Kickbusch v. Corwith

• Decision Date: 01 February 1901
• Citation: 108 Wis. 634,85 N.W. 148
• Parties: KICKBUSCH ET AL. v. CORWITH ET AL.
• Court: Wisconsin Supreme Court

108 Wis. 634

85 N.W. 148

KICKBUSCH ET AL.

v.CORWITH ET AL.

Supreme Court of Wisconsin.

Feb. 1, 1901.

Appeal from circuit court, Wood county; Charles M. Webb, Judge.

Action by F. W. Kickbusch and others against Charles R. Corwith and others. From a judgment in favor of all defendants except one, plaintiffs appeal. Reversed.

This is an action in equity by the plaintiffs, as judgment creditors of one J. E. Leahy, to set aside as fraudulent a number of mortgages, deeds, and other transfers of real and personal property made by Leahy. The transactions involved were numerous, and the testimony voluminous; but the dispute was principally as to the proper legal inference to be drawn from the facts, rather than as to the facts themselves. The following facts were substantially undisputed:

This action was commenced September 6, 1895. The plaintiffs are creditors of J. E. Leahy in various amounts, aggregating more than $20,000, whose claims accrued in or about the years 1889 and 1890, and whose judgments were entered at various times between December, 1890, and April, 1896. Some of the judgments were not obtained until after the commencement of this action, and the parties were brought into this action on motion before the trial. Executions had been issued and returned unsatisfied upon most of the judgments prior to the commencement of the action. In 1886, and for some years prior, the defendant J. E. Leahy and one M. P. Beebe, as partners, were doing a general lumbering and logging business at Wausau, Wis., owning and operating a sawmill with a capacity of eight or ten million feet per year. The title to the mill was not in the firm, but each partner had title to an undivided half interest therein. In addition to the firm business, Leahy also carried on an individual logging and lumbering business, his logs being manufactured into lumber at the same mill. Henry Corwith, deceased, of Chicago, was a capitalist, of whom both Leahy individually and the firm of Leahy & Beebe borrowed large sums of money for business uses in and prior to the years 1885, 1886, 1887, and 1888, giving security therefor by way of mortgages and contracts, assigning logs or lumber as security. One John Ross, of Galena, Ill., was Corwith's agent, who negotiated these loans, and had some interest in the profits of such loans, and was frequently at Wausau. January 19, 1886, Leahy owed Corwith on previous loans $31,215.49, and gave his note therefor. January 21, 1886, Leahy made a contract with Corwith, through Ross, to borrow $20,000 additional,--the money to be advanced at intervals during the year,--and gave a mortgage on the undivided half of the mill property therefor; and a written agreement was also made that this mortgage should not be recorded, except in case of default in the payments or the death of either party. Further loans were made by Corwith to Leahy, of $10,000 January 8, 1887, and of $10,000 March 22, 1888, both secured by contracts giving logs as security; and for the loan of January 8, 1887, 143 shares of stock of the Wausau Boom Company was assigned to Corwith as collateral security. None of the agreements above referred to were recorded or filed, except the mortgage upon the mill, which was recorded at a later period, as hereinafter stated. On the 15th of September, 1888, Henry Corwith died testate, leaving the defendants Charles R. Corwith and John Corwith his executors, who duly qualified. On December 26, 1888, Leahy owed James McCrossen $15,000 for goods purchased at McCrossen's store, in Wausau, which amount was afterwards increased. In July and September, 1890, Leahy purchased pine timber of McCrossen on credit, amounting to $31,500, and McCrossen was also liable as indorser on Leahy's notes for $20,500, making Leahy's total indebtedness to McCrossen in November, 1890, $73,760. November 13, 1890, McCrossen, who was then residing and in business in Ashland county, came to Wausau and demanded security of Leahy for his indebtedness, and Leahy gave him a mortgage on a large amount of lands in Price, Lincoln, and Oneida counties; also a chattel mortgage on his horses, oxen, sleds, and camp outfits in the woods; also a mortgage on lands in Marathon county. These mortgages covered the great bulk of Leahy's property outside of the mill, but not quite all of it. McCrossen then left Wausau, having recorded his mortgages, and returned to Ashland county. On November 18, 1890, Leahy sent the following letter to Charles R. Corwith, at Chicago: “Charles R. Corwith, Esq., Chicago, Ill.--Dear Sir: I am not satisfied with the way my affairs are running, and would therefore advise you to send that mortgage against the mill here at once, and have it recorded. Don't delay this matter. Send by first mail to register of deeds, Wausau, Wisconsin. Yours, truly, J. E. Leahy.” Leahy then owed the Corwith estate about $60,000, for which it had as security the unrecorded mortgage on the mill for $20,000, referred to in the letter, and the various contracts above referred to. Charles R. Corwith immediately came to Wausau, placed the real-estate mortgage on record, and saw Leahy. He then first learned, as the court finds, of the large indebtedness to McCrossen, and also of McCrossen's mortgages. He asked for security, and obtained, November 21, 1890, a second mortgage upon the real-estate mortgaged to McCrossen, and recorded the same. On the following day he purchased of Leahy and Leahy & Beebe 250 shares of Wausau Boom Company stock at 88 cents on the dollar, amounting to $11,000, and agreed to apply the same on the indebtedness of Leahy and Leahy & Beebe, and returned to Chicago.

Affairs remained in this situation until December 1, 1890, when a meeting was held at Wausau between Leahy, McCrossen, Charles R. Corwith, Ross, also Mr. Alexander Stewart and Mr. W. C. Silverthorn, and a conference had as to Leahy's affairs. As a result of this meeting an agreement was executed on the following day known as the “Tripartite Agreement.” This agreement was signed and acknowledged by McCrossen, Charles R. Corwith, and by J. E. Leahy and his wife, and, after reciting the indebtedness to McCrossen and Corwith, and the various securities which had been executed therefor, proceeds as follows: “And whereas, all the parties to this instrument have agreed, and do hereby agree, that the said property, both real and personal, shall be so managed as to yield the greatest amount available therefrom, by carrying out the plans of operation in the logging and lumbering business already begun for the present season, so as not to sacrifice thereon by disposing of the same immediately or by forced sales; and whereas, said James McCrossen has not ready means to carry on such operation: Now, therefore, for a consideration of the mutual promises and understanding herein contained, it is hereby agreed that the said Charles R. Corwith shall have immediate possession of all of the said property, both real and personal, on following terms and conditions, namely: The said Charles R. Corwith shall continue on with the operations of logging and lumbering already begun, and shall furnish necessary means and funds necessary therefor; and the said James McCrossen shall have the general supervision and control of such operations for the present time until the logs and timber put in and to be put in, in all of the several camps, shall be logged, put in, driven, sawed and manufactured into lumber, and piled. The said Charles R. Corwith shall dispose of all of the said property in such a way and upon such terms as will bring the greatest amount for all parties concerned under that contract, in so far as his judgment shall dictate and improve, under the terms, conditions, and the intentions of the parties expressed and set forth in this instrument; and the proceeds thereof shall be applied by the said Corwith upon the following named indebtedness and advances, and in order as follows: First, for the said payment of the five last-named promissory notes mentioned in the list of notes in the indebtedness of said J. E. Leahy to said James McCrossen, amounting in the aggregate to twenty thousand five hundred dollars, with interest thereon; second, the said payment and reimbursement to the said Charles R. Corwith for all the funds and moneys to be advanced and paid by him from this time forward in carrying on said logging and lumbering business, as hereinbefore set forth, together with interest thereon at the rate of eight per cent. per annum, and including any and all funds which may be necessary for him to advance to discharge any and all taxes, judgments, and liens upon any or all of the property mentioned in any of the said securities which may be prior thereto, and including any and all taxes which may be necessary to pay hereafter upon any of the said property before the same is disposed of; third, payment of the said indebtedness of the said Leahy to the said McCrossen as hereinbefore set forth and not already provided for, by the payment of the said five notes, amounting to twenty thousand five hundred dollars ($20,500), and interest, as aforesaid; fourth, to the payment of the said indebtedness of the said J. E. Leahy to said Charles R. Corwith, hereinbefore mentioned and set forth; fifth, the payment to the said J. E. Leahy, or his representative and assigns, of any surplus which may remain after their imbursement and payment hereinbefore provided for. And it is further agreed that the said McCrossen shall furnish the said Corwith regular reports of the operations, moneys received and disbursed thereon, and of the conditions of said operations, and the said McCrossen shall be allowed and paid a reasonable amount for his services according to the time actually devoted thereto. And it is further understood and agreed that said McCrossen and the said Charles R. Corwith may each take for themselves such of the said property hereinbefore mentioned and referred to as they...