State ex rel. Sheldon v. Dahl

• Decision Date: 13 March 1917
• Citation: 162 N.W. 186,165 Wis. 272
• Parties: STATE EX REL. SHELDON ET AL. v. DAHL ET AL.
• Court: Wisconsin Supreme Court

165 Wis. 272

162 N.W. 186

STATE EX REL. SHELDON ET AL.

v.DAHL ET AL.

Supreme Court of Wisconsin.

March 13, 1917.

Appeal from Circuit Court, Fond du Lac County; Chester A. Fowler, Judge.

Action by the State of Wisconsin, on the relation of Henry T. Sheldon, receiver of the Wisconsin Savings Loan & Trust Company, J. C. Felthouse, surviving partner, etc., and others, against Andrew H. Dahl and the National Surety Company. Judgment for plaintiffs, and Dahl and the National Surety Company and plaintiff J. C. Felthouse, surviving partner, etc., appeal. Reversed, and cause remanded to circuit court, with direction to enter judgment awarding the plaintiffs nominal damages, and awarding the defendants judgment for costs.

The action is brought by plaintiffs against Dahl and the surety company for an alleged breach of the bond of Dahl as state treasurer. It is alleged that the treasurer breached his bond by unlawfully surrendering securities deposited with him as state treasurer by the Wisconsin Savings Loan & Trust Company of Hudson, Wis. The National Surety Company is the surety on the bond.

This case was before this court on appeal from an order sustaining a demurrer to the complaint. The statement of facts and pleadings contained in the report of the case on that appeal (150 Wis. 73, 135 N. W. 474) need not be repeated here. After the case was remanded to the circuit court for Dane county, that court determined that the action was one at law, and that defendants were entitled to a jury trial. Thereafter upon application of plaintiffs the case was transferred to the circuit court of Fond du Lac county, and a trial had in that court. The question whether or not the case was one at law or in equity was raised in that court, and Judge Fowler ordered that the case proceed to trial before a jury withholding final determination of this question. The case was tried to a jury and a special verdict was rendered. The court thereafter held that the action is one in equity, and treated the verdict as advisory only. The court made its findings of fact and conclusions of law.

The jury found by answers to special questions as follows:

Question 1: “Would the defendant Dahl have exercised ordinary care as state treasurer had he held the $45,000 of securities until the resolution of dissolution was recorded in the office of the register of deeds of St. Croix county, and then turned them over to the trust company?” Answer: “Yes.”

Question 4: “Did the defendant Dahl exercise ordinary care as state treasurer in turning over the remaining $5,000 securities on April 17, 1909?” Answer: “Yes.”

Question 5: “Did the Wisconsin Blue Grass Land Company have sufficient profits on June 16, 1905, out of which to pay the bond dividend?” Answer: “No.”

Among other findings the court made the following:

“2. That the Wisconsin Savings Loan & Trust Company was a corporation as in the complaint alleged, with its principal office and place of business at Hudson, Wis. That on March 10, 1908 the stockholders of said corporation at a special meeting duly called for the purpose of considering dissolution unanimously and duly passed a resolution declaring that the said ‘Wisconsin Savings Loan & Trust Company be and the same hereby is dissolved and its business discontinued from and after the passage of this resolution.’

3. That a certified copy of said resolution was filed in the office of the secretary of state of the state of Wisconsin on March 1, 1909. That a like copy was filed in the office of the register of deeds of St. Croix county, wherein Hudson is located, on March 2, 1909, at 8:30 o'clock a. m., and that the same was recorded in said office some time during the day of filing.

4. That the defendant A. H. Dahl was at all the said times treasurer of the state of Wisconsin, and as such held in his possession certain securities belonging to the said trust company for the purposes and under the trust designated and prescribed by section 1791e, W. S. 1898, as it then stood in force. That on March 1, 1909, said Dahl turned over to the representatives of the said trust company securities then in his possession as aforesaid of the value of $37,221.79, and that on April 17, 1909, he turned over to representatives of said corporation the remaining securities held by him as aforesaid of the value of $5,000,00.

5. That the turning over of said securities as aforesaid was induced and procured in reliance upon the truth of a statement in the form of an affidavit signed and purporting to be sworn to before a notary by one N. B. Bailey, the then president of said company, and who had theretofore been active in the management and was familiar with the affairs of said corporation. That said statement recited among other things that the debts of the said corporation were wholly paid, and that it had no outstanding obligations. That the said Dahl believed the said representations and acted thereon in entire good faith in the surrender of the said securities.

6. That in turning over the said first lot of securities the defendant Dahl did not act with due diligence and ordinary care, and that under the circumstances then present he would not have exercised due diligence and ordinary care had he turned them over when the said resolution of dissolution was recorded in the office of the register of deeds at Hudson, and that the turning over of the said securities proximately caused injury to such of the relators as were at the time creditors of the said trust company within the meaning of section 1791e, W. S. 1898.

7. That in turning over said second lot of securities the defendant Dahl exercised due diligence and ordinary care.

8. That at the time the defendant Dahl turned over said securities there were outstanding and not yet due a large number of bonds theretofore issued by the Wisconsin Blue Grass Land Company, a Wisconsin corporation. That the said trust company prior to the issue of said bonds had entered into an agreement with said other corporation, in manner and form as set out in the complaint, whereby it had undertaken to act as trustee for the holders of said bonds. That by said contract securities were to be turned over to the trust company by the said Wisconsin Blue Grass Land Company to the amount of 20 per cent. in excess of all bonds issued, the trust company was to hold such securities in its possession and collect the principal and interest thereof and pay therewith the principal and interest on bonds issued to the holders thereof as the same fell due, and was to countersign said bonds and certify thereon that each issued was one of the series for payment of which it held securities as aforesaid, and that no bonds were to be valid until so countersigned. That said bonds all bear date as of July 1, 1905, bear interest at the rate of 6 per cent. payable semiannually, are negotiable in form and fall due by their terms on July 1st at different years between July 1, 1909, and July 1, 1914. * * *

10. That subsequent to the issue of said bonds the said Wisconsin Blue Grass Land Company assigned all its assets to another corporation, the Northern Blue Grass Land Company by name, which assumed all its debts and obligations, and was at the time of the dissolution of said trust company liable for the payment of said bonds. That said Wisconsin Blue Grass Land Company at the said time of dissolution had no assets whatever. That at the time of dissolution of said trust company as aforesaid the said Northern Blue Grass Land Company was insolvent. That thereafter in proceedings for winding up its affairs in the federal court of the Western district of Wisconsin, a receiver was appointed, and assets were collected and administered sufficient to pay to its creditors a dividend of 2 per cent. and not in excess thereof, not making any deductions for attorney fees or expenses of administration. * * *

13. That prior to the actual dissolution of said trust company its directors had voted to borrow from the Union Investment Company, a corporation, the sum of $35,000 to raise money with which to pay its debts other than obligations in connection with said bonds, and to pledge certain securities it then had in its own possession, of the value of $10,917.19, and also all securities in the hands of the state treasurer, to secure the payment of said loan. That this resolution was passed November 13, 1908, and among the directors voting therefor were the relators Bailey, Bell and F. E. Settergren, for whom the relator Battles is trustee in bankruptcy. That the said resolution contemplated the procuring of all securities from the state treasurer and turning them over to the said Wisconsin Mortgage Loan & Investment Company. That the following relators and claimants herein as bondholders were stockholders of the said trust company at the time of the passage of the said resolution of March, 1908, and voted therefor in person or by proxy, viz.: E. A. Rademacher, J. H. Hannay, George W. Bell, William Paulton and A. H. Barber. There also voted for said resolution the following stockholders, viz.: F. E. Settergren, represented by relator E. J. Battles, his trustee in bankruptcy, G. W. Pittman, also represented herein by said Battles as his trustee in bankruptcy, and N. B. Bailey, who is represented herein by the relator, his trustee in bankruptcy, E. B. Kinney.”

By finding 14 the court finds that shortly after such resolution numerous claimants and plaintiffs signed an instrument as follows:

“The undersigned holders of bonds issued by the Wisconsin Blue Grass Land Company, the collateral securing which being held by the Wisconsin Savings Loan & Trust Company of Hudson, Wis., owing to the fact that the Wisconsin Savings Loan & Trust Company is to retire from business, hereby agree and consent that the securities securing these bonds be held by the Wisconsin Mortgage Loan & Investment Company, a corporation which is being formed to succeed the trust company, it being...