; February, 1878, $3,000, ($1,000 in cash, and $2,000 in note and mortgage of Jacob Bertschy.) The amount of this loan, with interest from the date at 10 per cent. to the time when the last payment was made, February 1, 1878, would be $4,158, very nearly; deducting the amounts paid, $3,500, and there would remain unpaid on this loan the sum of $658. As to this item there does not seem to be any reasonable doubt. The fact that it does not appear that there was any written agreement as to the amount of interest cannot alter the case. It appears that the first year's interest was paid at the rate of 10 per cent., and if that was the verbal understanding between the parties it would be no fraud upon the other creditors if it was finally paid at that rate by the borrower, Leonard Bertschy. After applying these payments there would still be due upon this loan when the deed was given the sum of $658, which formed part of the consideration for the mortgage and deed.

The claim made by the appellant John Bertschy that Leonard Bertschy was under...

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