#### Giblin, Appellant, vs. North Wisconsin Lumber Company, Respondent.

*February 1*—

April *9, 1907.*

*■County orders: Sale: Failure of consideration: Implied warranty: Action to declare void: Tender of defense: Privity between payee and his assignee: Judgment' conclusive between defendants: Contracts against public policy.*

1. When county orders are adjudged void there is a total failure of consideration for a prior contract to purchase them.

*2.*In the sale of county orders there is an implied warranty that the seller has title and that they are not spurious, false, or counterfeit.

'8. Where both the payee named in county orders and his assignee were defendants in a taxpayers’ action to have the orders declared fraudulent and void, it was not necessary for the as-signee to tender the defense of the action to the payee in order to make the judgment conclusive as between them.

4. In such case the payee named in the orders and his assignee were in privity in the action with respect to the invalidity of the orders.

£. Where the plaintiff makes a claim hostile to each and every defendant in the suit, asserting that an instrument for the payment of money in which each defendant has or claims an interest, either as present holder or as privy to the present holder by reason of being a transferrer of such holder, is fraudulent and void and obtains judgment to that effect, the instrument must he held fraudulent and yoid in any subsequent litigation between the same parties, however they may he arrayed therein against one another.

'6. A judgment in a taxpayers’ action canceling and declaring void certain county orders is *quasi in rem*and establishes *prima fa-cie,*as against all persons, the status of such orders.

7. A contract whereby the manager of a corporation, who was also chairman of the county hoard, knowing £hat an action to have certain county orders declared void was threatened, agreed on behalf of the corporation to purchase and pay for said orders and take chances on the litigation, was *contra bonos mores*and void.

Appeal from a judgment of tbe circuit court for Sawyer county: Johk K. Paeisi-i, Circuit Judge.

*Affirmed.*

*262Tbe appellant brought this action at law upon contract for the sale of county orders of Sawyer county aggregating $2,500, and at the close of the testimony the trial judge directed a verdict in favor of the defendant, and from the judgment 'thereon dismissing the complaint the plaintiff appeals.

The county orders and the contract sued on came into existence as follows: The plaintiff was sheriff of Sawyer county in the years 1901 and 1902, and in August of the latter year made and presented to the county board of supervisors of that county a claim for “compensation and expenses incurred in pursuit of Albert Thompson, $975; A. G-. Lewis, $890; J. H. Wagner, $875; Peter Wirleck, $725; Peter Olson, $350; traveled to arrest Oharles S. Johnson, 4,000 miles, $400 ; subpoenaing witnesses in Johnson case, $150; traveled to subpoena six witnesses in Johnson case, 1,000 miles, $100; conveying John Helms, charged with selling liquor without license, $500;” some smaller items more definitely described— the whole aggregating $5,036.60. No dates of performing the alleged services were given, and the claim was not itemized further than shown. In his testimony in this action plaintiff admitted facts showing that the claim for the most part was false and fraudulent. This claim was certified by the then district attorney and verified by the plaintiff. The county board of supervisors of Sawyer county consisted of three members, among them a Mr. Peck, chairman of the board, who was strongly opposed to the allowance of the claim. On November 6, 1902, Mr. Peck resigned and Mr. Robert L. McCormick was elected in his place and held until the next spring election, when he was defeated for election. McCormick, at the time he held the office of supervisor and prior to that time, was an officer and general manager of the defendant corporation. The other two members of the county board were James Erickson, a farmer, and Oscar Holstrom, a saloonkeeper’.

After McCormick became a member of the county board,. *263and on or about December 20, 1902, tbe plaintiff and bis attorney bad a conversation with McCormick concerning tbe allowance of tbis claim at $2,500, and it was substantially agreed outside of tbe session of tbe board and between McCormick and tbe plaintiff that tbe board would allow tbe bill at $2,500, and tbat McCormick would take tbe county orders to be issued thereon and use them in tbe payment of taxes. Tbe plaintiff suggested tbat if tbe claim were allowed at $2,500 be would not get tbat much money because tbe county orders were at a discount, and that if tbe bill were allowed somebody might stop it, and McCormick thereupon informed tbe plaintiff tbat be would take tbe orders at their face because he bad taxes to pay, and that be did not think anybody would stop the issue of tbe orders, because $2,500 was a reasonable sum, and if they did be (McCormick) would take care of it and take bis chances. Tbe claim was again presented to tbe county board and allowed at $2,500 on or about January 5, 1903, McCormick not voting. Tbe county orders in question were issued in payment of said claim and delivered to an employee of tbe defendant corporation, and some days thereafter tbe plaintiff called at tbe office of tbe defendant and indorsed tbe county orders by signing bis name on the-back, leaving them in tbe possession of tbe defendant. The-defendant corporation delivered tbe county orders to tbe town treasurer, one Skogstad, in payment of part of its taxes then payable to tbe town treasurer. Tbe plaintiff and McCormick were expecting tbat some of “their enemies” might bring in-injunctions against tbe payment of these county orders or the-allowance of tbis claim and recognized that baste was necessary or at least desirable.

While matters were in tbis condition A. M. Carpenter and! tbe Chippewa Farm Land Company on or about February 25, 1903, began a taxpayers’ suit against Sawyer county, its treasurer, tbe said three members of its county board, tbe plaintiff, tbe defendant, and others for tbe purpose of enjoin*264ing the payment of said county orders or the receipt of the same for taxes, or the recognition of the same in any manner as evidence of indebtedness of Sawyer county. This suit was also directed against other county orders besides those involved in this action. Skogstad, who was a defendant and who had received the county orders in question in payment ■of defendant’s taxes, served an answer and cross-bill asking for affirmative relief against the defendant corporation, to the ■effect that such corporation be required to pay him in money the taxes which they had attempted to discharge by delivery of said county orders. The plaintiff appeared and answered in the taxpayers’ suit and the defendant corporation and the three supervisors defaulted therein. That suit was prosecuted to judgment, whereby “it was ordered, adjudged, and decreed that the following orders issued by the county clerk ■of Sawyer county on the county treasurer of said county are, and each of them is, wholly illegal and void ... to wit: , . . county orders issued ... in favor of the defendant, *William Giblin,*and numbered 12,085 to 12,091, inclusive.” There was also a perpetual injunction decreed against paying said orders or any of them, or receiving the same for taxes, or jn any manner recognizing the same as evidencing valid indebtedness of said Sawyer county. On the cross-bill of Skogstad the defendant corporation was required to repay to the county the amount of taxes attempted to be paid by the defendant by means of the illegal county orders in question, with interest from January 5, 1903, and it did so.

For the appellant there was a brief by *Franh B. Lamoreux*and *H. B. Walmsley,*and oral argument by *Mr. Walmsley.*

They contended, *inter alia,*that as the county orders were mere choses in action there was no implied warranty except that of genuineness. 15 Am. & Eng. Ency. of Law (2d ed.) 1220, 1240; *White v. Robinson,*50 Mich. 73, 14 N. W. 704; *'Otis v. Gullum,*92 U. S. 447; *Meyer v. Richards,*163 U. S. . 385, 413; *Lawton v. Howe,*14 Wis. 241, 250; *Hurd v. Hall,**26512 Wis. 112, 137; *Getty v.*Rountree, 2 Pin. 379, 386; *Lit-■tauer v.*Goldman72 N. Y. 506, 517; *Hall v.*Gonder, 26 L. J. O. P. 138. Plaintiff is not concluded by tbe judgment in tbe taxpayers’ action because no issue was there presented between bim and tbe defendant in this action. 24 Am. *&*Eng. Ency. of Law (2d ed.) 731-733; sec. 2656a, Stats. (1898) ; *Pioneer 8. & L. Go. v.*Bartsch, 51 Minn. 474, 38 Am. St. Eep. 511; *Jones v.*Vert, 121 Ind. 140, 16 Am. St. Eep. 379; *Ostrander v. Hari,*130 N. Y. 406; *Finley v.*Gaihcart, 149 Ind. 470, 63 Am. St. Eep. 292, 297, 298; *■Saveland v.*Green, 36 Wis. 612, 624.

For the respondent there was a brief by *Wichham & Farr*and *F. L.*McNamara, and oral argument by *Mr. McNamarra*and *Mr. James Wichham.*

Timlin, J.

If we assume as most favorable to tbe appellant that there was evidence tending to show that tbe defendant, through McCormick, purchased these county orders from the plaintiff and agreed to pay $2,500 therefor, there still remain many insuperable legal obstacles to the plaintiff’s recovery. One is that, the county orders so sold having been adjudged in the taxpayers’ suit fraudulent and void, there was a total failure of consideration. 1 Parsons, Cont. (9th ed.) 462, 463, and cases; *Rowe v.*Blanchard, 18 Wis. 441. Another is that in the sale of such nonnegotiable choses in action there is an implied warranty that the seller has title and that the chose is not spurious, false, or counterfeit. *Giffert v.*West, 33 Wis. 617; *Scott v.*Hix, 2 Sneed, 192, 62 Am. Dec. 458, 468, and cases in note; *Roehl v.*Volckmann, 103 Wis. 484, 79 N. W. 755. The decree in the taxpayers’ suit having been offered in evidence, it was competent evidence not only against the parties actually named in said suit, but also against all the taxpayers and citizens in said county. *State ex rel. Wilson v.*Rainey, 74 Mo. 229; *Clark v. Wolf,*29 Iowa, 197; *Sauls v.*Freeman, 24 Fla. 209, 4 South. 525; *266*Bear v. Board of Co.*Comm’rs, 122 N. C. 434, 29 S. E. 719*Scotland Co. v.*Hill, 112 U. S. 183, 5 Sup. Ct. 93. Both the plaintiff and defendant in this cause were parties to that taxpayers’ suit brought by Carpenter and another to enjoin payment of the county orders in question.

The appellant seeks to avoid the effect of the foregoing by two propositions: First, he contends that in an action brought by a plaintiff against several defendants the judgment or decree, therein is not conclusive upon two or more of said defendants in a subsequent controversy between themselves over the same subject matter; second, that where a judgment or decree is not conclusive it is not evidence at all, — citing to the first proposition 24 Am. & Eng. Ency. of Law (2d ed.) 731, 733, and cases there referred to; and citing to the second proposition *Pioneer S. & L. Co. v. Bartsch,*51 Minn. 474, 53 N. W. 764, which declares that the rule is familiar that, “as against any one except the parties and their privies, a judgment is evidence only of the fact of its recovery.” We are reminded that the lumber company, defendant, did not tender the defense of the taxpayers’ action to the plaintiff, and it is asserted that there was no privity between the defendants in that action, the *North Wisconsin Lumber Company*and *William Giblin.*Upon these last two propositions we are vinced that no tender of the defense of the taxpayers’ suit to *Giblin*was necessary; he was himself a defendant therein and controlled his own defense, and had every opportunity to prove the county orders in question valid if he was able so to do, and that in such ease the requirement of tendering the defense of an action to one liable over to a defendant has no application. *Giblin*was also in privity with the *North Wisconsin Lumber Company.*He was its vendor. The very action that he has now before the court assumes and is based upon privity by contract But the rule that an adjudication in favor of a plaintiff against two or more defendants is not binding upon such defendants is rather an exception to the rule that all parties to a decree are concluded thereby, than a rule itself. *267This exception relates to matters between codefendants which are not in themselves necessarily involved in the plaintiff’s-contention against each and all the defendants, or matters-which are not the main object and purpose of the plaintifPs--suit. But where the plaintiff makes a claim hostile to each and every defendant in the suit, asserting that an instrument for the payment of money in which each of the defendants claims an interest or has an interest, either as present holder- or as privy to the present holder by -reason of being a transferrer of the present holder, is fraudulent and void, and obtains a decree affirming his claim against, such instrument,,, that instrument must be held fraudulent and void in -any subsequent litigation between the same parties however they are arrayed against one another in such subsequent *litigation.*In *Louis v. Brown Tp.*109 U. S. 162, 3 Sup. Ct. 92, the plaintiff brought an action at law against Brown township on bonds and interest coupons of the defendant township and the defendant filed two pleas of former., adjudication. By the first' of these pleas it was averred that in an action brought by one-Hiram Hippie, the owner of real estate incumbered by mortgage given to secure the payment of these bonds, which action-was' against the trustees of Brown township, Eichard ,B. Hopple and others, and in which Eichard B. Hopple filed across-bill alleging the bonds and mortgage to be valid and praying that said bonds and mortgage might be declared to be-valid and for a decree of foreclosure, it.was adjudged that these bonds were void for want of authority in the trustees - of Brown township to issue the bonds. It was also averred that the plaintiff claimed under Eichard B. Hopple. With reference to the first plea the court said:

> “But if there had been no cross-bill, the fact that both-Hopple and the trustees were placed as defendants in the suit of Hippie does not impair the conclusive character of the decree in that case as between those parties. The present casé-is precisely analogous to that of *Corcoran v. Chesapeake & Ohio C. Co.*94 U. S. 741.”

*268It would be a rather extraordinary condition if county orders, municipal bonds overdue, or other nonnegotiable choses in action which have been by proper decree of a court of equity declared fraudulent and void could be dealt in and bought and sold thereafter, and in every case the purchaser would have to prove over again the fraudulent character or invalidity of such choses in action, and could not use the de-cree declaring the paper invalid and fraudulent to establish *prima facie*such claim. This would make judicial investigation of that proposition interminable, facilitate fraud, and result in many cases that the things in action would be held void in one lawsuit and valid in another, according as evidence was available or unavailable or the fortunes of litigation fluctuated. It may be answered, all this could be obviated by requiring the instruments to be surrendered up and canceled by the original decree. But the complainant in that case is usually satisfied if he obtains an adjudication which protects him or the corporation for which he sues and is not apt to be concerned in the protection of the general public. Where the instruments are negotiable the complainant will usually have this inserted in his decree. Where they are nonnegotiable he is apt to be indifferent. In Simonton, Mun. Bonds, § 119a, it is said that the doctrine of *Us pendens*has no application to negotiable paper, and the holder of negotiable bonds is not therefore affected by any litigation to which he is not a party, and a decree or judgment in such suit will not bind him; but if he purchase such paper after maturity and after it has been adjudged void, he is bound by the judgment. He also refers to *Stewart v.*Lansing, 104 U. S. 505, which is worth considering in this respect. Coupon bonds of the town of Lansing in New York were by commissioners executed to a railroad company pursuant to an order of the county judge acting under authority of a statute. Certain taxpayers of the town procured a writ of *certiorari*to be issued from the supreme court ,to the county judge for a re*269view of this determination, and the supreme court reversed,, and in all things held for naught, the judgment of the county judge appointing commissioners and authorizing the issue of the bonds. Pending this .proceeding, however, the commissioners issued the bonds to the railroad company, and it disposed of them to various persons, among others to Stewart,, the plaintiff. The supreme court said:

> “As between the railroad company and the town, the judgment of the supreme court reversing and annulling the order of the county judge invalidated the bonds. The judgment of reversal was equivalent between these parties to a-refusal by the county judge to make the original order. The-next inquiry is whether, on the evidence, Stewart occupied in this suit a better position than the town. That‘depends on whether the testimony was 'such as to make it the duty of the court to submit to the jury, under proper instructions, the determination of the question whether he was in a commercial’ sense the *bona fide*holder of the coupons sued for. ... Here-the actual illegality of the paper was established. It was incumbent, therefore, on the plaintiff to show that he occupied' the position of a *bona fide*holder before he could recover.”

After holding that there was sufficient evidence tending to-show that Stewart was not a *bona fide*holder, it was ruled that it was not error to direct a verdict in favor of the town. In this case the invalidity of the bonds as against Stewart was proven by the judgment of the supreme court to which Stewart was not a party, it having been ascertained that he was not in a commercial sense the *bona fide*holder of the-coupons sued on. There is some conflict and uncertainty with reference to the .admissibility of judgments in evidence against persons not parties to the judgment or privy to such parties. And the rule is by no means settled, and by no means without exception, that a judgment is not evidence in any case in which it is not conclusive evidence. It is said that

> “a record may be used to establish the fact of such judgment and the legal effect thereof, and cannot be collaterally attacked, even by strangers. The rule is stated by Sir James-*270^Stephen as follows: A11 judgments whatever are conclusive proof as against all persons of the existence of that state of things which they actually effect when the existence of the state of things so effected is a fact in issue or is or is deemed to be relevant to the issue.’ So, verdicts' and judgments on questions of a public nature, where evidence of a general reputation would be received, have been admitted,. although the parties were not the same nor in privity, but not as conclusive evidence; and, as will hereafter be shown, judgments in actions *in rem,*in so far at least as they fix the status of the particular subject matter, may not only be admissible, but may also be conclusive in a proper case, even against strangers to the record.” 2 Elliott, Ev. § 1525, and cases; *State ex rel. Atkinson v. McDonald,*108 Wis. 8, 84 N. W. 171.

Certain decrees in equity are classified as *quasi in rem,*and such decrees may be offered in evidence as against any person with respect to the particular property described therein for the purpose of establishing *prima facie*the status of that property. *Arndt v. Griggs,*134 U. S. 316, 10 Sup. Ct. 557; *Fry v. Taylor,*1 Head, 594; *Liginger v. Field,*78 Wis. 367, 47 N. W. 613. A decree declaring invalid, fraudulent, or spurious municipal obligations which are nonnegotiable but readily assignable is of this latter class. Consequently the decree in the taxpayers’ suit mentioned canceling and perpetually enjoining payment of the county orders in question was binding upon the plaintiff and defendant in this action as determining that said county orders were invalid and worthless, first, because they were both parties to the taxpayers’ suit and the matter of the invalidity and illegality of these county orders was a direct issue in that action between the plaintiff and each defendant therein; second, because they were residents and inhabitants of the county for and in whose behalf the taxpayers’ action was carried on; third, because the plaintiff and defendant were in privity in said action with respect to the invalidity of said county orders ; and fourth, because the decree in such case is *quasi in ■rem*and establishes *prima facie*as against all persons the *271status of tlie chose in action canceled up and declared fraudulent and invalid.

The appellant next contends that there was an agreement •on the part of the defendant, through McCormick, to take these county orders for better or worse; that is to say, to take them and pay $2,500 therefor, and take its chances on the taxpayers’ action which was expected or threatened. We do not think there is any sufficient evidence to establish *prima facie*such an agreement on the part of the defendant, hut if we assume that there was sufficient evidence for that purpose, then we would have a case where the chairman of the county board of supervisors and general manager of the defendant corporation, having notice that the taxpayers’ suit to cancel up the county orders in question or to enjoin the collection by the plaintiff, *Giblin,*of his claim filed with the county board for allowance was threatened, agreed to purchase said claim and pay $2,500 therefor and take his chances on the litigation, which means that he would place himself in an attitude of hostility to the suit brought in behalf of the county by its taxpayers and defeat such suit if possible. Such an agreement, if made by the corporation through the county ^chairman acting for it, would be *contra bonos mores*and void. In whatever way we look at this case the judgment of the circuit court must be affirmed.

*By the Gourt.*— The judgment of the circuit court is affirmed.