Larscheid v. Hashek Mfg. Co.

• Decision Date: 15 March 1910
• Citation: 142 Wis. 172,125 N.W. 442
• Parties: LARSCHEID v. HASHEK MFG. CO. ET AL.
• Court: Wisconsin Supreme Court

142 Wis. 172

125 N.W. 442

LARSCHEID

v.HASHEK MFG. CO. ET AL.

Supreme Court of Wisconsin.

March 15, 1910.

Appeal from Circuit Court, Brown County; Samuel D. Hastings, Judge.

Action by Lorenz Larscheid against the Hashek Manufacturing Company and another. Judgment for plaintiff, and defendant John A. Kittell, as trustee in bankruptcy of defendant corporation, appeals. Modified and affirmed.

Plaintiff sold to one Hashek certain lots in the town of Preble, Brown county, Wis., evidently with the contemplation that some kind of a factory would be built upon them. The sale price was $1,400, but the land contract provided for the payment of $2,000, plaintiff having loaned or agreed to loan said Hashek an additional sum to the amount of $600. December, 1907, Hashek organized the defendant corporation to take over his business, including these lots with whatever buildings and machinery had been erected thereon. Plaintiff participated in the organization of the company and agreed to take $400 of stock. Certain small amounts had been paid upon his land contract, and on January 9, 1908, the directors applied to him to make a deed, to the end that the company might borrow money upon its plant. A settlement was had, and the balance then due upon plaintiff's land contract was agreed on $1,350. He consented to make a warranty deed provided he was given a note of the company indorsed by all the directors for this $1,350, and this was done. March 12, 1908, the corporation, not having succeeded in finding a lender elsewhere, borrowed $2,500 of money of the plaintiff, for which amount it gave a mortgage upon the lots in question and buildings thereon and also a chattel mortgage upon the machinery therein. This action was brought about March 13, 1909, first to foreclose both the real and chattel mortgage securing the $2,500 loan, and, as a second cause of action, to establish and enforce a purchase-money lien upon the equity of redemption for said $1,350. On the 7th day of April following the corporation was adjudged bankrupt, the defendant John A. Kittell appointed trustee and allowed to interplead as a defendant in this action. The plaintiff had at all times been a director in the corporation which, both prior and subsequent to the making of his warranty deed, had been incurring indebtedness both for goods purchased and for money borrowed upon its general credit. It was largely insolvent at the time of the adjudication in bankruptcy, but there is no direct proof as to insolvency at any specific earlier date. Some evidence was offered as to the understanding which plaintiff and the corporate directors had at the time of the making of the warranty deed tending to show that they contemplated that plaintiff would have a right to enforce his purchase-money note of $1,350 against the equity of redemption. The court held that plaintiff did not intend to waive or relinquish his purchase-money lien and that the same thereafter persisted as against all except innocent purchasers, of whom there were none. Judgment was accordingly for foreclosure of the real estate and chattel mortgages and for the application of the proceeds of such foreclosure sale to the $2,500 debt thereby secured, also declaring a subsequent lien for the $1,350 note with its interest and the application of any surplus proceeds of the real estate sale thereto, from which judgment the defendant Kittell appeals.Minahan & Minahan, for appellant.

Cady, Strehlow & Jaseph, for respondent.

DODGE, J. (after stating the facts as above).

The right of a grantor of lands to have established a lien thereon for unpaid purchase money is neither a legal lien nor an interest in the real estate. It is a right merely recognized in courts of chancery in order to protect the very general equity that the purchaser shall not enjoy the property purchased with immunity from his agreement to pay therefor. 3 Pomeroy, Eq. Jur. § 149 et seq.; Halvorsen v. Halvorsen, 120 Wis. 52, 97 N. W. 494. Since it is only recognized under the broadest of equity powers and for the purpose of promoting equity in excess of legal rights, courts will not enforce it to the extent of doing inequity to others, nor in cases where the conduct of the seller has been such as to lead others to adopt a position upon the assumed absence of any such right so that they will suffer if it is asserted and sustained. To such extreme exercises of the extraordinary function of the court of chancery is especially applicable that general rule controlling that court in all activities, that no one will be admitted as a suitor unless he comes into court with clean hands and due diligence. Swartzer v. Gillet, 2 Pin. 238;Blanchard v. Doering, 23 Wis. 200;Raasch v. Raasch, 100 Wis. 400, 76 N. W. 591;Post v. Campbell, 110 Wis. 378, 85 N. W. 1032. The exclusion of a plaintiff from the peculiar favors of courts of equity results equally where his conduct has been unconscionable by reason of a bad motive or where the result in any degree induced by his conduct will be unconscionable either in the benefit to himself or the injury to others. This rule has been applied in a multitude of cases, a few only, specially illustrative, we select from other jurisdictions: Booker v. Smith, 38 S. C. 228,...