Wis. Trust Co. v. Munday

• Decision Date: 08 October 1918
• Citation: 168 Wis. 31,168 N.W. 393
• Parties: WISCONSIN TRUST CO. ET AL. v. MUNDAY ET AL. MUNDAY ET AL. v. WALTER ET AL.
• Court: Wisconsin Supreme Court

168 Wis. 31

168 N.W. 393

WISCONSIN TRUST CO. ET AL.

v.MUNDAY ET AL.

MUNDAY ET AL.

v.WALTER ET AL.

Supreme Court of Wisconsin.

June 19, 1918.

On Motion for Rehearing, Oct. 8, 1918.

Appeal from Circuit Court, Racine County; E. B. Belden, Judge.

Action by the Wisconsin Trust Company and another against C. B. Munday, trustee and others and by C. B. Munday, trustee, and others against Horace E. Walter and others. By stipulation the actions were tried as one. From the judgment rendered C. B. Munday, the La Salle Street Trust & Savings Bank and its receiver, William C. Niblack, appeal. Modified and affirmed.

Eschweiler, Kerwin, and Vinje, JJ., dissenting in part.

There were originally two actions begun. The action here designated No. 1 was instituted by the Wisconsin Trust Company and Frederick Robinson, hereinafter called plaintiffs, to cancel, rescind, and set aside two separate deeds given by each to the Realty Realization Company, all dated and delivered February 28, 1913, pursuant to the contract between said parties, in which contract Clinton S. Woolfolk, president of the Realty Realization Company, joined as party of the third part, and also to cancel a deed given by said Realty Realization Company to the defendant Horace E. Walter, dated March 5, 1913, and a trust deed or mortgage given by Horace E. Walter to C. B. Munday, trustee, dated March 5, 1913, to secure Walter's note for $50,000, upon the security of which there was loaned by the defendant La Salle Street Trust & Savings Bank the sum of $40,000, and to revest the title to the premises described in all the foregoing instruments in the Wisconsin Trust Company and Robinson free of all claims of the defendants therein.

The action designated No. 2 herein was instituted December 24, 1913, by the plaintiff Munday as trustee, and the La Salle Street Trust & Savings Bank to foreclose the trust deed described above as a mortgage upon the premises pledged to secure said loan of $40,000 made by said bank to said Clinton S. Woolfolk, president of the Realty Realization Company, evidenced by the note of Horace E. Walter, dated March 6, 1913, for $50,000. The premises described are a lot and five-story brick office and store building thereon, located in the city of Racine, Wis., and worth between $60,000 and $75,000. The actions by stipulation were tried as one. The plaintiff Robinson claimed that he was induced to enter into the contract of February 28, 1913, and to execute his deed and to procure the execution of the deed of the Wisconsin Trust Company pursuant thereto by fraud; that the deed to Walter and the trust deed from Walter to Munday were given for the purpose of defrauding the plaintiffs and hindering and delaying them in the recovery of the premises. This claim was practically abandoned upon the trial, and is expressly abandoned in the briefs of counsel filed here, and will not be considered other than as it may bear upon the question of whether or not the conveyances made by the plaintiffs to the Realty Realization Company are void.

Plaintiffs further claim that the deeds given by them to the Realty Realization Company were absolutely void, because the Realty Realization Company, being a corporation organized under the laws of the state of Maine, had not complied with section 1770b, Stats.; that no title passed to said Realty Realization Company, and it could therefore convey none to Walter; that Walter, not having any title as against the plaintiffs, could not give a valid mortgage to Munday, and that the defendants could not acquire any rights in the property by virtue of the subsequent transactions superior to the rights of the Wisconsin Trust Company and Robinson. On behalf of Munday, the bank and Niblack, receiver, hereinafter called appellants, it was claimed that there was no fraud; that section 1770b, Stats., had no application to the transaction because it was entirely negotiated and executed at Chicago, Ill.; that appellant Munday, trustee, being an individual, and the La Salle Street Trust & Savings Bank were expressly excepted from section 1770b, Stats., with reference to the loan; that said transaction having been negotiated and consummated long after the passage of section 1770j, Stats., the original transaction, if the statute had any application to executed contracts and unilateral instruments of transfer, was voidable only on a proper case-made, and not absolutely void; that, the subject-matter being property not within the state of Illinois, the Illinois foreign corporation law had no application to the transaction between the original parties; that the trust company and Robinson by the contracts and deeds in effect agreed that all persons claiming under the Realty Realization Company, including appellant, could not avoid the transaction, and are estopped thereby from so doing; that the plaintiffs ratified and confirmed the contract of February 28, 1913, and their deeds given pursuant thereto; that Robinson, the owner of the entire equitable title and interest in the premises, having placed the title in the control of the Realty Realization Company, a dealer in real estate, with knowledge that said property would be used by the latter in its business, was and is estopped and precluded from questioning the subsequent dealings by that company with said property, to the prejudice of the rights therein acquired by appellants. There was a trial by the court, and the court found that the Realty Realization Company was guilty of fraud in the procurement of the contract and conveyances to it, but did not connect the appellants therewith; that the bank loaned $40,000 on the trust deed for which it issued its certificate of deposit, and that no part of the loan had been repaid; that Woolfolk discounted the certificates of deposit received by him on account of the loan on March 18, 1913, with James H. Prentiss, and used part of the proceeds for the benefit of the Realty Realization Company, the balance being unaccounted for; that said certificates at or prior to the maturity thereof were paid by the bank to the holders, who discounted the same for the said Clinton S. Woolfolk; that prior to the making of said loan the Realty Realization Company and Woolfolk were well known to the bank and Munday, and were depositors therein; that appellants Munday and the bank were warned and put upon inquiry by the recitals contained in the deeds, to the effect that the Realty Realization Company was a body corporate of the state of Maine, as to whether said company had complied with section 1770b, Wis. Stats., and that said appellants had failed to exercise ordinary care and prudence to ascertain whether said company had complied with the laws of Wisconsin, and that the Wisconsin Trust Company and Robinson had no knowledge that said company had failed to comply with section 1770b until on or about March 30, 1913.

As conclusions of law the court found that the contract between Robinson and the Realty Realization Company and the deeds from the trust company and Robinson to the Realty Realization Company pursuant thereto were and are wholly null and void; that the Realty Realization Company secured no title thereby, conveyed none to Walter, and that Walter's trust deed to Munday was and is a nullity; that Munday and the bank were and are chargeable with notice and knowledge of the invalidity of the title claimed by and through the Realty Realization Company, and that Robinson and the trust company are not estopped by any act or conduct on their part from asserting their title to said premises as against any of the other parties thereto; that the receiver of said bank, by virtue of said trust deed and the loan made thereon by said bank, acquired no lien on the premises, and no right to be subrogated to the Realty Realization Company; that F. M. McKey, trustee in bankruptcy of the Realty Realization Company, was entitled to the return of the consideration received from said company by Robinson for said conveyances; that plaintiffs were entitled to judgment for the relief prayed for in their complaint in action No. 1, and in action No. 2 to judgment dismissing on the merits appellants' complaint for foreclosure, vacating and setting aside the trust deed, and removing same of record as clouds on their title, and quieting their title to the premises and for costs. Judgment was entered accordingly. Munday, La Salle Street Trust & Savings Bank, and Niblack, as receiver, appeal from the entire judgment. The appellants took proper exceptions to the findings made, made proper requests for other findings and assignments of error necessary to raise all the questions hereinafter considered. The case was thoroughly tried and ably presented both in this court and in the trial court. We shall not attempt a detailed statement of all the facts, as the record is a long one and it is not thought necessary in view of the disposition which we make of this case.

Thompson, Myers & Kearney, of Racine (Joseph W. Moses, of Chicago, Ill., and Thomas M. Kearney, of Racine, of counsel), for appellants.

Simmons & Walker, of Racine (William E. Black, of Milwaukee, of counsel), for respondents Wisconsin Trust Co. and Robinson.

Hand & Quinn, of Racine, for respondents Realty Realization Co. and McKey.

ROSENBERRY, J. (after stating the facts as above).

The deeds given by the plaintiffs to the Realty Realization Company were dated and delivered February 28, 1913, at which time the Realty Realization Company admittedly had not complied with the provisions of section 1770b, Stats. It is claimed that the failure of the Realty Realization Company to comply with the provisions of section 1770b does not render the deeds absolutely void, for three reasons: (1) The business was not transacted in Wisconsin; (2) the transaction was interstate in character; and (3) the statute applies only to bilateral and executory agreements, and does not apply to executed contracts.

Section 1770b has...