Herman v. Schlesinger

• Decision Date: 13 May 1902
• Citation: 114 Wis. 382,90 N.W. 460
• Court: Wisconsin Supreme Court
• Parties: HERMAN v. SCHLESINGER.

114 Wis. 382

90 N.W. 460

HERMAN

v.SCHLESINGER.

Supreme Court of Wisconsin.

May 13, 1902.

Appeal from circuit court, Milwaukee county; W. C. Silverthorn, Judge.

Action by Henry Herman, as assignee of the Plankinton Bank, against Ferdinand Schlesinger. From a judgment for defendant, plaintiff appeals. Affirmed.

Action to set aside a release of indebtedness on the ground of fraud. The substance of the complaint is as follows: June 1, 1893, the Plankinton Bank, a banking corporation located in the city of Milwaukee, Wis., was insolvent and made a voluntary assignment for the benefit of its creditors to William Plankinton, who accepted the trust, entered upon the discharge thereof, and continued in office till July 18, 1899. He was then succeeded by Irving M. Bean, who acted as assignee till December 20, 1899, when he was succeeded by the plaintiff, Henry Herman, who has since been the assignee and brings this action as such. At the time of the assignment defendant was indebted to the assignor in the sum of $78,878.32 for principal and a further sum for interest thereon. On and prior to April 9, 1899, defendant represented to the assignee, William Plankinton, that he was not possessed of any property whatever out of which any part of his indebtedness could be collected, and that it was for the best interests of the creditors of the insolvent bank that his indebtedness to it, then aggregating for principal and interest more than $168,000, should be released in consideration of the payment by him to the assignee of $1,486, one-half in 60 days and one-half in 8 months, and caused said assignee to make like representations to the circuit judge having judicial charge of the assignment proceedings. Such representations were false and fraudulent and were made to the assignee and caused to be repeated to the said circuit judge for the purpose of obtaining a release of defendant's said indebtedness, for the trifling sum of $1,486, thereby cheating and defrauding those interested in the assigned estate. The circuit judge was misled, by said false and fraudulent representations, into making an order authorizing the assignee to accept from the defendant the sum of $1,486, one-half in 60 days and one-half in 8 months, and in consideration thereof to release all his said indebtedness, and such authority was acted upon to its full extent. Defendant refuses to consent to a rescission of said fraudulent transaction or to accept a return to him of the $1,486 paid as aforesaid, or to respond to the assignee for the benefit of those interested in the assigned estate to the amount due from him as aforesaid, or any part thereof, though he is amply able to do so. The complaint closed with a prayer for appropriate relief.

The answer put in issue all the allegations of the complaint in regard to wrongdoing on defendant's part. It admitted the making of the assignment, the succession of plaintiff as assignee, the existence of large indebtedness to the assignee at the time of said assignment, and its subsequent release in consideration of $1,486 as stated in the complaint; but alleged that all representations made to the assignee and repeated to the circuit judge, upon the faith of which the settlement was authorized and made, were true in point of fact. The answer further alleged that in March, 1899, defendant was indebted to various persons in sums aggregating about $3,000,000, that he entered into agreements for the settlement of substantially all his indebtedness not represented by assignees and receivers prior to the transaction in question, on the same basis as that accepted by the assignee of the Plankinton Bank; that after securing such agreements he acquainted such assignee therewith and offered to make a like settlement with him, stating, as the facts were, that he was insolvent, that he was indebted in the sum above indicated, that he had no property whatever out of which any part thereof could be collected, and that unless he was permitted to settle the same in the manner suggested he would take the benefit of the bankruptcy laws; that his offer was to pay the assignee, in consideration of a release of all his indebtedness to the assignee, and that of the firm of Schlesinger Bros., of which he was a member, and also that of Adolph Schlesinger, $1,486, and to convey to the assignee absolute title to some collateral held by the latter to secure the payment of said indebtedness; that upon due consideration, by such assignee and the circuit judge having judicial charge of the assignment proceedings, of the whole situation, including the opportunity and right of defendant to take the benefit of the bankruptcy laws whereby his indebtedness to the estate might be wholly lost to it, the proposition for settlement was authorized by the circuit court, and was duly accepted and fully consummated.

The court decided the controverted issues and defensive matters pleaded, upon the evidence produced, in effect as follows:

(1) On or about April 1, 1899, defendant's indebtedness to the assignee of the Plankinton Bank, being still wholly unsettled, and amounting to $123,878 and interest, his total indebtedness to all his creditors being about $3,000,000 and he having already secured agreements for settlements covering a large part thereof for one and one-fifth per cent. of the amounts due to his creditors respectively, he proposed to pay, for a release of all his indebtedness to such assignee, $743 in 60 days and a like sum in 8 months, with interest thereon at 6 per cent. per annum, that being substantially the basis of settlement agreed upon with other creditors, and to release to such assignee all collaterals in his hands, held to secure the payment of such indebtedness, and at the same time satisfied such assignee that he was insolvent, that he was indebted in the sum of about $3,000,000, that he was unable to pay any substantial part thereof, and that if the offer of settlement was not accepted he would take the benefit of the federal bankruptcy laws.

(2) April 7th, the assignee, by a written petition for judicial advice, submitted the offer of settlement to the circuit judge, accompanied by a statement, that he had made diligent effort to collect the indebtedness owing him by defendant; that he had been unable to collect any part thereof; that neither the defendant nor the firm of Schlesinger Bros., nor any member thereof, possessed any property available for the payment of their liabilities; that their debts exceeded $3,000,000; that many of their principal creditors had agreed to submit to a settlement of their claims, not more favorable than that offered to him; and that unless such offer was accepted there was a probability that the debtors would take the benefit of the bankruptcy laws, in which case no part of their said indebtedness would be realized. In response to such petition an order was entered by the court authorizing the assignee to accept such offer of settlement, whereupon a contract of settlement was made between him and the defendant, embodying the terms thereof.

(3) The sum stipulated to be paid to the assignee was paid in due time and the contract of settlement was fully carried out upon both sides.

(4) At the time said settlement was made defendant was insolvent, his indebtedness amounted to some $3,000,000, and neither he nor any other person liable for the released indebtedness had any property out of which any part thereof could be collected.

(5) No false statements were made by defendantto secure the settlement, and in view of all the circumstances it was just to those interested in the assigned estate.

Upon such findings judgment was ordered dismissing the complaint with costs, and was entered accordingly.

M. M. Riley, Moritz Wittig, and Joseph B. Doe, for appellant.

Ryan, Ogden & Bottum, for respondent.

MARSHALL, J. (after stating the facts).

Fifty-three assignments of error are presented for consideration. The appeal does not seem to call for a discussion of them in detail. None of them have been overlooked. Such will receive special attention in this opinion as are deemed of sufficient importance to merit it.

1. Assignments of error 1 to 6, inclusive, relate to rulings upon the trial sustaining claims of privilege made by Mr. James G. Flanders, from testifying to matters in respect to which he was interrogated, upon the ground that whatever knowledge he had on the subjects was acquired in his professional employment by the parties to the transactions. The exceptions to such rulings present for consideration several propositions:

(a) Can the successor of a person acting in a representative capacity, such as an assignee, waive the privilege of his predecessor as to secrecy in regard to communications made by the latter to his attorney while he was in office? The attorney for an assignee, administrator or other person similarly situated, is his private employé. At law the attorney must look to such person for his pay, and the latter must rely for reimbursement for his outlay in that regard upon the allowance of his account by the court having judicial charge of the matter. The attorney does not, as counsel for appellant seem to think, stand for the beneficiaries of the trust. He stands for the trustee. He is the latter's personal representative. The trust estate is not directly chargeable with the attorney's claim for compensation. The professional relation existing between him and the trustee is substantially the same as it would be if the representative character of the latter were absent. Miller v. Tracy, 86 Wis. 330, 333, 56 N. W. 866;Thomas v. Moore, 52 Ohio St. 200, 39 N. E. 803;Platt v. Platt, 105 N. Y. 488, 501, 12 N. E. 22. Upon the trustee going out of office and being succeeded by another, there is no devolution of the liability of the former upon the latter for the expenses of the former's attorney. The outgoing trustee must account to his successor, or as the court may direct. His...