148 Wis. 548 | Wis. | 1912
The following opinion was filed January 9, 1912:
The judgment must be affirmed. Not because it is grounded upon altogether legitimate logic; but because it is right.
Compulsory contribution between cosureties does not rest in mere equity though, true, such is the origin of the law. The individual chancellor cannot, as an original proposition, do in each case what he may think will fit the facts from the standpoint of justice in the abstract. He cannot merely seize upon his ideal in the moral sense and vitalize it by a decree.
Doubtless, “sense of right developed sense of duty.” Continuing the logic; sense of duty developed sense of moral obligation ; sense of moral obligation, intensified by contemplation of the mischiefs incident to its violation, developed sense of necessity for compulsory responsibility; the latter developed sense of need' for remedial justice. At that point of growth progress waited for its crowning effort. There was no written law to meet the case; none was offered. Then the boundless source of instrumentalities for coping with human transgressions, with its ready means, or power of invention thereof, for reparation of every wrong above mere moral infractions best dealt with by one’s own conscience and sensibility to the rewards and punishments afforded by social environment ; a source as limitless and fruitful as man’s capacity to wrong his fellow men; that one in which has originated more of the beneficial regulations of human conduct found in the scientific ethics of the law, than in all the legislatures of a century, — equity, vitalized by its human conscience, furnished the needed remedy, recognizing the primary right, duty, and obligation with an environment of correlative rights, duties, and obligations, in all an entirety with mutually dependable elements fixing limitations and conditions.
So from the very nature of the matter the whole subject of contribution was at first and for a long time dealt with solely in equity, taking, however, more and more, with the lapse of time, the form of a definite judicial code, appropriate to a proper standard, in moral conception, of business ethics. Those rules, being well established and, universally applied with quite as much certainty as legal rules, strictly so called, or rules dependable upon written law, came to be regarded as automatically written into every contract of guaranty, nothing appearing efficiently to the contrary, and enforceable at law as well as in equity.
Now the logic of the enforceability of contribution, at law as well as in equity, is that there is a real right of contribution growing out of the relations of the parties, not a mere privilege to be extended or not in judicial discretion. The right may be contracted away or lost by violation of some correlative right, but it is not within the province of the court, as an original matter, to give it or to take it away. The right, inchoate, has its inception at the time of signing the guaranty. It sleepeth, so to speak, till aroused into life, by compulsory payment by one of more than his share of the loss. Upon others refusing to make good, there is a violated right creat
Said this court in Hardell v. Carroll, 90 Wis. 350, 63 N. W. 275, quoting from a standard author:
“The right of contribution is an equity which springs up at the time two or more persons assume as to each other the relation of cosureties for a common principal, and ripens into a cause of action when one of the sureties pays more than his proportion of the debt for which all were liable.”
While it is an equity the right to the eqriity is legal as well ■as equitable, because the parties are presumed to have agreed that the right shall exist, and so legal as well as equitable remedies are available to redress its violation. Mason v. Pierron, 63 Wis. 239, 23 N. W. 119; Bushnell v. Bushnell, 77 Wis. 435, 46 N. W. 442; Faurot v. Gates, 86 Wis. 569, 57 N. W. 294; Boutin v. Etsell, 110 Wis. 276, 85 N. W. 964; Fanning v. Murphy, 126 Wis. 538, 548, 105 N. W. 1056.
“The liability of a surety to contribute to one who has paid more than his share of the common debt, is one that is mow recognized and enforced both at law and in equity.”
“The time was that the paying surety in an action could only recover from his cosurety an aliquot part of the whole •debt; regard being had to the number of sureties, and without xegard to the insolvency or nonresidence of any of them. The*558 considerations before mentioned induced a modification of tbis rule, so that it may be said to be established law in this-state, as well as others, that, when one surety has paid the whole debt, he may compel contribution from such of his co-sureties as are solvent and within the state.” Boutin v. Etsell, supra.
“In contemplation of law, the act” of payment by a surety,, the ^principal having defaulted, “is characterized by a request from the cosurety, if there be such, to the one acting in the-matter to pay the debt, and a promise on the part of the former,” implied from the obligation assumed to have been entered into at the start, “to contribute his proper proportion.. Thus a cosurety is liable to contribute to the one making the-payment, both upon the ground of equitable and legal obligation.” Fanning v. Murphy, supra.
As before indicated, the right of contribution may be-parted with to cosureties by contract, or lost to the extent that prejudicial breach of duty to the cosureties would otherwise-proximately cause loss to them, and may be forfeited in some-other ways definitely -established in the law.
Consistent with the principle that each surety, impliedly,, by joining in the guaranty, contracts not to take any special advantage, growing out of means of immunity from, or indemnity for, loss, secured from the principal during the existence of the contract of guaranty, and to reasonably conserve for the common protection property of such principal under his control, forming a legitimate means of such protection, it has been held as follows: Where a surety bought, in the principal claim at a discount he can only claim contribution as to the amount paid. Tarr v. Ravenscroft, 12 Gratt. 642; Derosset v. Bradley, 63 N. C. 17. A surety who pays in depreciated currency can only have contribution on the basis-of its value, such currency not being a legal tender. Edmonds v. Sheahan, 47 Tex. 443. A surety who receives security from his principal, although the latter intends it specially for the individual benefit, is required to apply the same-for the benefit of all. Fuller v. Hapgood, 39 Vt. 617, 620.
All such instances were ruled by settled results, in the law, for violations of recognized- duties, — not by the court’s mere
We are compelled, seemingly, to go elsewhere for illustrations of the principles above stated. Though there is an abundance of instances where they have been applied, there is dearth of such in the history of our own jurisprudence. Such principles axe so well entrenched, as of legal as well as equitable cognizance, that modem text-writers turn the matter off hy the mere statement that “the right to contribution may be destroyed by a subsequent contract of the parties, or by the fault of the party who causes the loss toward which he seeks contribution from his co-obligor.” 9 Cyc. 804.
Of particular significance here is the fact that both in law and equity, a cosurety is a qua.si-trustee for his associates of all special advantages he acquires from the principal debtor,— either in adversary proceedings or otherwise, — for the benefit of the bearers of the common burden, with all the duties incident to such relation. He cannot specially profit out of it. He is liable for loss proximately caused to his associates by failure to honestly and with reasonable care perform his legal duty to his associates, — to reasonably conserve his special advantages for the common benefit; this having regard to acts of omission as to facilities under his control, or commission respecting fraudulently or negligently dissipating the means of paying the principal debt, or indemnity for losses occasioned by failure to pay, — especially indemnity derived from the business regarding which the liability has its origin. The duty in this regard is as strictly legal, though based on equitable principles, as it is plainly moral.
The foregoing, somewhat lengthy discussion, is for the purpose of showing that, upon the facts appearing, vitalizing, in the absence of anything of a defensive character, the right of contribution, what is matter of defense is dependable upon definite legal principles though they may be founded in equitable considerations. The inquiry is, Was the right parted
Turning to the answer of respondent to appellant’s claim for contribution, we find that the pleader grounded the defense on, first, a claim that when John C. Koch took over respondent’s stock it was expressly mutually agreed, as part of the transaction, that the former should hold and savekarmless the latter from all liability on the guaranty, and see to it that the obligee became a party thereto; second, the claim that, in the composition proceedings in bankruptcy of the corporation, the appellant, as personal representative'of John C. Koch, obtained a secret advantage, in that, after securing respondent’s consent to a compromise of the claim made on account of payment of the guaranteed debt, he exacted and obtained $6,500 for the worthless corporate stock, as a condition of joining in the composition. Thus no fraud or wrong, in that John C. Koch failed to reasonably, as regards respondent, conserve the assets of the corporation to protect the cosureties, was pleaded or, seemingly, thought of.
The evidence disclosed many facts giving rise, as We shall see, to a further defense which might have been pleaded at the start or insisted upon at the end. The circumstance that it was not so pleaded or insisted upon, or, perhaps, thought of at all, or if thought of to some extent, was not appreciated,
The court found, specifically, in appellant’s favor as to whether there was an express contract relieving respondent, as between the two parties to the transaction, from the burden of the guaranty, — found that no such contract was made. It is insisted, on the part of respondent, in support of the judgment that such finding is against the clear preponderance of the evidence. It is legitimate to make that claim. It is not so void of merit as to be unworthy of consideration.
The court seems to have reached the conclusion that the contract alleged to have been made never existed, from the evidence of what was said, expressly, between the two Kochs when the transaction in regard to the sale and purchase of the stock took place. There was hut one witness to that who testified upon the trial, — the son. of John 0. Koch. He was an interested witness, — interested, as he came to definitely understand, in having it held that there was no contract. Ilis evidence, from first to last, was somewhat contradictory. From one viewpoint, examined apart from corroborating circumstances, quite self-destructive. The trial court heard him give his testimony on one occasion and his effort, then, to square himself with what he had testified to on a former occasion, and came to the conclusion that his evidence in the whole was not sufficient to raise the burden of proof, which was on respondent, to establish the defense of contract surrender of the inchoate right of contribution.
We are somewhat constrained to the view that too little
It seems that the findings were intended to strictly follow the claims of respondent as to a contract defense. Only an express contract was claimed. The learned trial court thought only of an express contract, expressly made, in the' technical sense. Only that seems to have been specially and plainly passed upon, as appears more clearly from the opinion filed by the trial judge than by the findings. It was not essential to the defense of express contract that it should be established to have been made by use of express language.
The findings are not altogether satisfactory on this branch of the case. If the judicial thought was either that respondent was confined to proving an express contract, in the technical sense, because only such would be efficient in any event, or because respondent elected by his pleading to stand on that, or through inadvertence or other reason he omitted to prove that a contract was otherwise made, as by an inference of fact from all the circumstances of the transaction, — that is wrong.
What particular significance, in the legal conclusion, was given to the circumstance that appellant, as a condition of participation with the estate in the composition proceedings in bankruptcy, exacted and obtained for the estate $6,500 for the worthless corporate stock, does not appear. The court freed appellant from any imputation of fraudulent purpose in failing to disclose to respondent the secret advantage obtained, and exonerated him from having made any false or fraudulent representations to induce the former to consent to compromise regardless of the secret advantage. The learned
As indicated, the. relations between respondent and appellant in reference to the guaranty were those of trust and confidence. In the very nature of the case they could not meet or deal “at arm’s length” unless by mutual consent. They met as bearers of a common burden, conceding for the time that respondent was held under the guaranty, and entitled to share fully in each other’s confidence and advantage. It was not enough that appellant stated to respondent, truthfully, what he attempted to state and therefrom the latter formed his judgment to consent to the compromise. It was not enough, that in failing to disclose the secret advantage appellant had no thought of wronging respondent. He owed to him the duty of full disclosure. Failure to perform was a manifest breach of that duty, — a fraud in law, a remediable wrong, and, as such, a defense to the claim' for contribution to the extent that respondent was .damaged, 'and, in any event, to the extent of liability to account for the full amount of the secret exaction by applying it for joint, benefit upon the loss suffered under the guaranty, — this upon settled principles heretofore discussed and declared. ■
We have reached the end as regards matters of fact, seemingly passed upon by the trial court. The general conclusion was that “under all the circumstances in this case it would be inequitable to require the said Henry A. Koch, to contrib
John C. may have taken the stock believing it was worth all he gave and been mistaken, or in so believing counted, as an element of value, on the advantage to the corporation of the continued existence of the joint guaranty, or the property have been in fact worth all he supposed and, through misfortune or causes not attributable to any want of reasonable diligence on his part, the business have become worthless, or all the results happened leading to enforcement of the guaranty without breach of duty on his part to respondent. With no contract surrender of the right of contribution, nor any breach of duty which John 0. owed to his cosurety, found, there was no legitimate, basis for the conclusion, in the letter of the decision as to facts. The case was not one for judicial arbitration, but' for judicial disposition upon settled principles. Wherein did John 0. Koch wrong respondent? Wherein is there breach of duty of the former to the latter which, under the law, constitutes a defense to the claim for contribution? The findings of fact, as indicated, are silent as to that, so far as they speak specifically. Are they thus silent, speaking inferentially and circumstantially ? If not, and an inference of fact plainly arises, prima, facie, from the specific facts found, that John C. Koch breached his duty to respondent as cosurety, and thus the default
We repeat, the circumstance, if such be the fact, that the trial court, did not appreciate the foregoing and so made no finding with reference to it, does not militate against the efficiency thereof as a defense, if such fact plainly appear. It was the most significant matter in the case after passing the contract feature, and should have been dealt with as matter of fact, following the numerous circumstances found in much detail, and others shown conclusively by the evidence which might have been found, if mere matters of detail upon which the main fact was dependable, were to be covered.
On this vital branch of the case we do not overlook the distinction between the relations of partners and stockholders to each other, and associates in each capacity and the common property. We need not do more than make this- passing reference to matters discussed in that respect in the briefs of counsel. They are not considered material because of the conclusion which seems inevitable.
At the time' respondent and John 0. had their stock deal, the two were, as clearly shown by the statement, virtually, though not directly, the owners of substantially all the corporate property. They controlled it as absolutely as if they had owned every dollar of outstanding stock, which they did in practical effect, — that is either as sole or trustee owners, th,e latter status only covering ten shares. They -could have suspended operations, paid off the indebtedness, and surrendered their corporate charter at any time. Prima, facie, they could have done so, paid all ordinary and stock liabilities,
How did John O. Koch perform his duty, mentioned, to respondent ? The fact, if it be a fact as the court found, that the latter did not protect himself at the time of the stock trade by an express definite contract as regards the guaranty, only emphasizes the trustee status of John O. to conserve his '
Eor nearly a year after the stock transaction aforesaid, John C. was sole master of the corporate situation. Then he transferred about two fifths of the stock to his sons, thus continuing in virtual control and the corporation exclusively his family affair, — evidently a convenient instrumentality for holding and investing the family property, and probably acquired for that purpose. That is the natural inference from the persistency with which John 0. urged respondent to leave the corporate business solely to him.- He continued to control the policy of the corporation till he died. On the face of things,- — no explanation whatever having been offered by evidence, — with more than twice property enough at the start to pay all liabilities, ordinary and stock as well, — he so handled the situation as to cause the default and loss. He did that in the brief period of less than three years. At the end of that time there was nothing left of the prosperous corporation with stock worth seventy-five per cent, above par, of less than two years before, but a mere wreck to be wound up a short time later in bankruptcy, where a loss of property equal to some three times the face value of the capital stock, developed. Where did all that property go to in the brief space of time? How could it have been so dissipated without a most flagrant breach by John 0. of duty to his cosurety and to the corporation as its managing officer? With no explanation of such strange shrinkage of assets, — and there is none in the record, — John C. Koch, deceased, stands, by necessary inference, convicted of such breach. With such a showing the burden was upon appellant to,make a full explanation, exonerating deceased from the apparent dereliction. The status was very much like that of a trustee, when called upon to account, charged with trust property, unquestionably traced into his hands.
It is futile to argue that John C. did not own the property
The foregoing seems so plain, the wonder is that appellant could have expected to recover on the obligation of contribution once existing, without making the suggested explanation. We must presume that this phase of the case, very plain as it seems to be and likewise its fatal character as indicated, did not occur to appellant or his counsel. They went down to the trial on the first, and second occasions and persisted here, upon the theory that the only matter of clear efficient defense pleaded was the express contract, and that the case would stand or fall on that. They were warranted in so thinking, as regards any disclosure of attitude by their adversary, or that of the court, so far as the result is grounded on any specific finding of fact clearly warranting it.
A question is raised by an appeal from the judgment taken
The whole case was removed to the circuit court on the seasonable service of notice of appeal upon the personal representative of deceased. He stood for all interests. The guardian did not appear in the county court contest as matter of right. There is no rule of court or statute or unwritten law affording such right. It was proper for such court to recognize the interests of the minors in the special way it was done, but that did not give their special representative any control of the litigation. He was not a party in interest as in Tyson v. Tyson, 94 Wis. 225, 68 N. W. 1015. However, being recognized to specially conserve the somewhat remote interests of minors, the ordinary duties of the position, as suggested in Tyson v. Tyson, supra, applied.
This was not a case where a guardian was essential to jurisdiction. The only necessary party adverse to the claimant was the personal representative. All interested in the estate, in the collective sense, really the estate itself, vitalized by such representative, was the only adverse party to the claimant in the matter of the hearing on claims, and upon him notice of the appeal from county court, as required by sec. 4033, Stats. (1898), was duly served.
The guardian ad litem was permitted to appear after the nature of amicus curice, — recognized as such by reason of
However, we quite agree with counsel for respondent, that it was competent for the guardian, by permission of the court, to waive any irregularity there might have been in failing to recognize him as a party in the appeal proceedings. Such irregularities are waivable either expressly or by conduct. Kasson v. Estate of Brocker, 47 Wis. 79, 1 N. W. 418. The jurisdictional feature of the appeal statute, as regards county court matters, is in sec. 4031, Stats. (1898), which provides that any person aggrieved by a decision of the county court “may appeal therefrom to the circuit court’... by filing a notice thereof with said county court within sixty days from the date of the act appealed from, . . . together with such undertaking as is required” by sec. 4032. Thus the prime essential, as said in Charmley v. Charmley, 125 Wis. 297, 301, 103 N. W. 1106, is the filing of the notice of appeal within the time required. Compliance even with the requirement as to filing the bond has reference to perfecting the appeal which may be done somewhat irregularly and yet be sufficient. Perkins v. Shadbolt, 44 Wis. 574.
So from any viewpoint, the judgment rendered below and affirmed here, is binding on all parties interested in the estate, including the minors represented by the guardian ad litem.
By the Gowrt. — The judgment is affirmed on both appeals.
A motion.for a rehearing was denied March 12, 1912.