Spangler v. Kittel

Rosenberry, J. It is contended on the part of the defendants Kittel that the trial court erred in finding that [588] Florence E. Kittel was not an innocent purchaser for value; and second, that the court erred in failing to dismiss the plaintiff’s complaint for the reason that the plaintiff is not i-n court with clean hands. In addition to the facts above' stated, it appeared that in July, 1916, the plaintiff moved his family upon the North Dakota farm, taking with him his horses, machinery, and household furniture, and proceeded to make extensive and valuable improvements upon the farm, erecting buildings and making preparations for occupying the farm during the following year. That the defendant Richard C. Kittel was guilty of fraud in the making of the representations by virtue of which he secured the execution of the $12,00® mortgage by the plaintiff and the execution of the blank deed by virtue of which the defendant Florence E. Kittel subsequently took title, seems to be amply established. The serious, question in the case is whether or not Florence E, Kittel had knowledge of such fraud or of circumstances which charged her with notice. The trial court neither found,'nor is it claimed, that Florence E. Kittel had actual knowledge of the facts and circumstances connected with the exchange of the properties in question.. It is said that she knew that her husband was dealing extensively in real estate, that he was operating through several corporations which he controlled, and that the property described in the deed to her was a property involved in one of these transactions. She knew that her husband was in straitened financial circumstances and that .these facts were sufficient to put her upon her inquiry: The answer of Mrs. Kittel to this contention is that there were no circumstances known to .her which suggested a path of inquiry and that there was no path of inquiry which led to knowledge of the ultimate facts, to wit, that her husband had procured the execution of the deed through fraud and without consideration. 'Mrs. Kittel was a woman thirty-nine years of age, had been married to R. C. Kittel twelve years, and during that time had resided at Casselton, North [589] Dakota. She had been a school teacher, kept a bank account of her own, was a stockholder in the R. C. Kittel Company, knew of her husband’s connection with the R. C. Kittel Company, the Northern Trading Company, and the Alfalfa Land Company. It appears that she was a woman of more than average intelligence, well able to take care of herself in business transactions. A transaction such as this, whereby, without consideration and by means of fraudulent representations, a husband procures the title to the property of another to be transferred to his wife so that if she] be a good-faith purchaser the title will be lost to the true owner, is properly viewed with suspicion by the courts and should be very closely scrutinized on account of the great inducements and facilities afforded for the commission of fraud. Hathaway v. Arnold, 157 Wis. 22, 145 N. W. 780; Cole v. Getzinger, 96 Wis. 559, 71 N. W. 75. The deed by virtue of which she took title recited a consideration of $25,000. For this she gave $5,000 of refunding bonds of the Northern Trading Company and assumed a mortgage of $12,000. Although the deed ran from Spangler to her, she had never had any dealings with Spangler. She made no inquiries from him, or any one, as far as the record shows, as to what Spangler had received for the deed. The bonds which she gave as part payment of the purchase price were found by the court to be worthless, and were worthless except that under some contingencies, which do not clearly appear, they might have been used by Kittel in procuring a release of some of the prior liens on some of the lands traded to plaintiff. Although she came to Beaver Dam to examine the property described in the deed and ascertained the state of- the title thereto, we are of the opinion that the trial court was right in holding that under all the circumstances she was not a bona fide purchaser without notice. In reply to this contention it' is urgently and ably argued by her counsel that there was no path of inquiry open to her. It seems to us that upon very slight inquiry from any one con [590] nected with the transaction, other than her husband, the true situation would have been fully disclosed. Inquiry from Spangler, who was in the state in which she was a resident, would have elicited the fact that he supposed a deed free and clear of incumbrances was on deposit in the bank. She knew of the liens against this property or could easily have ascertained the same. Inquiry at the bank would have disclosed the fact that no such deed was there, and there was abundant opportunity for ascertaining the true facts. In November, 1916, Richard C. Kittel pleaded guilty to a charge of unlawful banking and was sentenced to confinement, pursuant thereto. If in reliance upon the statements made by her husband she has been misled to her injury, that is a regrettable circumstance, but not material here. While the court hesitated to pronounce the conduct of Kittel in procuring the deed from Spangler to be fraudulent, we have no hesitation in so characterizing it. Whether he had an active intent to defraud the plaintiff on not, the statements which he made, if not knowingly untrue, were so recklessly in disregard of the truth as to be fraudulent. As against Richard C. Kittel there can be no doubt of the plaintiff’s right to a full recovery. Having in mind the suspicion which naturally attaches to a transaction between husband and wife where a third party is deprived of his property, we are of the opinion that the trial court correctly held the defendant chargeable with notice as to the. true state of the title and that she took the same subject to all the equities existing in favor of the plaintiff. It is very doubtful, indeed, if she has lost anything of value by the transaction. The contention of the defendants Kittel that the plaintiff is not in court with clean hands is based upon the proposition that he very much overstated the value of the Reaver Dam property and that, by reason of such overstatement of value, Richard C. Kittel was unable to procure the necessary funds with which to clear the title to the Dakota prop [591] erty. We find nothing in the record to substantiate this claim. The deed was drawn and prepared by Kittel, presented to Spangler and his wife, and signed by them. There is no testimony, so far as we can find, that any one relied upon the statement as to the amount of the consideration or in any way hindered the defendant Kittel in his operations, or that it was relied upon by Mrs. Kittel. So far as we are able to ascertain there was no element of bad faith in the conduct of Mr. Spangler in relation to any of these transactions. By the Court. — Judgment affirmed.