Rosenheimer v. Krenn

106 N.W. 20, 126 Wis. 617, 1906 Wisc. LEXIS 130

• Court: Wisconsin Supreme Court
• Decided: January 9, 1906
• Status: Published

Opinion

Dodge, J.

The principal controversy in this case is one ■of fact, namely, whether the conveyance from Krenn to Frank Day was received by him with intent to hinder, delay, ■or defraud creditors of Henry Krenn, or with knowledge of such intent on Krenn s part, and whether it was induced by fraud and duress upon Krenn. The narrative of the transaction occurring on the 12th day of August, presented by Krenn and several of his family, in which they all concurred with striking unanimity down to the most trivial details, was in direct antithesis to that presented by Frank Day. That narrative is in effect that Krenn at that time had no reason to apprehend imminence of criminal proceedings against him for the murder of Gehl, nor -doubt of ability to prove innocence by the members of his family, although there had been sucb suspicion in tbe community as to make bis continued residence there unpleasant; that in tbe early morning of June 12th Frank Day came to Krenn’s farm, and, with great manifestations of grief and protestations of friendship, told him that a warrant was about to be issue'd and within twenty-four hours he would be arrested with practical certainty of being sent to Waupun for life; that he could place no reliance on a defense resting on the testimony of members of his family; that Waupun contained more innocent than guilty, and his innocence would not avail him; that he must flee the country and go to Germany or, as well, to Canada, where he would be safe; also that Day urged, as the only means of accomplishing this result, that Krenn sell the farm to him and get the money to go away; that he offered to buy it at $14,000 and, on Krenrís protestation that that was not enough to pay his many outstanding debts and make any provision for his numerous children, Day insisted that such considerations should not weigh against the certainty of arrest and conviction which hung over him, and that he could disregard all but mortgage debts; that the family was thrown into great excitement and terror; that tears were shed copiously at all times, but finally Krenn and his wife were induced to consent, and Day went and got Mr. Rix, an attorney at Hartford, to draw the necessary papers; that the same excitement, weeping, and threat of arrest were persistent after Rix’s arrival, and that Rix confirmed Day’s statement that Krenn would bé safe in Canada; that then was executed the deed in question, but for the consideration of $13,000 instead of $14,000, Day insisting that he would give but $13,000 and that Krenn could not possibly let the matter of $1,000 stand between him and escape from state prison. They also testified that at that time, and in the presence of Mr. Rix, Krenn reiterated the statements that this was not enough, in view of the numerous unsecured debts which Krenn owed. Further, that, as a part of the scheme, Day suggested a secret flight by defendant Henry Krerm and bis oldest son, wbo was included in tbe threat of prosecution, and insisted that they should go to a remote comer of the farm some two miles away and meet him after dark that night, to be taken to West Bend to catch train for Canada.

On the other hand, Day's narrative is to the effect that¿ upon his visiting the farm Monday morning for purpose of examining it more thoroughly to enable him to: handle it as a real-estate agent under the option which had been given him on the 10th, he was met by Krenn with the statement that Mrs. Krenn and the girls had heard at church the day before that a warrant was to be issued that day for Krenn’s arrest, and that he must ffee the country. He urged Day to purchase the farm at once under the option. The latter, responding to Krenn’s inquiry, stated that he had heard the same story about the issuing of warrant, but that nothing had been heard of it in Hartford and that he did not believe there was any foundation for it, since, if there were, it would probably be known there. He also objected strenuously to buying the property at all, stating he had no means to buy it with and did not want any farm; and, upon further solicitation, said that the only inducement upon which he could be brought to consider it would be a price so low that he was sure to be able to promptly sell it at a good profit, as he would have to borrow all the money and could not take the chances of having to carry it for any considerable time; that he could not think of paying for it the $15,000, for which he held an option for ninety days, during which time he had hoped to find a customer, but at last he offered to give $13,000 for it, whereupon, after protestation that it was too little, and acknowledgment by Day that it was not a full price for the property but all he could afford to give, Krenn accepted and arranged that $1,800 was to be paid at once to him and the rest to be paid to Mrs. Krenn as soon as an abstract could be prepared and delivered showing good title; that no suggestion was made by Krenn of the existence of any creditors other than those holding the mortgages, and that the existence of any such creditors never occurred to Day’s mind and was wholly unknown to him. After those terms had been agreed npon Day proposed that they go to town and have the papers drawn np; but Krenn insisted that a scrivener be brought to the honse. Day accordingly went and got Mr. Rix, who had theretofore been acting as attorney for the Krenns both in regard to the charges of complicity in the Gehl murder and in regard to other business.

At this point Mr. Rix takes np the narrative and tells of a conrse of conduct at the house entirely consistent with the story told by Day, and in entire contradiction of those differences related by the Krenns. He says there was no excitement, no tears, no urgency by Day or assertion of any peril, but that the question was put to him by Krenn and his wife whether he knew of the rumor which they had heard at church of the imminence of arrest, and that he assured Krenn that, in his best judgment, there was no foundation for it, and that he stood in no peril, and urged him above all not to think of leaving the country, as it would give strong support to the suspicions against him; also assured him that it would do no good, for he could be arrested in Ganada as well as in Wisconsin, advising him, if he still persisted in moving away from the farm by reason of the unpleasantness, that he should not go to any considerable distanqe. He also contradicts the Krenns3 statement that any reference was made in those interviews to the existence of debts other than those secured by the mortgages.

Thus was presented to the trial court two theories of the transaction out of which sprung Day’s title, wholly inconsistent, and inconsistent in such a way that one or the other must be a fabrication as to the general color and character of the events. The story of one side convicted the other of wilful falsity. The choice between the two involved in a peculiar degree in this case that function of the trier of facts ■which consists in judging of the personal character and credibility of tire witnesses. It appears that the Krerms had already been through a litigation in the presence of the same judge, that Mr. Rix was a practicing attorney in close proximity to the judge’s home, and, in addition to this, and of great weight under the circumstances, was the appearance and manner of the several witnesses, which cannot be made to appear in this court by the manuscript record. Could we know that all the witnesses were of equal credibility, we might find it hard to say that the testimony of the four or five members of the Krenn family did not constitute a volume of evidence preponderating over that of the one interested defendant, Frank Day, although he was confirmed, and they refuted, as to many essential elements by the attorney, Rix, who was at least free from pecuniary interest; but, under the rule so long recognized, it would be very dangerous for this court, upon inspection merely of the written testimony, to place its judgment in opposition to that of the circuit judge who presided through the trial and had superior knowledge of the character of the witnesses and saw the manner in which they gave their testimony.

In addition to this direct conflict of testimony there are mumerous circumstances of conduct and the like of one or an■•other of the parties which are in some degree consistent with ■ one theory of the transaction and inconsistent with another, ilt, of course, is not the province of this court to attempt to ■ summarize those; but, as an illustration, it may be pointed out -.that when, as is the fact, Frank Day learned on the afternoon ■ of the 13th that .one Jackson claimed to be a creditor of Krenn’s, he immediately went with him to Mrs. Krenn with the expectancy of having her pay him out of the money which she was to receive. Such conduct would hardly be expected of a man who knew that the transaction had been entered into by Krenn with the purpose of evading payment of such debts. Again, the defendant Day co-operated with Rix in an effort to induce Krenn to change his mind about leaving the country, and, although given money for the purpose of buying tickets to Canada, bought them only to Fond du Lae, and brought Krenn in contact again with Rix and with Rix’s father, who seems to be an old acquaintance of Krenn s, both of whom again urged upon him the folly of fleeing the country, and tried to disabuse his mind of the existence of any peril from remaining. The court might, and doubtless did, consider that conduct on the part of Krenn which under some circumstances would strongly suggest fraud against creditors, both to the court and to a purchaser, was fully accounted for by another motive, namely, that of immediate flight to escape arrest, to which all witnesses testified. The haste, the se-crecy, the assent to a low price, the dealing with the nearest buyer instead of seeking better price elsewhere, all fall in such category. Also was significant the payment of the bulk of the money consideration into tire wife’s hands, especially as it was to remain for a time at least within reach of neighborhood creditors and under circumstances such that she at least understood she was authorized or expected to pay honest debts with it, for she paid some $1,400 of such debts when presented; refusing to pay plaintiff because'“they didn’t owe him anything.” Further, it should be noted that Krenn himself denied any intent to delay or defraud his creditors, but testified that fear of arrest was the sole motive of the sale, which, by the way, left him entirely solvent and supplied with much more than enough money to pay all unsecured debts after deducting the $1,500 which he carried away with him. Of course, when the trial judge concluded that the Krenns had deliberately testified to a false and fabricated story, they stood before the court self-impeached generally, and any of their statements might of themselves have been given little or no weight as against conflicting evidence.

Doubtless there are circumstances which could be urged as -confirmatory of, or at least consistent with, the other theory of the transaction; but all of these were before the trial court, and his finding discloses that the various points of dispute and all the circumstances were most carefully considered by him. We are persuaded, after examination and re-examination of the evidence, and after giving all due consideration to the very forcible and able argument made by appellant’s counsel in this court, that we cannot justify ourselves in the conclusion that the finding of the trial court is so against that clear preponderance of evidence that we must conclude that he made a mistake of law or ignored the evidence upon one side. These findings establishing, as they do, that there was no intent on the part of either Krenn or Ua.y to hinder, delay, or defraud creditors of the former, the grounds upon which a conveyance can be held void, under sec. 2320, Stats. 1898,. fail, and the conclusion follows that the plaintiff, being a mere general creditor until after the conveyance, has shown no interest in the property which he can invoke aid from the-court to protect.

Counsel, to avert such result, seek to invoke the doctrine that so long as any portion of the price remains unpaid the purchaser, however bona fide in other respects, is not so with reference to the portion remaining unpaid at the time he receives notice of another’s fights. That doctrine may be conceded full force in its proper field, namely, where the plaintiff' has a right, legal or equitable, in the property which upon the facts as they really exist is and ought to be superior to any interest which his vendor could convey to the defendant, but where a court of equity will defeat those rights in protection of one who has bought in good faith and for a valuable consideration. There, since the whole purpose is merely protection to the purchaser, courts go no further than the point where he could have protected himself. Examples of the principle are found in our recording statutes, under which are several of appellant’s citations. There the true title in favor-of the first grantee is cut off in favor of the second grantee,. who, in reality, obtains no title’ by bis conveyance. Again, if a conveyance is actually void because made with intent to defraud creditors so that neither the first nor any "subsequent •grantee obtains any title in fact valid against creditors, yet the latter may be denied enforcement of their rights against the land in favor of a tona, fide purchaser for a valuable con•sideration; but under general equitable rules such denial will go no further than is necessary to protect him in his purchase, which can be accomplished by requiring that he pay them any portion of the consideration which he can control at the time he learns of their rights, unless some modification is accomplished by statute. Sec. 2324, Stats. 1898; Pomeroy, Eq. Jur. (3d ed.) § 735 et seq.; Everts v. Agnes, 4 Wis. 343; Wynn v. Carter, 20 Wis. 107, 111; Hamlin v. Wright, 23 Wis. 491; Nix v. Wiswell, 84 Wis. 334, 343, 54 N. W. 620. That doctrine, however, has no application to a valid sale, for there is no right in another, legal or equitable, in the property; there is nothing of which a purchaser can have notice to affect his good faith. The appellant’s contention would require every purchaser of property who learned at any time before completed payment that the seller owed a debt, to refuse payment to the vendor bn the chance that such creditor might elect to pursue the property sold instead of other assets of the debtor. Such doctrine would render sales on credit unsafe, and relegate the commercial world to cash transaction, if not, indeed, prevent sales altogether, by those known to owe any debts — an obvious absurdity. Only where there is intent, actual or constructive, of at least one of the parties to hinder, delay, or defraud creditors does sec. 2320, Stats. 1898, render the sale void. Since the findings negative any such intent, the sale was valid, and no after events could avoid it. If a general creditor would reach purchase money due on such a sale, he must impound it by garnishment or some similar legal process.

There remains for consideration appellant’s further contention that, ■whenever property is sold for a price known by both vendor and vendee to be less than its true value, the difference between price and value will be deemed a voluntary gift, void as to creditors, and for which even an otherwise bona fide purchaser will be charged as trustee. Obviously this doctrine, carried to the extent of its statement, would be subversive of any considerable commercial activity and preclude a purchaser from availing himself of what he deemed a good bargain. Nevertheless, the rule is so stated in some text-books and in some decisions. 14 Am. & Eng. Ency. of Law (2d ed.) 299; Withrow v. Warner, 56 N. J. Eq. 795, 35 Atl. 1057, 40 Atl. 721; Fuller v. Griffith, 91 Iowa, 632, 60 N. W. 247; Cox v. Collis, 109 Iowa, 270, 80 N. W. 343; Wiltse v. Flack, 115 Iowa, 51, 87 N. W. 729; Jameson v. Dilley, 27 Ind. App. 429, 61 N. E. 601; Worthington v. Bullitt, 6 Md. 172, 198; Norton v. Norton, 5 Cush. 524; Bailey v. Kennedy, 2 Del. Ch. 12. On examination these cases fall into three classes: First, where actual donation is understood and intended, but something is paid either because the property is greater than the intended donation, as where a farm is given to one son in excess of his share and he pays a small portion of its value to equalize, or because the donor must have a certain sum of money which is measured purely by that necessity and not by reference to the value of the property transferred; second, where the purpose of both parties is merely payment of antecedent debt, and courts have held that, if payment be accomplished, all equities are satisfied — a doctrine antagonistic to many Wisconsin decisions; and, third, in one or two cases of original bargain and sale, in which, however, the fraudulent intent of the grantor "has been apparent, though not fully proved to have been shared by the grantee. In those cases courts have, in somewhat high-handed manner, substituted a new bargain for the one actually made, with the excuse that no injury would be done the purchaser if he was protected in all the money he had paid, apparently forgetting that under the genius of our system of law the fruits of a good bargain honestly made are as much property as the consideration money paid.- This doctrine would seem repugnant to see. 2323, Stats. 1898, providing that mere absence of valuable consideration alone shall not avoid a_ conveyance.

It is, of course, in the third class, if any, that the present transaction must fall; for, obviously, there was no purpose of free gift between the parties. Krenn was seeking to obtain all that he could get for his property in the market to which his exigency of haste and secrecy confined him. Neither was there any antecedent debt attempted to be paid. But there is lacking here the element of a fraudulent purpose in the grantor which was present in the only cited cases belonging to this class, and which we deem essential to even an approximately sound basis for application of the doctrine contended for. Then only can the validity of the sale be inquired into at all, or the good faith of the purchaser be material, for this class of cases must rest upon an extension of the doctrine of good faith heretofore discussed.

But, apart from all other reasons, we deem it plain that there was no such extreme discrepancy between price and value as would render the doctrine applicable even according to the authorities which support it. True, the court has found that the property conveyed for $13,000- was reasonably worth $16,200, an ostensible inadequacy of about one fifth— far less than that which in any of the cases cited has been held sufficient to arouse this supervisory power of the court. But “reasonable worth” is. an elastic term, especially as to farm property. It ordinarily means what may be obtained by one under no pressure or compulsion to sell until he can seek and find a customer desiring to purchase. Market value varies with the market. It is undisputed that, at a time when Krenn was under no pressure of haste or secrecy, he was willing to accept $15,000, free of commissions and expenses of sale, and Day was willing to risk a certain amount of work, and nothing else, in testing the existence of any one desirous of buying and the views of such a buyer as to value. On June 12th the parties were in no such market. No ninety days of search for a buyer could be indulged. Such search, even for a few hours, could not be extended among people generally, for thereby the apprehended arrest might be precipitated. Bay, if he purchased, must raise a large sum of money, perhaps to the embarrassment of or loss in his other enterprises and transactions. He must tie that money up in property needing continual care and attention, and he must run the chances of the correctness of his judgment as to the salability and sale value of the property. Inadequacy is said to exist only where the price is palpably less than what the property could bring at public sale in the market — what the vendor would have taken from another. Bump, Fraud. Oonv. § 265. We are not prepared to sáy that, in such situation as outlined, the price was inadequate, even though the “reasonable worth” of the property was as found by the court; certainly not in the degree to warrant a court in setting aside a bargain made by the parties honestly and with no fraudulent intent.

Several other propositions urged by appellant depend for their applicability upon fraudulent intent in one or both of the parties to the original conveyance, and our conclusion that the negation of any such intent must be sustained renders their discussion unnecessary.

Complaint is made of the taxation of a separate bill of costs in favor of each of the defendants Bay, who appeared by the same attorneys, and, thereby, to duplication of items of “retainer” and “brief.” In this we can find nothing of error. James B. Bay’s defense involved issues of fact and questions of law not included in that of Frank Bay. It was necessary to his complete defense that he retain counsel, and that a brief be presented covering those issues and questions. Since the amount of his separate costs was to be ascertained and ultimately embodied in a judgment in his favor individually, certainty required that they should be presented in a separate bill of costs; a general bill would have been uncertain and ambiguous as to which of the two defendants claimed recovery for those general services which could be taxed but once, such as attendance on trial, drawing findings and judgment, etc.

Further complaint is made of taxation against plaintiff of the whole 138 folios of findings covering the facts involved in both the issue of fraud against creditors in the conveyance from Krenn to Bay and the issue of duress and fraud against Krenn in the same transaction. Beyond question, if any distinct portion of the findings could be said to have no reference to the issues joined on the complaint, no folioage should be taxed against the plaintiff therefor; but the difficulty is that all that was said and done in these transactions had legitimate bearing on those issues, although much of it was also relevant to the issue of duress. We find substantially none of the facts and circumstances passed on. by the findings which are not urged by one party or the other as tending to support or refute the theory of an intent to defraud creditors on the part of either Krenn or Bay, or of the latter’s want of good faith. We are therefore unable to conclude that any separate portion of the findings is so disassociated from the issues tried between the parties to this appeal that we can overrule the trial court’s exercise of discretion, which is plenary over costs in equitable actions within the limits fixed by the statutory cost bill.

By the Gourt. — Judgment af&rmed.