Smith v. Pfluger

• Decision Date: 14 November 1905
• Citation: 126 Wis. 253,105 N.W. 476
• Parties: SMITH ET AL. v. PFLUGER.
• Court: Wisconsin Supreme Court

126 Wis. 253

105 N.W. 476

SMITH ET AL.

v.PFLUGER.

Supreme Court of Wisconsin.

Nov. 14, 1905.

Syllabus by the Judge.

A conveyance of property in writing as security is a mortgage regardless of the letter of the instrument. The purpose not the form determines its character.

No matter what the nature of a conveyance may be which is given as security, when the evidence, either written or parol, establishes the fact that the relation of mortgagor and mortgagee exists between the parties, the right of the party is limited to a mere mortgage interest.

The foregoing propositions do not violate the rule that a written contract cannot be varied or contradicted by parol, nor are they inconsistent with the statute of frauds.

Such propositions rest on the rule that an ambiguity in a written instrument, which arises by applying the paper to the subject with which they deal, may be solved by the circumstances characterizing its making, and the further rule that the reduction of one feature of an entire transaction to writing in part execution thereof does not preclude proof by parol of the other features and the enforcement of the intention of the parties as evidenced by the whole transaction.

If a person makes a contract with another for the benefit of a third person, the latter may enforce it at law regardless of his relations with the first person, or whether he had any knowledge of the transaction between such person and such other at the time of its occurrence, and regardless of any formal assent thereto on his part prior to the commencement of the action.

A novation contract, as where A. owes B., and B. owes C. and the three mutually agree that A. instead of paying B. shall pay C., and C. agrees to take A. as his debtor in place of B. and release the latter, is one thing, and an agreement for a sufficient consideration to support it moving from one to another for the benefit of a third, who may be an entire stranger to the transaction, is another. The latter is enforcible without any element of a novation contract characterizing it.

Appeal from Circuit Court, La Crosse County; J. J. Fruit, Judge.

Action by T. M. Smith and others against John Pfluger. Judgment for plaintiffs, and defendant appeals. Affirmed.

Action to recover on contract. The claim of the plaintiff was that one Peter Pfluger, being indebted to various persons, including plaintiffs for $643.45, and possessed of some cooperage machinery, sold the same to John Pfluger for $1,400, the latter agreeing to pay the purchase price to certain specified creditors of the former, including plaintiffs, so far as necessary to discharge the indebtedness to them respectively; that in consummating the sale the property was delivered to the vendee but transferred in form by bill of sale to the C. & J. Michel Brewing Company, of La Crosse, Wis., as security, on account of its having aided him in obtaining money to pay for the goods, by means of a note given to the German American Bank, the company taking from him a paper showing that its interest in the property was only as security against liability on said note; that defendant paid for the property accordingly as regards all creditors of Peter Pfluger, except plaintiffs; that the latter have demanded payment from defendant of their claim, but that the same has not been paid.

Defendant answered by a general denial. On the trial the theory advanced by defendant was that there were some negotiations for a sale by Peter Pfluger of his cooperage machinery to John Pfluger for the sum of $1,400, the consideration to be paid to the creditors of Peter Pfluger, but no trade of that sort was consummated; that the idea thereof was abandoned and the property sold by Peter Pfluger to the Brewing Company, it in turn selling the same to defendant. There was evidence tending to support both theories. It was undisputed that Peter Pfluger made a bill of sale of the property direct to the Brewing Company, but that the goods were delivered by him to John Pfluger, the Brewing Company taking from him a written acknowledgement at the foot of its bill of sale to the effect that the property was received from such Company, and was to be absolutely the property of John Pfluger upon his saving the Company harmless from the aforesaid note. The creditors of Peter, which plaintiff claimed John agreed to pay on account of the consideration for the cooperage machinery, were paid by John, save and except the plaintiffs. Upon the evidence, under the direction of the Court, the jury rendered a verdict in favor of the plaintiffs upon which judgment was rendered.C. L. Hood, for appellant.

Doherty & Baldwin, for respondents.

MARSHALL, J. (after stating the facts).

Complaint is made by appellant because the court referred to the bill of sale to the Brewery Company and the receipt taken by it from appellant, showing such company's only claim upon the property to be for security, as a mortgage. Counsel seem to suppose that an instrument, in form an absolute conveyance, cannot be shown to be anything else except by judicial interference in an equitable action. Such is not the general rule, especially in jurisdictions where the distinctions between actions at law and suits in equity have been abolished.

The mere form of an instrument cuts but very little figure in respect to whether it is enforcible as a mortgage or not upon its character being called in question in a legal or equitable action, as those terms are used under our system. The purpose of the instrument is the controlling feature under all circumstances. If that is security and the facts of the natter are established in any action involving the subject, the instrument is treated as a mortgage and nothing else. Starks v. Redfield, 52 Wis. 349, 9 N. W. 168;Hoile v. Bailey, 58 Wis. 434, 17 N. W. 322;Schriber v. Le Clair, 66 Wis. 579, 29 N. W. 570, 889;McCormick v. Herndon, 86 Wis. 449, 56 N. W. 1097;Schierl v. Newburg, 102 Wis. 552, 78 N. W. 761;Cumps v. Kiyo, 104 Wis. 656, 80 N. W. 937.

In the majority of instances here and elsewhere, which have been reported in the published reports, where the rule permitting admission of parol evidence to show that an instrument purporting on its face to be an absolute deed or bill of sale, to have been intended by the parties thereto to be a mortgage, the law in that regard was applied in cases formerly cognizable only in courts of equity and expressions were used well calculated to mislead one stopping short of a thorough study of the subject into the belief that a court of equity only can give effect to the true purpose of the instrument. The contrary has been established here by a long line of decisions. The following are but a few of them: Kent v. Agard, 24 Wis. 378;Andrews v. Jenkins, 39 Wis. 476;Brinkman v. Jones, 44 Wis. 498;Howe v. Carpenter, 49 Wis. 697, 6 N. W. 357;Dobbs v. Kellogg, 53 Wis. 448, 10 N. W. 623;Manufacturers' Bank of Milwaukee v. Rugee, 59 Wis. 221, 18 N. W. 251;Lamson v. Moffat, 61 Wis. 153, 21 N. W. 62;Gettelman v. Commercial Union Assurance Co., 97 Wis. 237, 72 N. W. 627; McCormick v. Herndon, supra; Jordan v. Estate of Warner, 107 Wis. 550, 83 N. W. 946.

In Howe v. Carpenter, supra, the Court laid down the rule thus:

“Under the repeated decisions of this court * * * it is held that * * * no matter what the nature of the conveyance may be, which is given * * * as security * * * when the evidence, either written or parol, establishes the fact that the relation of mortgagor and mortgagee exists between the parties, the right of the former is limited to a mere mortgage interest.” In Kent v. Agard, supra, the point was made that equity jurisdiction only was competent to give effect to a written instrument as a mortgage contrary to its letter, and the court speaking by Mr. Justice Paine said: “I see no reason why” the real character of the instrument intended as a mortgage cannot be shown regardless of its letter “in an action to recover possession of real estate. When the facts are proved, such a deed is a mortgage only, both at law and in equity. The rights of the mortgagor and mortgagee are precisely the same as though the defeasance were contained in the deed itself. The only difference is in the manner of proving the defeasance.”

There are authorities, it is true, making a distinction in regard to the rule under discussion as between a conveyance of land and one of personalty, but no such distinction is recognized here (Manufacturers' Bank of Milwaukee v. Rugee, supra), nor by courts generally. Herman on Chattel Mortgages, § 21, and cases cited in the note.

It should be said, perhaps, that there is ample authority sustaining the general proposition contended for by counsel for appellant. See Jones on...