Kaehler v. Nibbles , 32 Wis. 19 ( 1873 )

The following opinion was filed at the January term, 1872 :

Cole, J.

No one contests the priority of the mortgage given to Caroline Kritzner. This mortgage was subsequent in date to the mortgages given by Peter F. Kaehler to h'is father and mother for their support; and to the one given to his brothers and sisters to secure the payment of $8,600 on the first of June, 1875; but, by a valid agreement made between the parties interested in those mortgages and Caroline Kritzner, they were postponed to her mortgage, which became the first lien upon the property. And this being so, no further consideration need be given to the question of the priority of that incum-brance. But the real contest in this case is over that part of the decree of the court below which adjudges the mortgage given to the defendant JEzra B. Dibblee for the benefit of the firm of Dibblee, Worlc & Moore, a lien prior to the mortgage of the plaintiff being foreclosed, and the one given to the brothers and sisters. The court held that both these latter mortgages were fraudulent and void as to Dibblee's mortgage, and therefore gave that mortgage the preference over them. Was the court in error in so adjudging that the Dibblee mortgage was prior in right and superior in equity to those mortgages ? Upon the undisputed facts of the case we think this question must be answered in the negative.

It is conceded by all concerned, that Peter F. Kaehler bid in the property at the foreclosure sale on the 9th of April, 1860, for the benefit of his father, John FT. Kaehler, who was the plaintiff in the foreclosure suit. Peter paid nothing at the sale except the costs of foreclosure, and consequently the property really belonged to his father. But the parties saw fit to let the sale stand, and that Peter should become the owner of the property, paying the consideration by giving the mortgage to his father and mother for their support, and also by giving the $3,600 mortgage to his brothers and sisters in the way of an advancement out of their father’s estate. At this time both John H. Kaehler and Peter F. Kaehler were largely indebted to tbe, firm of Dibblee, Work & Moore, upon promissory notes previously given that firm for goods furnished Peter F., in carrying on his mercantile business. They were joint debtors to that firm, and the proposition would seem too plain to admit of serious discussion, that no transfer, as between themselves, could place the property beyond the reach of their creditors. But further than this; in June, 1862, Peter F. Kaehler and wife executed and delivered to the defendant Ezra P. Dibblee, the mortgage above referred to, for the purpose of securing the payment of the amount due and unpaid upon their joint notes given the firm of Dibblee, Work & Moore.

The mortgage being foreclosed is the one given by Peter F. to his father and mother on the 8th day of May, 1860, conditioned for the payment of $480 per annum, in monthly installments of forty dollars, to John H. Kaehler and wife, or the survivor of them, so long as they or either of them should live. This mortgage was assigned to the plaintiff in this suit on the 8th of April, 1868, whose equities under the mortgage are the same and no higher than his father’s would have been had he retained it. And now suppose John H. Kaehler himself were foreclosing this mortgage, would he be heard to say, as against his creditors, that his lien must have the preference and be considered prior in equity to a mortgage given to secure a joint debt due Dibblee, Work & Moore? If so, upon, what principle would a court of equity proceed in granting this preference ? We really are at a loss to conceive of any principle upon which a court could so adjudge, unless it were upon the ground that a debtor is under no obligation to pay his debts honestly contracted and justly due, which of course will not be contended. It is said that John H. Kaehler was an accommodation maker of the notes, but we do not see that this fact affects the question. It is not claimed that the firm of Dibblee, Work & Moore has ever made any agreement to extend the day of payment of those notes, or has done any other act to release him from liability. True, they may not be entitled to any personal judgment against bim, for any deficiency which may be found due after a sale of the mortgaged premises, owing to the fact that the statute of limitations has run upon the notes. But otherwise we cannot see why they do not stand in as favorable position as they would if John H. Koehler were seeking to foreclose the mortgage. And in that case it seems to us very clear that a court of equity would not prefer his mortgage to one given to secure the payment of his debt, though the latter were subsequent in date. Eor to do so would be to relieve him entirely from the obligation he had contracted, at the expense of creditors. It is the duty of men to pay their debts, and the law makes their property liable therefor, except such as is specifically exempted. And, as it appears to us, it would be most inequitable, upon the facts in this case, to give the mortgage assigned the plaintiff a preference over the one given the defendant Kzra B. Dibblee, as it is admitted the mortgaged property is entirely inadequate to discharge all the liens upon it. And it is immaterial whether the firm knew of the existence of this mortgage when they received their own, because they were doubtless aware that the property was liable for their debt, whether in the hands of one debtor or the other. They were creditors of both mortgagor and mortgagee when this incum-brance upon the property was created. And it was really a matter of no importance to them what transfer was made of the property, as between the joint debtors, as in any event they could look to that property for the payment of their debts. This is all we deem it necessary to say in respect to that portion of the judgment which gives priority to the Dibblee mortgage over the mortgage which the plaintiff is foreclosing. The other mortgage is the one executed by Peter F. Koehler and wife on the 8th of May, 1860, to secure the payment of $3,600 to his brothers and sisters. This mortgage was given at the request of John II. Koehler, as an advance or settlement to his children. It was entirely voluntary, and was void as to creditors. The doctrine is well settled, that a voluntary conveyance will not he sustained when it deprives the debtor of all means fordiseharg- , ing existing indebtedness. John H. Kaeliler had but a few,*' hundred dollars of property left after giving to his children this large portion of his estate. He had previously become liable to a large amount on notes given by him and Peter F. to the firm of Dibblee, Work & Moore. Now, whether this mortgage was given by Peter F., at the request of his father, with the intent on the part of either or both to hinder, delay and defraud the defendant Pibblee, as found by the court below, we shall not stop to inquire. If there was no actual intent to defraud, the mortgage under the circumstances was unquestionably fraudulent in law. Por, “ in regard to voluntary conveyances, they are unquestionably protected by the statute in all cases where they do not break in upon the legal rights of creditors. But when they break in upon such rights, and so far as they have that effect, they are not permitted to avail against those rights. If a man, therefore, who is indebted, conveys property to his wife or children, such a conveyance is, or at least may be, within the statute; for, although the consideration is good as between the parties, yet it is not, in contemplation of law, bona fide; for it is inconsistent with the good faith which a debtor owes to his creditors, to withdraw his property voluntarily from the satisfaction of their claims ; and no man has the right to prefer the claims of affection to those of justice.” 1 Story’s Eq. Jur., § 355. The good sense and sound morality of these remarks of Mr. Justice Stoby are too obvious to require further comment When applied to the facts of the present case, they are entirely decisive and unanswerable. Por John U. Kaeliler, by causing this voluntary mortgage to be executed in favor of his children, placed himself in a position where he was utterly unable to pay existing creditors. This mortgage ought not, therefore, to have a preference over the lien of the defendant Dibblee, since it is a maxim of general application, that “ every man is bound to be just before he is generous.”

Eor myself I fully agree with the counsel for the defendant Dibblee, that the judgment of the court below in respect to the $400 mortgage is quite as favorable to the plaintiff and all the defendants except his client as the facts of the case would warrant. Bitt there is ’no serious complaint with the judgment in this particular, the whole controversy turning upon the question whether the Dibblee mortgage should take precedence of the liens of the plaintiff and of the other defendants, children of John H. Kaehler. And upon that question it is believed that enough has been said to vindicate the correctness. of the decree of the court below. The objection that the creditors are invoking the aid of a court of equity to enforce a stale demand, appears to us quite untenable. And the same remark may be made in respect to the objection that they have slept so long upon their rights that they are now estopped from insisting upon the fraudulent character of these mortgages postponed to their own. The Dibblee mortgage is a valid lien, and the rights of no one have been prejudiced by the delay in enforcing its collection out of the property. The creditors have indeed been very indulgent in waiting for the payment of the indebtedness due them; but it does not well lie in the mouth of any member of the Kaehler family to complain of this forbearance.

By the Court.— The judgment of the circuit court is affirmed.

On a motion for a rehearing, the counsel for appellants argued that as John H. Kaehler was not a party to the mortgage of 1862, and had done nothing to keep good the notes made by him jointly with Peter F., or to waive the protection of the statute of limitation, unless the'court was ready to overrule the statute (secs. 38, 39, 42, ch. 139, R. S.), and to say that the act of one joint debtor in giving security operates as a waiver of the protection of the statute as to the other joint debtor, the decision could not be sustained; that while no transfer between the parties could place the property beyond 'the reach of the creditors, and while as against the creditors all such conveyances were void, still the creditors could bar themselves by neglect to assert their rights within the time limited by the statute, and had done so here; and that if no conveyance at all had been made, but John H. Kaehler had himself bid in the property at the sale or foreclosure of the Kritzner mortgage, and still retained it, neither this property nor any other belonging to him would now be subject to the payment of the notes held by Dibblee, Work & Moore, those notes being outlawed.

The motion for a new trial was denied at the January term, 1873.