Franzke v. Hitchon

Dodge, J. The contemporaneous parol understanding or •agreement that the mortgagors might remain in possession and continue sale of the mortgaged stock of merchandise, and apply to their own benefit an indefinite portion thereof, renders the mortgage fraudulent as to other creditors, and void in law. Bakeslee v. Rossman, 43 Wis. 116; Charles Baumbach Co. v. Hobkirk, 104 Wis. 488. The fact that the authority given was to consume the merchandise itself, instead of to sell it and apply proceeds to living expenses and to supplying mortgagors’ logging camps, is a distinction without a difference. The mortgagees’ duty of good faith to other creditors to use their security only for the reduction of their debt is equally breached in either case. Equally [14] the mortgage serves to stand off the creditors while the debtor consumes his property. The pretense of an understanding that the mortgagors were to keep an account of the consumption of mortgaged property, and owe the mortgagees therefor, with hope of pajdng them out of a sale of logs, did not change the situation. They already owed the whole debt, and did not change that fact by keeping a further book account of part of it that they had not paid. Their general creditors were not helped by multiplication, of evidences of the mortgage debt while the security was being consumed without being applied to that debt. Without discussing other questions, upon which it is claimed there was some conflict, it appeared without dispute that the plaintiffs’ mortgage was fraudulent and void as to creditors for the reason above stated, and direction of a verdict for defendant was proper. By the Court.— Judgment affirmed.