Schwartzburg v. Rahtjen

• Decision Date: 12 April 1938
• Citation: 279 N.W. 19,227 Wis. 525
• Parties: SCHWARTZBURG et al. v. RAHTJEN et al.
• Court: Wisconsin Supreme Court

227 Wis. 525

279 N.W. 19

SCHWARTZBURG et al.

v.RAHTJEN et al.

Supreme Court of Wisconsin.

April 12, 1938.

Appeal from a judgment of the Circuit Court for Milwaukee County; Daniel W. Sullivan, Judge.

Affirmed.

This appeal is from a declaratory judgment of the circuit court for Milwaukee county, entered under section 269.56, Statutes, on the 19th day of October, 1937, whereby it was adjudged:

(1) That the 6 1/2 per cent. first mortgage gold bonds issued by Harry W. Lewis and Maude Vaughn Lewis, his wife, of Milwaukee, Wis., to the defendant, Wayland University, a Wisconsin corporation, of the aggregate par value of $5,000, under and pursuant to that certain trust deed recorded in the office of the register of deeds for Milwaukee county, Wis., on September 6, 1922, as document No. 1164758, being bonds serially numbered 121, 122, 123, 124, 125, 126, 127, 128, 129, and 130, each of the par value of $500, each having attached thereto interest coupon No. 18, maturing August 1, 1931, and all of said bonds maturing August 1, 1931, be and they hereby are declared fully paid and satisfied, and the lien thereof, under and pursuant to said trust deed on the premises hereinafter described, is hereby discharged.

(2) That the defendant trustee, aforesaid, satisfy and discharge said bonds and the lien thereof of record in the office of the register of deeds for Milwaukee county.

(3) That the defendant Wayland University surrender said bonds to the defendant trustee aforesaid, for cancellation.

It was further adjudged:

(1) That the 6 1/2 per cent. first mortgage gold bonds issued by Harry W. Lewis and Maude Vaughn Lewis, his wife, of Milwaukee, Wis., to the defendant, Emilie Netter, of the aggregate par value of $1,000, under and pursuant to that certain trust deed recorded in the office of the register of deeds for Milwaukee county, Wis., on September 6, 1922, as document No. 1164758, being bonds serially numbered 133 and 134, each of the par value of $500, each having attached thereto interest coupon No. 18, maturing August 1, 1931, and both of said bonds maturing August 1, 1931, be and they hereby are declared fully paid and satisfied and the lien thereof, under and pursuant to said trust deed on the premises hereinafter described, is hereby discharged.

(2) That the defendant trustee, aforesaid, satisfy and discharge said bonds and the lien thereof of record in the office of the register of deeds for Milwaukee county.

(3) That the defendant Emilie Netter surrender said bonds to the defendant trustee, aforesaid, for cancellation.

The defendants Wayland University and Emilie Netter appeal from said judgment. The material facts will be stated in the opinion.Bender, Trump & McIntyre, of Milwaukee (E. L. McIntyre, of Milwaukee, of counsel) for appellants.

A. W. Schutz, of Milwaukee, for respondents.

MARTIN, Justice.

Plaintiffs brought this action for declaratory relief, to establish that certain bonds, owned by the appellants and others, which were secured by a first mortgage on real estate owned by the plaintiffs, had been fully paid, and to discharge the lien thereof.

Lewis and wife, original mortgagors, acquired title to the premises June 20, 1921, and were in possession until August 1, 1922, on which date, for the purpose of refunding outstanding incumbrances, the trust indenture in question was executed to secure the payment of bonds in the aggregate principal sum of $130,000, maturing serially. The bonds became due and payable August 1, 1931. The trustee, Hackett, Hoff & Thiermann, Inc., went into possession of the mortgaged premises on August 1, 1922. It was authorized so to do by the terms of the trust indenture. The trustee was authorized to manage the property and premises, to make from time to time such repairs or replacements as seemed to said trustee to be judicious, to lease the premises or any part thereof under such terms and conditions as to it should seem best, to collect and receive all rents, income, issues, and profits of the same and any part thereof, and to use and apply and any all rents, issues, and profits so received as follows:

(a) To the payment of the cost of operating and maintaining the buildings on said mortgaged premises by superintendents, managers or servants, agents or attorneys, including the cost of all such repairs and replacements as may have been made by the trustee in its discretion.

(b) To set aside and retain as a commission for its services in operating and maintaining said buildings a sum equal to 2 per cent. of the rents and income of the premises aforesaid to be computed and allowed monthly.

(c) To the payment of all taxes, insurance premiums, and any other charges payable by the mortgagors hereunder or made a charge upon any or all of the premises hereby mortgaged.

(d) To pay, out of the sum remaining after the foregoing disbursements and deductions, from time to time the principal and interest on the bonds as they severally mature, upon presentation and surrender of said bonds and coupons as in the said bonds provided: “Provided, always, if the sum so received by the trustee shall not be sufficient to pay all of the above mentioned payments when and as they become due, the first parties hereby covenant and agree to pay to the trustee a sum sufficient to pay the same on demand or in time to prevent the happening of any default or foreclosure.”

A summary of the material facts found by the trial court, based largely upon facts stipulated and from documentary evidence, is as follows: That on and prior to the 1st day of August, 1931, the defendant Wayland University was the owner and holder for value of such bonds of the aggregate par value of $5,000, numbered 121 to 130, inclusive, each of the par value of $500, each having attached thereto interest coupon No. 18, maturing August 1, 1931, and all of said bonds maturing August 1, 1931.

That on and prior to the 1st day of August, 1931, the defendant Emilie Netter was the owner and holder for value of such bonds of the aggregate par value of $1,000, being bonds numbered 133 and 134, each of the par value of $500, each having attached thereto interest coupon No. 18, maturing August 1, 1931, and all of said bonds maturing August 1, 1931.

That with the exception of the bonds owned and held by the defendants, all of the bonds outstanding are held by the defendant State Bank of Milwaukee as collateral security for the payment of a loan made by it to the plaintiffs Edward H. Schwartzburg and wife in the sum of $55,000, bonds of the aggregate par value of $62,500 having been heretofore surrendered for cancellation by the several owners and holders thereof; that said bonds of the par value of $7,500 and interest coupons attached, being the bonds owned and held by defendants, are the only bonds in controversy in this action.

That Hackett, Hoff & Thiermann, Inc., in its capacity as trustee, took possession of the property and premises on August 1, 1922, and retained possession as such trustee until the 10th day of August, 1931, on which date said trustee resigned, and thereupon, the Marine National Exchange Bank of Milwaukee was appointed and qualified as such trustee. On the 28th day of April, 1937, said bank resigned as trustee, whereupon, the defendant Ernest Rahtjen was duly appointed and qualified.

That on July 11, 1924, Harry W. Lewis and wife, conveyed the mortgaged premises to the plaintiffs Edward H. Schwartzburg and Flora Schwartzburg, his wife. Said plaintiffs have ever since been and are now the fee owners of the property and premises in question. That the possession, management, and control of the property and premises was vested in Hackett, Hoff & Thiermann, Inc., until August 10, 1931, at and about which time the possession, management, and control was and ever since has been assumed by and vested in the plaintiffs.

That while said Hackett, Hoff & Thiermann, Inc., in its capacity as trustee, was in possession and control of the mortgaged premises, it did collect sufficient rents and profits to pay and discharge, in full, bonds numbered 121 to 135, both inclusive, being the bonds owned and held by defendants, together with the interest coupons attached, after the payment by it of the items specified above in paragraphs (a), (b), and (c), but that it failed and neglected, notwithstanding such sufficiency of funds, to deliver to the holders of said last-named bonds the principal and accrued interest thereof, notwithstanding that said bonds and accrued interest did mature and become due on the 1st day of August, 1931, except that it did deliver a sum equal to 25 per cent. of the par value of each of said bonds to the holders thereof and a sum equal to 50 per cent. of said coupon No. 18, attached to each of said bonds, being in the aggregate sum of $1,875 on account of principal, and $121.88 on account of accrued interest.

That on June 8, 1931, Hackett, Hoff & Thiermann, Inc., was adjudged a bankrupt in and by the United States District Court for the Eastern District of Wisconsin; that thereafter the owners and holders of the bonds in controversy in this action did duly and severally file in the office of the clerk of the United States District Court, aforesaid, their several claims, wherein they did each severally allege, among other things, that there was due and owing to them from the bankrupt estate the balance of the principal of their several...