Case Name: Gardinier vs. Kellogg, and others
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1861-06
Citations: 14 Wis. 605
Docket Number: 
Parties: Gardinier vs. Kellogg, and others.
Judges: 
Reporter: Wisconsin Reports
Volume: 14
Pages: 605–609

Head Matter:
Gardinier vs. Kellogg, and others.
A being indebted to B & Co. on a draft over due, it was agreed between him and them and his attorney, who was prosecuting a suit to obtain an assignment to A of certain notes and a mortgage for nearly the same amount as the draft, that the attorney should proceed to compel such assignment, and then collect the notes and apply the proceeds to the payment of the draft, which was left with him for that purpose by the creditors. Sold, that the transaction was not a sale of the notes to B & Co., and that after they were assigned to A, the latter could maintain an action in his own name for the foreclosure of the mortgage. A, being the legal owner of the notes, may be regarded as a trustee of an express trust, within the meaning of the statute.
The complaint of A for the foreclosure of said mortgage, alleged that he was the owner and holder of the ¿otes, and the answer was that the notes had been transferred, before suit brought, to B & Co., and that A had no interest in them. Held, that the objection that the complaint contained, no averment of the trust, and that there was consequently a variance between the pleading and the proof, (if good at any time,) comes too late in this court.
If that averment were necessary, and the objection for the variance had been taken at the trial, the court should have ordered an immediate amendment, or have found the facts in accordance with the evidence.
Proof having been given on the trial that A had stated that he had sold the notes to B & Co., and that they owned them, the attorney of A, who was present at the supposed sale, was a competent witness, for the plaintiff, to show the real nature of the transaction.
APPEAL from tbe Circuit Court for Milwauleee County.
Action commenced in February, 1860, to foreclose a mortgage given to secure tbe payment of two notes, for $250 ea°k’ ma(^e payable to one Scott, and alleged to have been assigned by bim to one Stone, and by Stone sold to Butler, an(} foy Butler and Stone assigned to tbe plaintiff. The complaint averred that the plaintiff was the holder and owner of the notes. Answer, that the notes and mortgage had been transferred and delivered, before the commencement of the suit, to Hoard & Sons, a firm in New York, who were still the sole owners thereof, and that the plaintiff had not, at the time the suit was commenced or the answer filed, any interest in the notes.
On the trial, the defendant testified that the plaintiff told him before the suit was commenced, that he had sold the notes to parties east, and after the suit was brought told him that Hoard & Sons owned the notes; that he then wrote to Hoard & Sons stating that he was informed that they were the owners of the notes, and requesting an extension of the time of payment, to which they replied that they needed the money, but were disposed to accommodate him, and referred the matter to their attorney, L. Hub-bell, Esq., of Milwaukee. The letter and reply were produced by the witness. Mr. Hubbell, as a witness for the plaintiff, testified, that in the spring of 1869, one of the firm of Hoard & Sons called upon him with a draft (which the witness exhibited) for about $490, payable to their order, drawn by the plaintiff Gardirder and past due; that the witness had been employed by Gardirder in a suit against Stone and Butler, and a judgment had been obtained, determining the right of Gardirder to the notes and mortgage which are the subject of this suit, and directing an assignment of them by Stone and Butler to Gardirder; that it was agreed between Hoard and Gardirder and the witness, that the witness should take the draft and hold it, and should go on and enforce the judgment against Stone and Butler, and apply the proceeds of the notes (less witness’s lien for $50) to the payment of the draft; that the notes and mortgage were after-wards assigned by Stone and Butler to Gardirder in pursuance of the judgment, and were placed in the witness’s hands, which was all the assignment of the notes and mortgage which had ever been made to the Hoards, to the knowl edge of tbe witness. This testimony was objected to by tbe defendant, and tbe objection overruled. On cross tion, Mr. Hubbell said: “ Tbe Hoards became tbe owners of tbe mortgage before tbe commencement of this suit, so far as tbey became tbe owners at all. I told Mr. Kellogg tbat tbe Hoards were tbe parties interested in this mortgage; perhaps I told bim.tbey were tbe owners of it.” Finding and judgment for tbe plaintiff; to wbicb exceptions were duly taken.
Goón, Cotton & Cay, for appellants,
argued tbat tbe testimony of Mr. Hubbell bad relation to a transaction between tbe plaintiff and third parties, and was inadmissible; tbat if tbe plaintiff sought to maintain tbe action on tbe ground tbat be was trustee of an express .trust, be should have so averred bis title in tbe complaint; and tbat when a negotiable note is delivered by tbe bolder to bis creditor or tbe creditor’s attorney, with power to collect and apply the proceeds to tbe payment of a liability already due, and of wbicb payment has been demanded, it is not a delivery as a pledge contingent upon a condition in futuro, but is a valid assignment of tbe note, and passes title pro tanto; the party receiving it becomes tbe holder, and’ entitled in law to receive tbe contents. Byles on Bills, 2.
Levi Hubbell, for respondent:
There was no transfer or delivery of tbe notes and mortgage to tbe Hoards; no price paid pr agreed to be paid, and therefore no sale or change of property. Cardinier was to collect tbe notes and apply tbe net proceeds on bis debt to tbe Hoards. If tbe Hoards became tbe equitable owners, Cardinier took the legal title for-their use, and was a trustee of an express trust. It was not necessary tbat tbe complaint should aver that be held tbe notes and mortgage as a trustee. Crinnell vs. Schmidt, 2 Sandf., 706 ; Bright vs. Currie, 5 id., 483 ; People vs. Norton, 5 Seld., 176; Merritt vs. Seaman, 2 id., 168.

Opinion:
By the Court,
DixoN, C. J.
Tbe action was properly instituted in tbe name of tbe present plaintiff. There was no sale of tbe notes and mortgage to tbe Hoards. Tbe parties ^ ^ ^en(^ a sa^e> ^he transaction was in tbe nature of pledge, and differed from the ordinary contract only in this, that the pledgees had no right to sell, but, through their attorney, who was likewise the attorney of the pledgor, were to proceed to the collection of the notes, and to apply the proceeds in payment of their debt. All pledges are not necessarily subject to the same incidents or conditions. The contract may be modified by the express stipulation of the parties, and where such stipulations are made, they must govern. In case of the pledge of a chose in action it is competent for them to agree that it shall be collected and the moneys realized appropriated to the satisfaction of the principal demand. And such, we think, was the nature of the agreement in this case. Hubbell, the mutual attorney and agent was to collect the notes and mortgage, and, after deducting the sum due to himself, apply the proceeds to the payment of the draft which he likewise held. This was not a transfer of the ownership of the notes and mortgage to the Hoards. They acquired a special property or lien, which was no doubt available, if not at law certainly in equity; but the general property or legal title remained in the plaintiff. There was to be no discharge or abatement of his liability upon the draft until the money was realized. The notes and mortgage were a mere security, and if, at any time, he had paid the draft, they would have become his absolute property without any further act, which shows that his legal title was never divested. It is not true, therefore, that he has no interest in this action. He is interested in the notes and mortgage as much as ever, for until they are collected, his liability to pay the draft continues. It was doubtless contemplated that the collection would go on in his name, and being the legal owner he may properly be denominated a trustee of an express trust within the meaning of the statute.
The objection that the complaint contains no averment of the trust, and consequently that there was a fatal variance between the pleading and proofs — if such objection would have been good at any time (vide 2 Sandf., 706; 5 id., 483; 2 Seld., 168; and 5 id., 176) — comes too late. No such ground of objection was taken in the court below. The de fendant went to trial and rested bis defense upon an endeav- or to sbow that tbe plaintiff bad no sucb interest as enable him to maintain tbe action. Were tbe averment necessary, and bad tbe objection been taken at tbe trial, there can be no doubt that tbe court would have ordered an immediate amendment, or have found tbe fact in accordance with tbe evidence, since it could not have been claimed that tbe defendant was actually misled to bis prejudice by tbe proof of a fact wbicb be bad set up and insisted upon in bis answer. B. S., cbap. 125, secs. 33, 34.
Tbe testimony of tbe witness Hubbell is not obnoxious to tbe charge of hearsay, or of relating to transactions between tbe plaintiff and third parties wbicb could not affect tbe rights of tbe defendant Tbe defendant, in support of bis answer, bad testified to tbe admissions of the plaintiff that be bad sold tbe notes and mortgage to Hoard & Sons. Tbe admissions were but presumptive evidence of tbe facts admitted, and as sucb were liable to be explained and rebutted. Tbe witness was present at the supposed sale, and bis testimony went directly to tbe facts themselves concerning wbicb tbe defendant sought to raise a presumption by force of tbe admissions. It was. clearly competent for tbe plaintiff, by this original evidence, to show tbe real nature of tbe transaction by way of explaining and repelling tbe presumption arising from tbe admissions.
The judgment of tbe circuit court is affirmed, with costs.