Schoedel v. State Bank of Newburg

• Decision Date: 14 March 1944
• Citation: 13 N.W.2d 534,245 Wis. 74
• Parties: SCHOEDEL v. STATE BANK OF NEWBURG et al.
• Court: Wisconsin Supreme Court

245 Wis. 74

13 N.W.2d 534

SCHOEDEL

v.STATE BANK OF NEWBURG et al.

Supreme Court of Wisconsin.

March 14, 1944.

Appeal from an order of the County Court of Washington County; F. W. Bucklin, Judge.

Affirmed.

This is an action commenced on February 22, 1943, by Ernst A. Schoedel, plaintiff, against State Bank of Newburg, a banking corporation, and F. P. Isselman, defendants, to recover damages arising out of the alleged false and fraudulent representation by defendants that a certain mortgage sold to plaintiff by defendants was a first mortgage on the real estate therein described, and that the premises were adequate security for the payment of the note. There was a demurrer upon the grounds that the action was not commenced within the time limited by section 330.19, Stats. From an order entered September 22, 1943, overruling the demurrer, defendants appeal. The facts will be stated in the opinion.

Schloemer & Stoltz, of West Bend, for appellants.

Fish, Marshutz & Hoffman, of Milwaukee (E. H. Hallows and M. A. McLaughlin, both of Milwaukee, of counsel), for respondent.

WICKHEM, Justice.

The State Bank of Newburg is situated in the village of Newburg and defendant, Isselman, is its cashier. Plaintiff resides in the state of New York. On March 16, 1931, Charles Schoedel, as agent for plaintiff, went to defendant bank looking for the purchase of a first mortgage on farm property. The bank owned a mortgage on the Fahney farm dated January 27, 1922, and recorded January 28, 1922. Charles Schoedel bought it for plaintiff upon defendants' representation that it was a first mortgage. In fact, there was another mortgage upon the same farm dated and recorded April 15, 1929, and a foreclosure action was later commenced by the holder of this mortgage. In litigation which followed this court held that plaintiff's mortgage was junior to the mortgage of 1929. Fuetsch v. Fahney, 233 Wis. 34, 287 N.W. 687. According to the allegations of the complaint, plaintiff knew nothing about the other mortgage until May 10, 1937, when the summons and complaint in the foreclosure action were served upon him. This action was commenced on February 22, 1943, and is therefore within the six years if the six years dates from May 10, 1937.

Defendants contend that plaintiff, as assignee of the mortgage, was charged with notice of the recorded facts establishing the legal position of his mortgage and that plaintiff, having constructive notice of matters of record which disclosed the falsity of the representations, must be deemed to have discovered the fraud at the time when he was affected by such constructive notice.

We deem this position to be unsound and to be contrary to the rule in Wisconsin upon the subject. At the outset, attention should be called to the fact that constructive notice is in point of literal fact neither notice nor knowledge. For the promotion of sound policy or purpose, the legal rights and interests of parties are treated as though they had actual notice and knowledge. The term ‘constructive’ is the mere trade mark of a fiction. In McMahon v. McGraw, 26 Wis. 614, it was held that for the purpose of the...