German American Bank v. Magill

Bardeen, J. The main point made by the appellant against the validity of the trial court’s judgment is that the chattel mortgage given by the defendants is void, because the firm was insolvent and the mortgage was given to pay the debt of an individual member of the firm. On the question of fact of whether the debt for which the mortgage was given was a firm debt or not, there is little room for controversy. On the very day the first money was received by J. M. Scherrer in his capacity as guardian, $400 of the amount 584 was used "by Ms partner to pay a firm indebtedness. The remainder was deposited in the hank, and checked out from time to time by the firm as their necessities required, mostly by the defendant William Scherrer. The manner'in which they kept their accounts cannot have a controlling influence over the actual facts. At the time the money was received by J. M. Scherrer, the firm was a going concern. Its business was established, and had been for some years. They were in apparent need of funds. They took this money and used it in their business, both partners consenting. In law it thereby became a firm debt. The facts are quite different from some of the cases in the books. This was not the case of one partner using trust funds to pay an obligation he owed the firm. J. M. Scherrer was under no obligation to contribute any more capital for the firm’s use. So, when the firm took and used this money, it became as fully and absolutely a firm debt as though it had been borrowed from a third party. Both parties treated it as such, and, in the absence of any circumstances showing that the mortgage was given with intent to defraud creditors, it cannot be impeached in this proceeding. While it may be admitted that the proof shows that the firm was insolvent at the time the mortgage was given, there is no proof that either of the garnishees had any knowledge of that fact. So far as we are able to judge, Mrs, Teiml took the mortgage in absolute good faith, and parted with her money relying upon the validity of the security she received. Such being the case, unless it be shown that the defendants had a design to defraud their creditors and that the garnishees participated in such fraudulent purpose, the transaction cannot be avoided in this kind of a proceeding. Bleiler v. Moore, 94 Wis. 385. There is no claim that any such vicious design existed, and hence the ruling of the trial court was right. By the Court.— The judgment of the circuit court is affirmed.