Lichtstern v. Forehand

• Decision Date: 18 June 1923
• Citation: 194 N.W. 421,181 Wis. 216
• Parties: LICHTSTERN ET AL. v. FOREHAND ET AL.
• Court: Wisconsin Supreme Court

181 Wis. 216

194 N.W. 421

LICHTSTERN ET AL.

v.FOREHAND ET AL.

Supreme Court of Wisconsin.

June 18, 1923.

Appeal from Circuit Court, Grant County; S. E. Smalley, Judge.

Action by Adolph J. Lichtstern and Gertrude L. Sickle, as executor and executrix of the last will and testament of Max S. Sickle, deceased, against William C. Forehand and others. Judgment for plaintiffs and defendants Forehand and wife appeal. Reversed in part, and remanded, with directions.

Appeal by the defendants William C. and Elizabeth M. Forehand from a judgment of foreclosure in favor of the plaintiffs, under which a deficiency judgment was authorized against appellants.

On the 25th day of May, 1915, one Sickle, of Chicago, was the owner of a certain lot with a building thereon, known as the Sickle building, in the city of Platteville, Grant county, Wis., and the defendants William C. and Elizabeth M. Forehand, husband and wife, being desirous of purchasing said premises, entered into an agreement, at Chicago, with said Sickle, for the purchase thereof for the sum of $22,500, pursuant to which the Forehands agreed to execute certain notes and mortgages to secure the payment of the purchase price, as follows, to wit: One purchase-money mortgage, stipulated to be a first lien on said premises, to secure the following notes: One note for $1,500, due on or before 13 years after date; one for $1,500, due on or before 14 years after date; and one for $9,000, due on or before 15 years after date, making the total of the principal of the notes to be secured by the first mortgage, the sum of $12,000. Also a purchase-money mortgage on said premises, which it was agreed should be a second lien thereon, to secure the payment of notes as follows: Five notes for $500 each, due respectively on or before 1, 2, 3, 4, and 5 years after date; five notes for $1,000 each, due respectively on or before 6, 7, 8, 9, and 10 years after date; and two notes for $1,500 each, due respectively on or before 11 and 12 years after date, making the total of the principal of the notes to be secured by said second mortgage the sum of $10,500, all of said notes to bear interest at the rate of 6 per cent. per annum, payable semiannually, and to have attached thereto interest coupons.

It was further agreed that the purchaser should at all times insure the building for the sum of $12,500, the insurance policies to be payable to the seller or mortgagee, as his interest might appear. The agreement also provided that the purchaser, as additional collateral, should execute second mortgages upon lands other than that above mentioned, which mortgages and the lands, exclusive of the first mortgages thereon, if any, should be of the net cash value of not less than $10,500; and it was further agreed that Sickle would release such additional collateral, at any time when a bona fide sale of such lands should be effected, upon payment of one-half of the net cash value of the collateral released, and the substitution of additional second mortgage collateral to cover the remaining one-half of the net cash value of the collateral released; all of such collateral to be to the entire satisfaction of said Sickle.

On the 1st day of June, 1915, the parties again met in Chicago, and Sickle then executed to the Forehands a warranty deed of said premises in Platteville, and the latter executed to the former two mortgages, respectively for $12,000 and $10,500, to secure notes as provided for in said contract, the $12,000 mortgage being executed upon the premises situated in Platteville, and the $10,500 mortgage on such premises and on several hundred acres of land in Grant county, Wis., belonging to said Forehands, and which lands were incumbered by prior mortgages. The $12,000 mortgage was recorded in the office of the register of deeds, of Grant county, at 8 o'clock a. m. of July 19, 1915, and the $10,500 mortgage on the same date, but at 8:10 o'clock a. m. Nothing contained in the two mortgages indicted a priority, and both mortgages, except as above indicated, apparently were executed in accordance with the provisions of the contract above referred to, excepting further that, instead of providing for $12,500 insurance, each of the mortgages contained a clause which called for insurance for the full insurable value of the building upon the Platteville real estate and of the fixtures contained therein; and in place of coupon notes the ordinary form of notes was used. Upon the execution and delivery of the deed and the notes and mortgages referred to, the Forehands went into possession of the premises conveyed to them, and from time to time sold and conveyed portions of the farm lands situated in Grant County, Wis., and from the proceeds of such sales made payments to the mortgagee, which were applied upon the notes secured by the $10,500 mortgage, so that the principal amount of such notes was reduced to the sum of $7,000, and the acreage of the lands unsold to 170 acres.

On September 30, 1918, the Forehands, by proper deeds of conveyances, sold and transferred all of the property still covered by said mortgages, to the Platteville Realty Company, and the latter, as a part of the consideration of such transfer, covenanted and agreed to assume and pay such mortgages, and at the same time the fire insurance policies herein referred to were furnished by the Forehands to the mortgagee, and delivered to the agents of the insurance companies to indorse their consent to the transfer; but such consent had not been given at the time of the happening of the fire hereafter related. Upon such sale being consummated, the Forehands left Platteville and removed to Alabama.

On the 8th day of February, 1919, the Sickle building was completely destroyed by fire, and such building at that time was insured under two policies of insurance procured by the Forehands, pursuant to the provisions of the mortgages, aggregating the sum of $12,000, one policy being placed with the Franklin Fire Insurance Company, for the sum of $4,000, and the other with the American Eagle Fire Insurance Company, for the sum of $8,000. Both insurance companies at first refused payment of these policies. The $4,000 policy was, however, paid in full without suit, and, suit having been begun by both the mortgagee and the realty company for the collection of the $8,000 policy, such suit was adjusted by the payment of the sum of $6,750. In the collection of this insurance, it is claimed by the attorneys herein for the plaintiffs that they represented the Platteville Realty Company, and that the mortgagee was represented by his own attorneys. The proceeds of this insurance, after deducting the sum of $50, attorney's fees claimed by counsel for the collection of the $4,000 policy of insurance, and the sum of $686.10, representing attorney's fees and disbursements in the litigation for the collection of the $8,000 policy, were by said attorneys delivered to Sickle, the mortgagee, and applied by him, without the knowledge or consent of the Forehands, as follows: First, to the payment in full of the principal and interest of the balance secured by the $10,500 mortgage, and the remainder to the notes first becoming due secured by the $12,000 mortgage, leaving a portion of one of said $1,500 notes unpaid; and the notes so paid were thereupon canceled by Sickle and mailed to and received by Kopp & Brunckhorst, attorneys, and by them filed away and retained up to the time of the pendency of the present litigation.

The realty company after the fire became insolvent, and all of its interest in the real estate covered by the mortgages was on October 7, 1919, sold by the sheriff of Grant county, on execution sale, to the defendant R. M. Orchard, for the sum of $1,810. On January 29, 1920, Sickle died testate, a resident of the city of Chicago, and the plaintiffs and the defendant First Trust & Savings Bank were thereupon appointed and qualified as executors of his estate.

In July, 1920, the bank notified the Forehands of the indebtedness due it as one of the executors, and in reply to such notice the Forehands requested additional information with respect to such indebtedness; and on July 31 the Forehands were informed in a letter from the bank that such indebtedness was represented by two notes, one for $796.70, due July 21, 1929, being the alleged balance due upon one of the notes secured by the $12,000 mortgage, and the other for $9,000, secured by the same mortgage, due July 1, 1930. To this last letter the Forehands replied that there was sufficient security for the balance due the Sickle estate, and requested that foreclosure proceedings be instituted so as to avoid the accruing of unpaid taxes and of interest. After the lapse of more than one year from the date of the last request of the Forehands, the plaintiffs and the defendant bank, pursuant to the provisions of the $12,000 mortgage for default in the payment of interest and taxes, declared the whole amount due, and demanded the immediate payment thereof, and the plaintiffs commenced the present action of foreclosure.

Upon the service of the summons and complaint herein upon the Forehands, the latter in a letter addressed to plaintiffs' attorneys, requested that the plaintiffs' complaint be amended and that both mortgages be foreclosed, and that an application be made to the court to the effect that the insurance moneys be applied first to the payment of the principal and interest on the $12,000 notes and mortgage. In the answer interposed by the Forehands, they prayed, among other things, for the judgment of the court directing that all insurance moneys received by Sickle, or his legal representatives, be applied to the reduction of the indebtedness secured by the mortgage sought to be...