McGovern v. Kraus

• Decision Date: 03 April 1928
• Citation: 218 N.W. 830,196 Wis. 178
• Parties: MCGOVERN v. KRAUS ET AL.
• Court: Wisconsin Supreme Court

196 Wis. 178

218 N.W. 830

MCGOVERN

v.KRAUS ET AL.

Supreme Court of Wisconsin.

April 3, 1928.

Appeal from an order of the Circuit Court for Vernon County; R. S. Cowie, Judge.

Action by Edward McGovern, as trustee of the estate of Fred Kraus, bankrupt, against Fred Kraus and others. From an order overruling a demurrer to the third cause of action, defendant Levi Eckhart appeals. Reversed.--[By Editorial Staff.]

See, also, 192 Wis. 564, 213 N. W. 334.

This is an appeal from an order overruling a demurrer to the third cause of action in plaintiff's amended complaint.

The third cause of action in the amended complaint, in summary, sets forth, by reference to the first, second, and third paragraphs of the first cause of action --1. (1) That defendant Fred Kraus has been adjudged a bankrupt. (2) That plaintiff is the duly qualified trustee of such bankrupt. (3) That the bankrupt, prior to being adjudged a bankrupt, owed divers persons, which now constitute valid claims against the bankrupt estate.

2. The defendant Eckhart, on November 19, 1924, secured from defendant Kraus his promissorynote for $6,000, and (by reference to paragraph 6, second cause) a certain bill of sale and real estate mortgage (described in paragraphs 8 and 9 of the first cause).

3. Eckhart claims the consideration of the $6,000 was two stallions and two mares sold by him to Kraus.

4. Said note did not have the red ink provisions required by section 116.03, Stats.

5. For that reason the note was void in the hands of Eckhart.

6. The note was sold to Glick, who had knowledge of the facts.

7. But Eckhart and Glick claim that Glick is a holder of said note in due course, and the mortgage and bill of sale securing the note. Glick, since the commencement of this action has begun foreclosure of the mortgage in the county court of Richland county, which action has been enjoined until the rights of the parties are determined.

8. If it be determined that the claims of Eckhart and Glick (No. 7 above) be valid, it will deplete the assets of the trustee so they will be insufficient to pay the creditors. For that reason, and in such event, judgment should go against Eckhart.

9. For if it be so determined, then Eckhart will profit at the expense of the estate, and in equity he should be adjudged to hold the consideration received by Glick in trust for the benefit of creditors of Kraus.

10. Unless the rights of plaintiff against Eckhart be determined in this action, it will result in a multiplicity of suits.

11. Plaintiff demands equitable relief in the alternative of the failure of relief under his first cause of action.

To such third cause of action the defendant Eckhart demurred on the ground that no cause of action is stated in the complaint.

The court overruled the demurrer, and defendant appealed.

C. J. Smith, of Viroqua (J. Henry Bennett, of Viroqua of counsel), for appellant.

Grady, Farnsworth & Walker, of Portage, for respondent.

CROWNHART, J.

This case was here on a former appeal from an order overruling a demurrer to the complaint, seeking to recover the penalty provided in section 116.04, Stats. McGovern v. Kraus, 192 Wis. 558, 213 N. W. 332.

[1] In that case the construction of the Statutes, sections 116.03 and 116.04, was involved, and this court, following the decision in Quiggle v. Herman, 131 Wis. 379, 111 N. W. 479, held that the giver and taker of the note were in pari delicto, and for that reason, if for no other, plaintiff could not recover the penalty. That decision is the law of this case, so far as the status of the parties is concerned under sections 116.03 and 116.04, Stats. Roberts v. Gerber (Wis.) 217 N. W. 691;Borosich v. Metropolitan Life Insurance Co., 191 Wis. 239, 210 N. W. 829.

[2] In the present case the complaint was amended; but the...