Whitford v. Reddeman
| Decision Date | 08 May 1928 |
| Citation | 196 Wis. 10,219 N.W. 361 |
| Parties | WHITFORD ET AL. v. REDDEMAN ET AL. |
| Court | Wisconsin Supreme Court |
OPINION TEXT STARTS HERE
Appeal from an order of the Circuit Court of Milwaukee County; Charles L. Aarons, Circuit Judge. Affirmed.
Action begun July 30, 1927; order entered December 3, 1927. Demurrer. Investment trust. Suit was brought by the plaintiffs individually and as members of noteholders' protective committee against E. A. Reddeman, trustee, Wisconsin Mortgage & Securities Company, H. A. Moehlenpah, S. M. Smith, John Rose, R. H. Watson, J. J. Jamieson, G. D. Bartlett, C. S. Morris, W. E. Sprecher, and L. T. Hammond, who were directors of the company, hereinafter referred to as the securities company. The defendants, H. A. Moehlenpah, S. M. Smith, John Rose, G. D. Bartlett, C. S. Morris, and J. J. Jamieson, demurred jointly to the complaint, and there was a separate demurrer by W. E. Sprecher. Upon full argument, the court overruled both demurrers, and the demurring defendants appeal from the order.Churchill, Bennett & Churchill, of Milwaukee, for appellant Sprecher.
Ekern & Meyers, of Chicago, Ill. (Luther F. Binkley, of Chicago, Ill., of counsel), for appellants Moehlenpah, Smith, Rose, Jamieson, Bartlett, and Morris.
Upham, Black, Russell & Richardson, of Milwaukee (Clark M. Robertson, of Milwaukee, of counsel), for respondents.
By the complaint it is alleged that the Bankers' Finance Corporation, predecessor to the securities corporation, entered into a certain trust agreement in writing with the defendant E. A. Reddeman, wherein it was proposed to issue and sell the obligations of the company thereunder and the company's collateral notes to be issued in denominations of $500 or multiples thereof, in the following form:
“Bankers' Finance Corporation, Milwaukee, Wisconsin.
+--------------+
¦No. AB. ¦$500.¦
+--------------+
The Bankers' Finance Corporation, for value received, promises to pay the bearer on ______ five hundred dollars ($500) in lawful money of the United States of America, at the office of the National Bank of Commerce, in the city of Milwaukee, Wisconsin.
This is one of the collateral notes issued under and secured by a certain trust agreement between the Bankers' Finance Corporation, and E. A. Reddeman, of Milwaukee, Wisconsin, as trustee, dated the thirty-first day of January, 1925. For a statement of the nature and extent of the security and of the rights of the holders of said notes under the trust agreement and the terms and conditions under which they are issued and shall be issued and secured, reference is made to the trust agreement. All the notes issued or to be issued under the trust agreement, at any time outstanding, shall be ratably and alike secured by the trust agreement. This note shall not become obligatory until the certificate hereon shall have been signed by the said trustee.
In witness whereof, Bankers' Finance Corporation has caused this collateral note to be signed by its president, and treasurer, attested to by its secretary, and its corporate seal to be hereto affixed.
Milwaukee, Wisconsin, ______ 1925.
Bankers' Finance Corporation,
By __________, President.
[Corporate Seal.]
__________, Treasurer.
Attest: __________, Secretary.”
By said trust agreement it was further provided that the said E. A. Reddeman, as trustee, should indorse upon said notes a certificate in the following form:
“It is hereby certified that this collateral note is one of the collateral notes mentioned in the trust agreement referred to within.
E. A. Reddeman, Trustee.”
The notes issued and so indorsed by the trustee were to be secured by certain collateral to be deposited with the trustee from time to time. The collateral notes were to be issued in varying amounts from month to month and from time to time upon the securities company assigning to, and depositing with, the trustee the collateral specified in the trust agreement.
It was further provided that, as said notes were assigned and deposited with the trustee, they should be entered in a schedule and should form a part of the trust fund. Such schedule was to be identified by a certificate signed by the company at the end thereof in the following form, to wit:
“Schedule of notes assigned by the Bankers' Finance Corporation to and deposited with E. A. Reddeman, as trustee for the holders of the company's collateral notes, series ‘AB,’ issued under and pursuant to the provision of a certain trust agreement bearing date of January 31, 1925, between the said Bankers' Finance Corporation, and the said E. A. Reddeman, as trustee.
Dated ______.”
All collateral notes issued under the trust agreement were to be ratably secured. It was furthermore provided in the trust agreement by article II that, at or before the time of the presentation of the collateral notes to said trustee for authentication, the company should deposit and leave with the trustee certain notes and obligations therein described in words and figures as follows:
“(a) 1. Notes executed by individuals, firms and/or corporations, residing in or existing under the laws of, and having their principal place of business in Wisconsin, who are manufacturers or dealers in agricultural implements or other articles used by farmers in connection with agriculture, and herein termed ‘implement dealers' notes.’ Such notes shall be accompanied and collateralized by notes executed by farmers to such dealers of manufacturers in the ratio of at least $120.00 of such farmers' notes for each $100.00 of such implement dealers' notes; or (2) notes executed by individuals, firms and/or corporations, collateralized by notes or conditional sales contracts or partial payment contracts on unmatured open accounts such collateral to be in the ratio of at least $110.00 face value of collateral to $100.00 face value of the notes secured thereby; or (3) notes executed by individuals, firms or corporations residing in or existing under the laws of the state of Wisconsin, who are engaged in the business of agriculture, managing, directing, or working farms, or notes of individuals or corporations collateralized by notes of individuals, firms or corporations who are engaged in the business of agriculture, the proceeds of such notes being used exclusively for agricultural purposes within the state of Wisconsin, said notes to be either guaranteed or indorsed by one or more individuals or Wisconsin banks or secured by chattel mortgage; or (4) notes of farmers secured by mortgage on farm real estate having a maturity of not over one and one-half years from the date of the company's collateral notes secured thereby; or (5) purchas-emoney obligations the proceeds of which have been used or are to be used in purchasing, carrying or marketing any motor, motor vehicle, truck, tractor, farm machine, farm implement or equipment, internal combustion engine, trailer, refrigeration system, household utility, lighting system or any part thereof or accessory thereto, such purchase-money obligations to be in at least the ratio of $110 to each $100 of company's collateral notes. All such notes shall be accompanied with assignments duly vesting the total thereof, and to the collateral accompanying the same in the trustee and shall be to a principal amount at least equal to the principal par value of the company's collateral notes executed by farmers to dealers or manuments to be accompanied by the schedule thereinbefore mentioned.
Or in lieu of aforesaid implement dealers' notes or other notes as above provided, cash, company's collateral notes issued under this or prior similar indentures at principal par value, or municipal or United States government securities at the value to not higher than 5 per cent. under the market value thereof as quoted on the day of deposit (exclusive of interest), or other government, utility or corporation bonds (to be agreed upon with the trustee) at a value not higher than 10 per cent. under the market value thereof as quoted on the day of deposit (exclusive of interest), to an amount at least equal to the principal par value of the collateral notes to be authenticated on the security thereof.”
It was furthermore provided by article II of the trust agreement that the deposit therein provided for might from time to time be made in any or either of the forms therein described or in any combination of said forms to the amount requisite to provide security as therein defined for said company's collateral notes to be authenticated, and that the trustee might decline to receive any notes which in his judgment should fail to conform with said trust agreement in any of the particulars therein set forth, and that said trusteeshould thereupon enter said notes and collateral in a schedule thereof, and should authenticate the company's notes so presented for authentication, and deliver the same to said company or to its order.
It was provided by article II that, at the time of presentation of any of the company's collateral notes to the trustee for authentication, the company should deposit and leave with the trustee, in addition to the notes and obligations therein described, the following:
“(b) A certified copy of a resolution of the board of directors of the company authorizing the issue of said collateral notes.
(c) A certificate by said company under its seal that each note so assigned and deposited is a valid note executed by the maker hereon in accordance with subsection (a).”
The defendant Reddeman accepted the trust, and entered upon the performance of his duties as trustee. The procedure by which the Wisconsin Mortgage & Securities Company succeeded to the assets and liabilities of the Bankers' Finance Corporation is set out in detail. It is alleged that there are now outstanding of the collateral trust notes provided for by the agreement of the principal aggregate sum of $796,000, which is set out in the schedule annexed to the complaint....
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