Case v. Fish

• Decision Date: 31 May 1883
• Citation: 15 N.W. 808,58 Wis. 56
• Parties: CASE v. FISH AND OTHERS. CASE v. FISH AND OTHERS.
• Court: Wisconsin Supreme Court

58 Wis. 56

15 N.W. 808

CASE

v.FISH AND OTHERS.

CASE

v.FISH AND OTHERS.

Supreme Court of Wisconsin.

Filed May 31, 1883.

Appeals from circuit court, Racine county.J. G. Jenkins, W. F. Vilas, and Charles H. Lee, for Jerome S. Case.

S. U. Pinney and Fish & Dodge, for Titus G. Fish et al.

COLE, C. J.

In the examination of these appeals it is essential, at the outset, to ascertain, if possible, the real relation which the parties held to each other during the period covering the transactions to be considered. The defense of usury must turn principally upon the view which is taken of that relation. On the part of the plaintiff it is claimed, in brief, that pursuant to a verbal agreement entered into about the time of the judicial sale, in March, 1868, it was understood that he should, by that sale, become the absolute owner of the personal property and effects of Fish Brothers; that thereafter the business of manufacturing wagons at their establishment, in Racine, was to be conducted by him as principal, the Fish Brothers managing it as his agents; that he was to furnish the necessary means and use his personal credit in carrying on the business, until such time as he should receive from the avails thereof the money which he had paid and become liable to pay to buy the debts of Fish Brothers, and all his advances to the business, with annual interest at the rate of 10 per cent. per annum, and the amount of their indebtedness to him for loans, represented by notes which he then held, with like interest, and reimbursement for his services and expenses; that in the mean time the Fish Brothers were each to receive from the proceeds of the business $100 per month for their living expenses, and in the end were to have and own whatever was earned or saved in the undertaking,--over and above such expenses and the amount which he was entitled to receive,--together with all the property and assets of the concern. On the part of the defendants it is claimed that the simple relation of debtor and creditor, or mortgagor and mortgagee, always existed between the plaintiff and Fish Brothers, and parties deriving an interest under them, and that the rights and liabilities of the respective parties must be determined by the principles of law applicable to such a relation. This claim, of course, implies that Fish Brothers continued to be the real owners, or at least the mortgagors in possession, of the personal property and assets of the firm; that they controlled the business for themselves as principals, and for their own benefit, the plaintiff loaning them money from time to time to carry it on as they might need.

This contention of the defendants is entirely irreconcilable with the facts of the case as we understand them, and with the manner the business was conducted for several years after the early part of March, 1868. Undeniably the plaintiff held, in December 1867, a chattel mortgage on all the personal property and effects of Fish Brothers, to secure the payment of $20,000 which he had loaned them and for which he held their notes. He had likewise a mortgage on their real estate to secure another loan, but that debt and security may for the moment be laid out of view, for the purpose of the argument we are now considering. In March, 1868, it is admitted a sale of the personal property of the Fish Brothers--subject to the plaintiff's mortgage--was made under the Platt judgment, and the judgments which the plaintiff had obtained on a portion of their debts which he had bought up pursuant to the compromise arrangement. The plaintiff bid in all the property sold at these sales, paying the Platt judgment in full. What was the object of these judicial sales? What purpose or end was intended to be subserved or secured by them?

The plaintiff's contention is that the object was to transfer and vest in him the absolute title to the personal property sold, in order that the business might be thereafter carried on as his own, but under the management of Fish Brothers as his agents, until he should be paid out of the business or by them his debts and expenses as above stated. This certainly gives some legal effect--some rational meaning--to those sales. But according to the claim of the defendants the sales really amounted to nothing; they did not change the relation of the parties in the least; were simply a sham, only designed to force reluctant creditors to come into the compromise arrangement. The plaintiff already held the title to the personal property as security by his chattel mortgage. He, therefore, gained nothing by going through the formality of a judicial sale unless he acquired whatever right the Fish Brothers had in the property.

But it is said the onus was on the plaintiff of showing that the legal relation of the parties had been changed; that from a mortgagee of chattels he had become the absolute owner by a purchase of the equity of redemption at a fair sale, and that this was so understood by both parties; and that the relation of mortgagor and mortgagee in respect thereto should cease. The plaintiff does show all this by proof which seems to us overwhelming and conclusive. But before we proceed to notice some of that evidence which shows that the relation of the parties was changed, and was intended to be changed, by those judicial sales, and the agreement entered into about that time, let us consider for a moment the position of the plaintiff, according to the defendant's theory of the case. The plaintiff was the mortgagee of chattels which were in the possession of Fish Brothers, the mortgagors. The latter had the right to go on and manufacture into wagons the materials and stock on hand,--which constitute a large portion of the mortgaged property,--sell such wagons, and with the proceeds buy other materials and stock, and so continue the business. What would become of the property specifically mortgaged after it had thus been manufactured into wagons and the wagons sold? Excepting the tools and machinery covered by the mortgage, would a vestige of it remain to which the mortgage would attach or upon which a lien would exist? Or is it claimed that the mortgage was a floating one, which changed and attached, contracted and expanded, as the stock and materials used in the business should change, contract, or expand?

No one understands better than the very able and intelligent counsel for the defendants that such a mortgage would not be valid, nor create any lien, legal or equitable, in this state. For the rule established by this court in many well-considered cases is “that a chattel mortgage of after-acquired goods does not create a lien, legal or equitable, by force of a mortgage upon after-acquired goods.” RYAN, C. J., Hunter v. Bosworth, 43 Wis. 583-591. So it would follow, on defendant's theory of the relation existing between the parties, that in a few weeks or months the plaintiff's security would be wholly lost. Most of the specific chattels included in the mortgage would have been manufactured into wagons, the wagons sold, and the property absolutely gone beyond the power of the mortgagee to identify or recover the same. This is the fatal vice in the argument of counsel, as we regard it, in attempting to apply to the chattel mortgage in question the same rules of law which control as to a mortgage of real estate, or a mortgage of specific chattels which are intended to remain in substantially the same condition as when the lien is created. In this case there is no pretense that the parties expected the stock and materials should remain in the condition they were when mortgaged, or when the judicial sales took place. And if the defendants had an equity of redemption in the mortgaged property, what became of it, or to what property did such equity attach under the circumstances in this case? But we pass on.

There does not seem to have been any change in the legal relation of the parties after the failure of Fish Brothers, and while the compromise agreement was being consummated. The Fish Brothers expected some satisfactory arrangement would be made with their creditors, and by such aid as the plaintiff had offered to render them, they would be enabled to resume business and carry it on as before until their stock was worked up and debts paid. But in that expectation they were disappointed, in consequence of the action of some of their creditors, who refused to come into the compromise. But the stock and material on hand when the chattel mortgage was given remained in their possession; some new material was purchased by the plaintiff for them, so that they could finish some wagons; and doubtless some material was worked up, but how much does not appear. The plaintiff advanced them some money on the real estate mortgage to pay workmen, and these accounts were assigned to him. But there was no material change in the management of the business until after the judicial sales. Soon after these sales a new set of books was opened, an inventory of the property on hand was taken, and this entry was made in the books: “Inventory of the effects of J. I. Case as principal, and T. G. and A. C. Fish as agents, under the name and style of Fish Bros., agents, on commencing business in the manufacture of wagons, carriages, etc., on State street. Inventory of wagon material, machinery, and fixtures, as per inventory book, $45,543.27; office furniture, $554. Total, $46,097.27.”

At about this time the plaintiff claims he went into the actual possession of the property purchased at the sales, became the absolute owner thereof according to the terms and conditions of the agreement he had made with Fish Brothers, which has been already mentioned. Indisputably, from that time all purchases of material were made upon the individual credit of the plaintiff, who held himself out to the world as principal, and responsible for all the debts and liabilities of the concern. Also it is admitted that the financial...