87 N.W.2d 792
Supreme Court of Wisconsin.January 6, 1958 —
February 4, 1958.
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APPEAL from a judgment of the circuit court for La Crosse county: LINCOLN NEPRUD, Circuit Judge. Reversed.
Claim against the receiver of a corporation in the process of liquidation.
On or about March 10, 1953, A. C. Klein loaned to Edwin B. Meyer and his wife, Monica C. Meyer, the sum of $3,000. The Meyers executed and delivered to Klein a promissory note payable within one year after date with interest at the rate of five and one-half per cent per annum. To secure said note the Meyers executed to Klein a chattel mortgage on certain dredging and sand-and-gravel equipment. Some time thereafter Mr. Meyer died and his estate is being probated in the county court of La Crosse county. Leonard F. Roraff was appointed as executor of his estate. Roraff had an opportunity to sell some equipment to a new corporation which had just been incorporated or which was in the process of incorporation. He knew that Klein claimed the right under the chattel mortgage to take possession of the property described therein as the note was in default. Accordingly on May 6, 1956, Roraff, as executor, and Klein entered into an agreement whereby Roraff was authorized to sell the property described in the chattel mortgage. Klein authorized the sale in consideration of the agreement by Roraff to deposit in a separate fund an amount sufficient to pay the balance due on the note. The agreement recited that there was a dispute as to whether the equipment was owned by Meyer personally or by the La Crosse Sand
Gravel Company, a Wisconsin corporation, of which Meyer and his wife were the principal officers and stockholders.
On May 7, 1956, the stockholders of said corporation adopted a resolution to dissolve. Roraff was appointed as receiver of the corporation to conduct the liquidation. After qualifying as such receiver he gave notice to creditors which fixed a final date before which claims must be filed. On August 6, 1956, Klein filed a claim against the corporation for the unpaid balance of the note and on the same date he
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filed a like claim against the estate of Edwin B. Meyer, deceased. The receiver objected to the claim filed with him on the ground that the claim was not an obligation of the corporation but was an obligation of Meyer and his wife. Klein then filed a verified document called an answer to the objection to his claim. For convenience we will refer to the document as the complaint.
In brief the complaint alleged that when Meyer contacted the claimant for the loan he represented that he was the lawful owner of certain equipment which was then subject to a chattel mortgage to the First Credit Corporation of La Crosse and that Meyer would give Klein a chattel mortgage on the same equipment to secure the loan; that in reliance upon said representations the claimant advanced to Meyer the sum of $3,000 and Meyer and his wife executed the promissory note for $3,000 together with a chattel mortgage securing the same; that the loan was made by means of two checks, one for the amount of the mortgage to the First Credit Corporation, and the balance to Meyer; that claimant would not have made the loan to Meyer and his wife without a chattel mortgage on the equipment and had no knowledge that the equipment was owned by the corporation, if such is the fact; that claimant is now informed that the money which was loaned to Meyer was actually turned over to the corporation and used for its benefit, and that payments made on principal and interest on the note were made out of funds of the corporation; that the loan was in equity made to the corporation and that the court should reform the promissory note and mortgage by making them the obligation of the corporation and that claimant have a prior claim to the proceeds from the sale of said equipment. Attached to the complaint were copies of the note and chattel mortgage and a copy of the agreement executed by Klein and Roraff as executor of the estate of Edwin B. Meyer, deceased.
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In an answer filed by the receiver he denied the material allegations of the complaint upon information and belief. Further in the answer the receiver pleaded certain legal defenses. On November 5, 1956, the receiver examined Klein adversely before a court commissioner. Thereafter the receiver filed notice of motion for summary judgment based upon his supporting affidavit. The affidavit included extracts from the adverse examination of Klein, together with conclusions which he claimed entitled him to summary judgment. The receiver’s motion was granted and on July 9, 1957, judgment was entered dismissing the claim. Claimant appealed from said judgment.
For the appellant there was a brief by Edwards Hafner
of La Crosse, and oral argument by Roger W. Hafner.
For the respondent there was a brief by Johns, Roraff, Pappas Flaherty of La Crosse, and oral argument b Leonard F. Roraff.
BROADFOOT, J.
In its memorandum decision the trial court stated that no grounds for reformation of the contract existed as a matter of law and therefore the claimant was entitled to no relief. The affidavit of the receiver in no way negatived the material allegations of the complaint. It did not deny that Meyer had mortgaged the property to the First Credit Corporation of La Crosse; that he represented that he was the lawful owner thereof; that the proceeds were used for the benefit of the corporation; and that the funds in addition to those used to pay the chattel mortgage to the finance company were turned over to the corporation. Nor did the affidavit explain how Roraff as executor of the estate could sell the corporate property. Mere denials of the material allegations in the complaint would not have been sufficient. To entitle the receiver to summary judgment it was his burden to show by evidentiary facts, including documents,
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that his denials or defenses are sufficient to defeat the claimant. He has failed to do so.
It is apparent that there are questions of fact to be determined. The first fact to be determined is whether Meyer owned the property or whether the corporation owned it. From the record before us it is impossible to determine who did own the equipment described in the mortgage. Klein was in the insurance business. In connection with his adverse examination the receiver submitted certain exhibits which were insurance policies and invoices for insurance policies issued by Klein to the corporation. The receiver contends that this establishes the fact that the equipment was owned by the corporation and that Klein had knowledge thereof. The policies and invoices do not so show. The policies were workmen’s compensation policies and the invoices were for insurance of a dredge in the name of the corporation. That dredge is not described in the chattel mortgage and we cannot determine from the record that the equipment described in the chattel mortgage was insured in the name of the corporation.
It must also be determined whether or not the proceeds of the loan from Klein were used for the benefit of the corporation. If the equipment was actually owned by the corporation and the proceeds were used to redeem its property and for the benefit of the corporation in other ways, the question of whether the claimant is entitled to equitable relief by way of subrogation or restitution on the theory of unjust enrichment might then arise. A determination of the facts might give rise to an estoppel on the part of the corporation to deny that Meyer had the right to pledge the equipment for a loan. Fair consideration of the question of reformation cannot be determined from the record submitted. If the mortgaged equipment actually belonged to Meyer the question of reformation will drop out of the case. If it develops that the mortgaged equipment was owned by the corporation
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it may well be that both Meyer and Klein were mutually mistaken in thinking that the equipment belonged to Meyer.
The receiver further contends that he is entitled to summary judgment because the claimant filed no counteraffidavits in opposition to the motion. In the case of Hermann v. Lake Mills, 275 Wis. 537, 82 N.W.2d 167, the plaintiffs filed no affidavits in opposition to a motion for summary judgment. In that case by resort to the pleadings we held that there was at least one contested material issue of fact to be litigated which made it error to enter a summary judgment. That is true in this case.
The receiver further contends that by filing a claim against the estate of Edwin B. Meyer, deceased, Klein ratified the note and mortgage as made, and therefore would have no right to reformation. We cannot agree. The last date for filing claims against the estate does not appear in the record. However, the claimant was under the necessity of filing his claim in the estate as well as in the liquidation proceeding or be barred. If he exhausted his remedy in one court it would be too late for him to file a claim in the other proceeding. The claims were against separate parties and we see nothing inconsistent in that regard.
Under all the circumstances we believe material issues of fact are presented by the record that must be tried before legal and equitable principles can be applied and a proper result reached.
By the Court. — Judgment reversed, and cause remanded for further proceedings consistent with this opinion.
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