Brothers v. Bank of Kaukauna

Pnmsy, J. 1. The evidence establishes beyond doubt or question that George W. Kelso, at the time he signed the note and mortgage in question, was of unsound mind and wholly incapable of conducting the business transaction in question. Extended comment is unnecessary to establish a conclusion so manifest, and against which respondent’s counsel were unable to offer serious argument. We have collected the evidence as to the condition of George W. Kelso, and as to what took place at the time the note and mortgage were signed, with the manner of its execution and alleged delivery, because of its important bearing upon the question of notice of his incompetency to the bank defendant. Mr. Towsley, who certified to the acknowledgment of the mortgage, and signed it as a subscribing witness, was, and for some two or three years had been, cashier and general manager of the bamk, and it is fair to assume that he possessed the intelligence, quickness of perception, experience, and sound judgment necessary to fit him for his position, and which similar bank officers usually possess. George E. Kelso owned and carried on a pulp mill, and had had dealings with the bank, and was then owing it a considerable sum of money, and in almost desperate financial straits. This note and mortgage were devised as a means of relief, either by selling it, or, it would seem, by using it at the bank; and the claim was made, acquiesced in by [394] him, as appears from his testimony, that, having been deposited in the bank immediately after its execution, it at once became collateral security for his indebtedness to the bank. Mr. Towsley testifies to goingwith George E. Kelso1 to the house of his father, George W. Kelso, with the note and mortgage already prepared, to get them executed, when it appears that George F. Kelso had never exchanged a word with his father in relation to them, and had never talked with, him on the subject at all; that he went solely at the request of George F. Kelso, and that it was not a matter in which he personally or the bank had any interest. But the fact is that the bank within less than two weeks advanced, as it is said, $1,500 in money on account of the note and mortgage, and followed it with other sums at short intervals, until the entire advance's within about sixty days reached $3,800. The condition of George W. Kelso at the time these papers were signed was quite enough to admonish any intelligent person not to undertake any business transaction with him, for he was a total wreck, mentally as well as physically; and had not as much business capacity as a mere child. It is difficult to understand how, as an acknowledging officer, Mr. Towsley could fairly certify to the acknowledgment of the mortgage. It was for a large sum, and upon the farm and homestead of one deplorably mentally incompetent. Mr. Towsley’s testimony in respect to what occurred is in some ■ material points at variance with that of three others who were present, and the fact that he asked William A. Kelso, then present, if he understood the transaction, shows at least a consciousness that there -was some propriety at least that some one connected with the family, aside from George F. Kelso, should comprehend it. He denies that he then knew or understood that George "W. Kelso was mentally incompetent, but he testifies on cross-examination that beyond a slight inclination of his head, and saying “Tes” twice, George [395] W. Kelso did not say anything; and that he spoke or could speak at all was denied by the others. The situation and the transaction just as it appeared spoke for themselves in a manner not to be misunderstood, and, if Mr. Towsley is now able to say that he did not know or understand that George W. Kelso was a mere imbecile, it is evident that the fault is his own. The facts and circumstances within his knowledge were such as to require him to stay his hand and make that inquiry which would have dispelled any doubt. The testimony of Freeman in this connection is not without weight or consequence, and is corroborated in part by the bank stamp of payment on his check. In view of all the facts and circumstances, which could not fail to have been in Towsley’s mind, as they were of such recent occurrence, as cashier of the bank he made the subsequent advances, now amounting, with interest, to over $5,000, for which the bank claims to hold and enforce the mortgage, for which no consideration whatever was ever paid or agreed to be paid to George W. Kelso or his wife. 2. Notice to an agent is notice to his principal, and it is conceded that the principal is bound and affected bj^ such knowledge or notice as his agent obtains in negotiating or attending to the particular transaction. But if the agent acquires his information so recently as to make it incredible that he should have forgotten it, his principal will be bound, although not acquired while transacting the business of the principal. The case of Walker v. Grand Rapids F. M. Co. 70 Wis. 92, is a strong case in point to show that the bank when it acquired its interest in the note and mortgage became affected with the notice Towsley had then so recently acquired at the time the papers were executed. This conclusion is supported by Dresser v. Norwood, 17 C. B. (N. S.), 466; The Distilled Spirits, 11 Wall. 366; Hovey v. Blanchard, 13 N. H. 145; Patten v. Merchants' & F. M. F. Ins. Co. 40 N. H. 375; Hart v. F. & M. Bank, 33 Vt. 252; Holden v. [396] N. Y. & E. Bank, 72 N. Y. 286; Fulton Bank v. N. Y. & S. C. Co. 4 Paige, 127. Besides, Towsley was the principal financial officer, the real and constant controller and manager of the affairs, of the bank. Indeed, it is not easy to separate him. from it, or to consider him other than the bank itself, so fully were the affairs under his management and control. It seems, in view of the particular circumstances, but proper to regard the case in the same manner as if a natural person, as Towsley himself, had acquired the note and mortgage with the knowledge he possessed; and in this connection it is material to observe that it was claimed, supported by George F. Kelso’s testimony, that the note and mortgage became immediate^ on execution collateral security for the debt he then owed the bank. We are therefore of the opinion that the bank is chargeable with notice of all the material facts of which Towsley had notice, and cannot be regarded as a bona fide purchaser of the note and mortgage. 3. It is contended that the plaintiffs are estopped from disputing the validity of the note and mortgage in the hands of the bank, and the judgment of the circuit court proceeds upon this ground. There is no ground for saying that either of them is estopped by the mortgage. William A. Kelso was not a party to it, and Margaret Kelso, the wife of the mortgagor, -was not bound by it, either as to her dower or homestead right. If the mortgage did not bind her husband, it did not bind her; and if avoided as to him, it would be avoided as to her as well. Separate and apart from her husband she could not convey or bind by deed or mortgage her dower or homestead right. Munger v. Perkins, 62 Wis. 499; Godfrey v. Thornton, 46 Wis. 677. As the bank is affected with notice through Towsley, its cashier, of all the material facts, it is in no position to insist upon an estoppel by matter in pais or an equitable es-toppel as against the plaintiffs. It cannot say that it has [397] been misled. In order that such an estoppel shall exist, there must generally be some intended deception in the conduct or declaration of the party to be estopped, or such gross negligence on his part as to amount to constructive fraud, by which another has been misled to his injury. Kingman v. Graham, 51 Wis. 233; McLean v. Dow, 42 Wis. 610; Brant v. Va. C. & I. Co. 93 U. S. 326. The fact that prior to the 1st of October, 1885, George W. Kelso signed various small checks ranging from $10 to $50, drawn on the bank, which were paid by it, is a circumstance of little or no weight as against the plaintiffs on the question of estoppel. It is not claimed that but one of these checks was so signed after the execution of the note and mortgage, and the cashier then had notice of facts and circumstances which would have justified him in refusing payment of it. The payment of $68.67 interest on the indebtedness to which the note and mortgage were collateral, by William A. Kelso, for George W. Kelso’s estate, as appears to have been the fact, was doubtless a payment made for the guardian, Hood, George W. Kelso being then alive. The facts relied on furnish, we think, no ground for holding that the plaintiffs are estopped from disputing the note and mortgage. For these reasons the judgment of the circuit court is erroneous, and should have been in favor of the plaintiffs and against the defendants. By the Court.— The judgment of the circuit court is reversed, and the cause remanded with directions to enter judgment declaring the note and mortgage in question void, and canceling the same as against the plaintiffs and their right, title, and interest in the lands described.