Case Name: Krause and wife, Appellants, vs. Reichel, Respondent
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1918-04-30
Citations: 167 Wis. 360
Docket Number: 
Parties: Krause and wife, Appellants, vs. Reichel, Respondent.
Judges: 
Reporter: Wisconsin Reports
Volume: 167
Pages: 360–367

Head Matter:
Krause and wife, Appellants, vs. Reichel, Respondent.
April 5
April 30, 1918.
Contracts: Rescission: Fraud: Sale of non-existent “good will" and “business:" Procuring appointment to agency: Discharge through appointee’s fault: Entire contract: Inadequacy of consideration: Married women: Separate property: Mortgage to secure husband’s debt.
1. In an action by K. and wife to set aside on the ground of fraud a mortgage given by the wife on her separate property to secure a part of the purchase price which K. had agreed to pay for the equipment used by defendant as a distributing agent for an oil company and for the “good will” of the business when the defendant procured the appointment of K. as his successor in the agency, findings by the trial court negativing fraud on the part of the defendant are held to be supported by the evidence, which shows, among other things, that K. knew that the agent was subject to discharge at any time by the company and that there was no “good will” or "business” which would exist after such discharge; that plaintiffs fully understood the contract with defendant; and that no claim of fraud was made until, a few months after his appointment to the agency, K. was discharged through his own fault.
2. The fact that in procuring the appointment of K. the defendant concealed his interest in the matter from the manager of the oil company, who testified that if he had known of such interest he would not haye accepted defendant’s recommendation, does not affect plaintiffs’ rights, they having obtained the property and the agency contracted for, and the agency having been lost wholly through the fault of the plaintiff K.
3. Since the plaintiffs paid or agreed to pay a gross sum for the equipment and for the procurement of the agency and it cannot be said that any definite part of that sum was for the one thing or the other, the contract is not separable.
4. Even if the equipment and the procurement of the agency, taken together, were an inadequate consideration for the payment to be made by plaintiffs, that fact alone is not a fatal defect or cause for rescission where, as in this case, the inadequacy is not so gross as, of itself, to prove fraud.
5. A married woman may give a valid mortgage on her own property in payment of or as security for her husband’s debt.
Eschweileb, J., dissents.
Appeal from a judgment of tbe circuit court for Oconto county: W. B. QuotlaN, Circuit Judge.
Affirmed.
Action in equity by busband and wife to set aside, on tbe ground of fraud, a mortgage of $2,000 upon- tbe wife’s separate property, given to secure tbe payment of $2,000, being a part of tbe consideration wbicb ber busband bad agreed to pay to tbe defendant by tbe written contract hereinafter set forth.
Tbe principal facts may be briefly stated as follows: Tbe defendant, Reichel, was for some years prior to May 25, 1915, tbe distributing agent of tbe Standard Oil Company at Shawano, Wisconsin, and vicinity, owning 'an equipment of horses, wagon, sleigh, etc., used in the business, worth about $1,000. He received a commission on all sales made and was subject to discharge at any time at tbe pleasure of tbe company. His gross receipts were about $2,600 to $2,700 a year, out of which, the expenses of keeping the horses had to be taken, the repairs on the outfit being defrayed by the company. Reichel and Krause had been friends for years, and there had been talk between them about Reichel getting Krause a job. Krause had accompanied Reichel on some business trips and had some knowledge of the business. Reichel wished to retire from the agency in May, 1915, and suggested to Krause and his wife that they buy him out, i. e. buy the equipment, and he (Reichel) would exert his influence with the Standard Oil Company to get him (Krause) appointed agent in his place. Reichel proposed that Krause pay him $5,000 for the equipment and “the business.” Both parties had the idea, apparently, that Reichel really had a good will or a business to sell. As matter of fact he had no “good will” in the legal sense, nor did he have a business to sell: he could be discharged at any time if he did not give satisfaction, and Krause knew this fact and knew that he himself would be in the same position if he were appointed agent. So while both parties'talked about the good will and the business and about the transfer of it from Reichel to Krause, both parties knew the fact that there was no “good will” or business which would exist for a day after the Standard Oil Company chose to .terminate the agency. Reichel stated to Krause what his receipts were, no inquiry was made as to the amount of the expenses, nor does that amount appear in the evidence. Reichel cautioned Krause to say nothing about the deal to others, and the parties finally agreed on $3,000 as the price of the property and “the business” as they called it, i. e. the procuring of the agency by Reichel for Krause, and had a written contract drawn embodying the agreement. This contract, after reciting Reichel’s agency and equipment and the fact that Krause desires to purchase the equipment, the good will of the .business, and secure the agency, provides that, in consideration of $3,000, to be paid $500 in cash, $500 in a seven-months note secured by chattel mortgage on the equipment, and $2,000 in notes payable at specified times in the future, secured by mortgage on certain described property (the same being the mortgage in control versy here), Reichel sells and conveys to Krause the equipment and the good will of the business, and agrees not to go into the business of selling oil in Shawano or vicinity as long as Krause remains in the business. The contract further states that no representations or warranties about the business, property, or income have been made except those set out in the contract and that the average gross income of the business for the immediately preceding year has been $220 a month. The contract further provides that if Reichel should be unable to obtain the agency after exercising due diligence to do so, the contract should be void, but that the contract should not in any manner be contingent upon the ability of Krause to keep the agency. This contract was executed by Reichel and Krause, Mrs. Krause being present at the time. Reichel immediately went to Milwaukee to see Mr. Nichols, the manager of the Oil Company, who had charge of the territory in question, and recommended Mr. Krause for appointment in his place. Nichols wanted to see Krause, and Reichel returned to Shawano and went back to Milwaukee with Krause. The result of the second interview was that Krause was appointed, and the deal between Reichel and Krause was closed and the mortgage in question executed and delivered. Reichel said nothing to Nichols about his arrangement with Krause, and Nichols testified that if the company had known of this contract they would not have taken ReicheVs advice. Krause took over the equipment and the business about June 1st. His gross monthly commissions on the average considerably exceeded the amount named in the written contract. Four months after the transfer. Krause paid Reichel $150 to apply on the $500 note. Krause was discharged at the end of October because he was short in his accounts. The trial court made findings of fact negativing all claims of fraud or misrepresentation on the part of Reiehel, and finding tfiat both Krause and Ris wife knew what they were buying, understood tbe business, and received all they bargained for. Judgment dismissing tbe complaint and affirming tbe validity of tbe notes and mortgage in question was rendered, and tbe plaintiffs appeal.
For tbe appellants there was a brief by Dillett & Winter of Sbawano, and oral argument by P. H. Martin of Green Bay.
For tbe respondent tbe cause was submitted on tbe brief of B. G. Glasson of Oconto.

Opinion:
Winslow, C. J.
There was' sufficient evidence to support tbe findings of fact of tbe trial court negativing fraud on tbe part of Reiehel. Tbe statement in tbe written agreement that there have been "no representations, warranties, or guaranties with reference to said business, property, or otherwise, or tbe income therefrom, except those herein fully set out," except that tbe average gross income of tbe business for tbe year has been $220 a month, may not perhaps be conclusive on tbe plaintiffs, but it is certainly of much weight when it is remembered that tbe plaintiffs were sui juris, of average intelligence and brightness, and that tbe contract was read over, to them and explained to them before signature, and that they made no claim of any deception or fraud until they bad, through their own fault, lost tbe business.
It appears by tbe testimony of tbe general agent, Mr. Nichols, that be would not have accepted Reiehel's advice as to tbe appointment of Krause as bis successor bad be known that Reiehel bad attempted to sell tbe business by bis contract with Krause, and tbe fact that Reiehel concealed tbe attempted sale from Nichols is much relied on as a fraud upon Krause and bis wife. We are not able to see, however, that this fact in any way concerns tbe plaintiffs or affects their rights. They received just what they bargained for and knew they were bargaining for. They lost tbe agency, not by reason of any act of Reichel's, but by reason of their own inefficiency or worse in the condiict of the business. There is no proof or intimation that the company would have discharged Krause so long as he was rendering faithful and satisfactory service, even had the prior contract with Reichel been discovered after he had entered on his work. Reichel's lack of candor and frankness with the company does not seem to have in any way affected the situation or the plaintiffs' rights at any time. Practically the only complaints the plaintiffs now have to make in their testimony is that Reichel had in fact no business to sell and that he ought to have told them that Krause would not be able to transact the business and hold the job. As we have seen, all the parties understood that Krause could be discharged at any time if his work was not satisfactory, and, knowing this, they necessarily knew that there was no "business," in the ordinary sense of the word, to sell. As to the second contention just named, the fact seems clear that Krause had full information as to the nature of the business and the demands which it made on business capacity.
It may well be that the plaintiffs made a poor bargain, indeed this seems fairly well proven, but they made it with their eyes open and were not defrauded. They paid or agreed to pay a gross sum for the personal property and for the effort of Reichel to procure the agency for them. It cannot be said that they paid any definite part of the consideration for this effort or influence and another definite part for the personal property; in other words, the contract is not separable. There was a tangible consideration (i. e. the equipment) and an intangible one, namely, the successful exertion of influence to obtain the agency for Krause. Taken together they may be inadequate, but mere inadequacy of consideration alone is not a fatal defect or cause for rescission unless the inadequacy be so gross as to prove fraud by its very inadequacy under the circumstances, and we cannot say that the present is such a case. Rust v. Fitzhugh, 132 Wis. 549, 112 N. W. 508. _
It was entirely competent for Mrs. Krause to give a valid mortgage on her own property in payment of or as security for her husband's debt. Fitzgerald v. Dunn, 112 Wis. 37, 87 N. W. 803.
By the Gourt. — Judgment affirmed.