JESKE v. HOTZ MFG. CO., 233 Wis. 500 (1940)

290 N.W. 208

JESKE and another, Plaintiffs, vs. HOTZ MANUFACTURING COMPANY and another, Defendants. [Two appeals.]

Supreme Court of Wisconsin.December 7, 1939 —
February 13, 1940.

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APPEAL from a judgment of the circuit court branch of the county court of Shawano county: C. B. DILLETT, Judge Affirmed in part and modified in part. Record remanded with directions.

Action begun by Frank Jeske and Lyman L. Aderman, coplaintiffs, for a declaratory judgment determining their respective rights in and to certain timber lying and being upon certain real estate in Shawano county, under and by virtue of the following written documents, designated on the trial as Exhibits 1, 2, and 3.

Exhibit 1.
“Memorandum of agreement by and between Matt Stoehr of Gresham, Wis., party of the first party, and Hotz Manufacturing Co. of Shawano, Wis., party of the second part.

“Witnesseth: The said party of the first party hereby sells, transfers and sets over to said party of the second part all the merchantable timber now standing, lying, or being on the northeast quarter of the northwest quarter, the northwest quarter of the northwest quarter, and the southeast quarter of the northwest quarter, of section three, township twenty-eight, range fourteen east, Shawano county, Wisconsin, being one hundred twenty acres more or less according to government survey, for the sum of five hundred and no/100 dollars ($500) in hand paid by said party of the second part the receipt of which is hereby confessed and acknowledged.

“It is mutually agreed by both parties that said second party shall not cut any timber that will not measure four inches or larger in diameter and that said second party shall have the right to enter upon and remove the said timber at any time within two years from date hereof.

“Said party of the first part for himself and his heirs or assigns says that he has good title free and clear of any incumbrances of any kind to the within-described lands from which he is now selling this merchantable timber and that he will and does guarantee to hold said second party free from any claims of any kind which might arise out of removing timber from incumbered lands.

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“Further: It is mutually agreed that said second party in cutting and removing the timber shall have the right to leave the limbs and tops cut from the trunks of trees as well as any brush cut in making roads, etc., as it may fall on said lands and shall not be required to burn or pile up any part thereof.

“Party of the second part agrees to give said first party a release of any rights gained by this instrument as soon as it has removed the said timber purchased and in any case before or at the expiration of the two years’ time for removal herein stipulated.

“Signed and sealed this 3d day of November, 1937.

“MATT STOEHR.”

Exhibit 2.

“Shawano, Wisconsin, November 3, 1937.

“Frank Jeske, Leopolis, Wis.

“Dear Sir: We hereby offer to pay you the following prices for cutting and delivering all the merchantable timber now standing, lying, or being on the northeast quarter of the northwest quarter, the northwest quarter of the northwest quarter, and the southeast quarter of the northwest quarter of section three, township twenty-eight, range fourteen east, Shawano county, Wisconsin.

“Popple $5 per cord of 128 cubic feet. Jack pine $5 per cord of 128 cubic feet. White pine $5.50 per cord of 128 cubic feet. Basswood $5.50 per cord of 128 cubic feet. All hardwood $4.50 per cord of 128 cubic feet. All to be cut 12 feet long with not to exceed 8% 8′ lengths 6″ in diameter and over at the small end and all to be cut 2″ to 4” longer than the length intended and cut so as to make reasonably straight boxwood and better logs. This is to be paid to you as follows:

“On the 15th of each month we will pay you $3.25 per cord for all delivered at our yard in the city of Shawano, Wis., the previous month which includes the delivery charges by any truckman you may hire.

“When all is cut and delivered we will pay the balance due on the 15th of the month that pays for the last delivered.

“You are to cut the popple down to 4” diameter and that part between four inches and 6 inches in diameter you are to peel and deliver to Green Bay, Nekoosa, or some other point and you then are to pay us $.50 per cord as our part. The hemlock we will sell to the Wolf River Paper Co. here

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in Shawano you to so deliver it. It is distinctly understood that we have purchased this timber and have paid cash for it in the amount of $500 and this money $500 will and is to be deducted out of the amount that may be due you when all is delivered, in other words this money is to come back out of the prices per cord we are to pay you.

“You are to try to finish cutting, delivering and peeling, etc., during the winter and spring or summer of 1938 but if that becomes impossible for good reasons then you are to be given one year more time in which to accomplish the work.

“This offer is made in duplicate and if agreeable please sign your acceptance below when it shall constitute a contract between us, you to retain one copy and return the other copy for our use.

“Yours very truly,

“HOTZ MANUFACTURING CO.

“O. L. HOTZ (Signed).

“Signed and accepted this 3d day of November, 1937.

“FRANK JESKE (Signed).”

Exhibit 3.

“Shawano Wisconsin, April 11, 1938.

“For one hundred fifty dollars, I Frank Jeske, Sr., hereby sell, assign and agree to have possession delivered to Lyman L. Aderman of the city of Shawano, Wis., all the timber of every kind and nature, that is four inches and over on the stump, except the poplar, that is located and growing on the following described land. The northeast quarter of the northwest quarter, the northwest quarter of the northwest quarter, and the southeast quarter of the northwest quarter, all of section No. 3, township No. 28, range No. 14 east, Shawano county, Wis.

“Terms are as follows: One hundred dollars to be paid on this 11th day of April, 1938, and the balance to be paid on or before three weeks from this 11th day of April, 1938.

“(Seal) FRANK JESKE, SR. (Signed).

“(Seal) LYMAN L. ADERMAN (Signed).

“Witness: W. J. DOLAN (Signed).”

The trial court in substance found that prior to November 3, 1937, Jeske had looked at the Stoehr timber and had orally agreed with Stoehr to purchase the timber for $500;

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that Jeske arranged to have Stoehr meet him in the office of the Hotz Manufacturing Company in Shawano; that on November 3, 1937, Stoehr and Jeske met at the Hotz office with Mr. O. L. Hotz; that during this meeting, O. L. Hotz personally drafted agreements Exhibits 1 and 2 (set out above), and that after said agreements were executed, O. L. Hotz paid Stoehr the sum of $500; that it was the intention of the defendants Hotz Manufacturing Company and O. L. Hotz and the plaintiff Jeske that the two instruments (Exhibits 1 and 2) should constitute a sale of the timber to Jeske and that Exhibit 1 was so drawn as to appear to transfer title to the timber to the Hotz Manufacturing Company for the purpose of affording security to said company for the $500 paid to Stoehr together with interest thereon, and that Exhibit 2 was drafted as it was for the purpose of further carrying out said intention and also providing that the Hotz Manufacturing Company might purchase such of the timber as it wanted at fifty cents less than the market value per cord at the time the instruments were executed; and that the prices which defendant Hotz Manufacturing Company agreed to pay Jeske, as stated in Exhibit 2, were at the time of the execution of said instrument fifty cents per cord less than the market value. The court further found that under agreement Exhibit 2 there was to be deducted and retained out of every cord of poplar delivered the sum of $1.75 and that there was so deducted, to be applied to the repayment of the $500 paid by Hotz to Stoehr and interest on account of poplar delivered, the sum of $149.24; that there was to be deducted and was deducted for each cord of white pine delivered the sum of $2.25; that there was to be deducted and was deducted for each cord of birch delivered the sum of $1.25; that the total amounts thus far deducted and retained by defendant Hotz Manufacturing Company was the sum of $198.48; and that this is the only amount paid by Jeske to apply on the $500 and interest due Hotz Manufacturing Company.

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The court further found that on April 11, 1938, Jeske sold to Aderman all of the timber four inches or more in diameter on the stump, excepting the poplar, executing for that purpose Exhibit 3 (set out above), and that Aderman thereupon paid Jeske the sum of $150. The court further found that Aderman had read Exhibit 2 prior to or at the time he purchased the timber from Jeske and that by having read Exhibit 2, it constituted notice to Aderman that the Hotz Manufacturing Company had a mortgage interest in the timber which Aderman had purchased and that he made said purchase with knowledge of the rights of the Hotz Manufacturing Company.

The court further found that Aderman entered upon the premises and commenced cutting, hauling, and selling the timber then remaining, and that “it appears from the undisputed evidence that at the time that said Lyman L. Aderman purchased said timber [from Jeske on April 11, 1938], no timber within the specifications described in Exhibit 2 remained upon said lands except poplar;” that Aderman sold and delivered to the H. Iwen Box Veneer Company at Shawano certain birch which was not within the specifications described in Exhibit 2, and that the said purchaser is holding a part of the purchase money; that in July, 1938, O. L. Hotz, upon learning that Aderman was cutting and selling timber from said premises, called upon Jeske and ordered him to cut no more timber from said premises and informed him that his contract was at an end. The court further found that the sale of said timber by Jeske to Aderman seriously diminished the value of defendants’ (Hotz Manufacturing Company and O. L. Hotz) security with the result that the timber now remaining is inadequate security therefor.

Among other conclusions of law, the court found that the agreements (Exhibits 1 and 2) should be construed together, and so construed constitute and were intended to be a sale of all the merchantable timber four inches or more in diameter

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on the premises in question to the plaintiff Jeske, and a mortgage from Jeske to defendants Hotz Manufacturing Company and O. L. Hotz on the same timber to secure the repayment to defendants of the sum of $500 with interest at seven per cent per annum, and a profit of fifty cents per cord on all poplar, jack pine, white pine, basswood, and hardwood coming within the terms of Exhibit 2; that Jeske thereby became the owner of all of said timber and defendants thereby became mortgagees; and that neither Jeske nor defendants have done any act or acts which has worked a forfeiture of any of their rights under the terms of the instruments referred to as Exhibits 1 and 2 except that waste committed by the plaintiff Jeske may, on proper application, be sufficient to warrant the appointment of a receiver.

The judgment provides: (1) That Jeske is the owner of all the timber four inches and over upon the real estate in question subject to a mortgage thereon in favor of the defendants in the sum of $500 with interest at seven per cent less the sum of $198.48 paid as principal and interest; (2) that Aderman purchased said timber (from Jeske) subject to the mortgage of the defendants; (3) that the contract entered into between Jeske and defendants required Jeske to deliver to the defendants all the remaining standing timber within the calls of the contract, and required defendants to receive said timber and pay therefor in the manner provided; (4) that defendants have no interest other than a mortgage interest upon the timber so purchased by Jeske, and that neither Jeske nor defendants have breached the contracts existing between them, and both are in full force and effect.

Appellant Aderman appeals from that part of the judgment which adjudges that the timber he purchased from Jeske was subject to, a mortgage in favor of the Hotz Manufacturing Company and O. L. Hotz in the sum of $500.

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Appellants Hotz Manufacturing Company and O. L. Hotz appeal from that part of the judgment which adjudges that Jeske is the owner of all of the timber four inches and over upon the property in question subject to a mortgage in their favor in the sum of $500, and also from that part of said judgment which provides that said defendants have no interest other than a mortgage interest upon said timber and which further provides that the contract entered into between Jeske and said defendants required Jeske to deliver, under the terms of said contract, all the remaining standing timber within the calls of the contract, and required defendants to receive said timber and pay therefor in the manner provided. Defendants have given notice of review as to the part of the judgment appealed from by Aderman, also for a review of certain findings of fact and conclusions of law.

For the plaintiff, Lyman L. Aderman, the cause was submitted on the brief of Eberlein Eberlein of Shawano.

For the defendants there was a brief by Fischer, Brunner Strossenreuther of Shawano, and oral argument by Ovid Strossenreuther.

MARTIN, J.

Both appellants contend that the court erred as to certain findings, conclusions of law, and certain provisions of the judgment. It is apparent that the written instruments, Exhibits 1 and 2 set out in the foregoing statement, are ambiguous. Aided by oral testimony, the trial court held that said instruments should be construed together and so construing them, held that it was the intention of the parties thereto that said instruments should constitute a sale of all the merchantable timber four inches and over in diameter to the plaintiff Jeske and a mortgage from Jeske to defendants Hotz Manufacturing Company and O. L. Hotz on the same timber to secure payment of the $500 which defendants had advanced to Stoehr, with interest at

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seven per cent per annum, and a profit of fifty cents per cord on all poplar, jack pine, white pine, basswood, and hardwood coming within the terms of Exhibit 2.

Appellants Hotz Manufacturing Company and O. L. HOTZ contend that the court erred in finding that said exhibits construed together passed the title from Stoehr to Jeske and gave them only the interest of mortgagees, their contention being that under agreement (Exhibit) 1, they became the sole owners of the timber therein described and that under Exhibit 2 it gave Jeske only the right to cut and deliver the timber described in said exhibit at the prices therein stated. We think the testimony and the documents themselves show that the purchase of the timber from Stoehr was in fact made for Jeske, that the Hotz Manufacturing Company and O. L. Hotz merely advanced the purchase price of said timber taking title thereto as security to be held until such time as Jeske repaid the $500 with interest, also to secure the fulfilment by Jeske of the agreement contained in Exhibit 2. If Exhibit 1 was to be a conveyance of the timber therein described, unconditionally, to the Hotz Manufacturing Company, then why the provision in Exhibit 2 that the $500 was to be deducted from the money that would be due and owing Jeske from said company for the timber he was to deliver to said company, plus seven per cent interest, which latter provision the court found the parties had agreed upon but through inadvertence had left out of the written agreement? The trial court, upon competent oral evidence and the documents themselves, found that Jeske in fact was the purchaser, and that defendants advanced the purchase price, taking title thereto, as security for the repayment of the money so advanced with interest. We cannot say that this finding is against the great weight and clear preponderance of the evidence; it must stand.

Aderman appeals from that part of the judgment which adjudges that the timber he purchased from Jeske under

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agreement (Exhibit) 3 was subject to a mortgage in favor of the Hotz Manufacturing Company and O. L. Hotz in the sum of $500. Aderman contends that he was a bona fide purchaser in good faith for a valuable consideration without notice of any mortgage lien or other interest of the Hotz Manufacturing Company or O. L. Hotz. The trial court found that Aderman had notice before he purchased the timber from Jeske that the defendants had a mortgage interest in said timber. This finding was based upon the fact that Aderman had read Exhibit 2 before he had entered into agreement (Exhibit) 3 with Jeske on April 11, 1938. There is no evidence to sustain this finding unless the contents of Exhibit 2 can be construed as constituting notice of such mortgage interest. There is no evidence that Aderman ever saw agreement (Exhibit) 1. He testified that Jeske told him that he had purchased the timber from Stoehr and that the Hotz Manufacturing Company and O. L. Hotz had advanced the purchase price of $500 which he was to repay to the defendants at the time and in the manner specified in Exhibit 2.

Neither Exhibit 1 nor 2 was recorded in the office of the register of deeds for Shawano county nor in the office of the town clerk of the town in which the timber was located. The purpose of recording instruments is to give notice. Where a party otherwise has notice, as Aderman had from reading Exhibit 2, he is bound by such notice.

The first paragraph of Exhibit 2 specifically refers to “all the merchantable timber now standing, lying, or being on the [real estate in question],” and in the third last paragraph there is the following provision:

“It is distinctly understood that we have purchased this timber and have paid cash for it in the amount of $500 and this money $500 will and is to be deducted out of the amount that may be due you when all is delivered, in other words this money is to come back out of the prices per cord we are to pay you.”

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Aderman made no inquiry of the Hotz Manufacturing Company or O. L. Hotz as to whether the $500 had been repaid to them. Clearly, he had notice that the Hotz Manufacturing Company and O. L. Hotz had advanced the purchase money for the timber to Stoehr. He knew of defendants’ contract interest in the timber which Jeske was obliged to deliver to defendants. It is apparent that if Aderman had made any inquiry of defendants as to their interest in the timber, such inquiry would have disclosed their interest in all the merchantable timber standing, lying, or being upon the premises described in Exhibit 2, not only as to the specific timber therein mentioned, but also as to all the merchantable timber four inches and over upon said premises. We cannot say that the finding of the trial court that Aderman had notice before he purchased the timber from Jeske that defendants had a mortgage interest therein is against the great weight and clear preponderance of the evidence; therefore this finding must stand.

That part of the judgment which adjudges that Jeske is the owner of all the timber four inches and over lying and being upon the premises in question subject to a mortgage thereon in favor of defendants in the sum of $500 with interest at seven per cent less the sum of $198.48 paid as principal and interest must be affirmed.

The judgment further provides that “the defendants have no interest other than a mortgage interest upon the timber so purchased by the plaintiff [Jeske].” This part of the judgment must be modified for the reason that defendants have their contract right under agreement (Exhibit) 2 to receive from Jeske the timber therein specified at the prices and terms therein stated. Defendants’ interest in this regard, is, of course, additional to their mortgage interest.

The judgment further provides that neither Jeske nor defendants have breached the contracts between them and that both are in full force and effect. This provision of the

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judgment is based upon the theory that Aderman purchased with knowledge of defendants’ mortgage interest in the timber, and that with such knowledge he purchased subject to the mortgage. Jeske had the right to sell the timber subject to defendants’ mortgage. In so doing he did not breach his contract with defendants, nor did defendants breach the contract on their part by forbidding Jeske and Aderman in July of 1938 from cutting timber on the premises measuring four inches and up in diameter until defendants’ mortgage and interest were paid. The judgment in this respect must be affirmed.

It appears that Aderman sold some timber from the premises measuring more than four inches in diameter to the H. Iwen Box Veneer Company at Shawano which was subject to the lien of defendants’ mortgage, that a part of the purchase price thereof is being withheld by said purchaser. Aderman is making a claim for the balance of the purchase price, also the defendants are claiming the balance due. Defendants claim that Aderman sold timber from said premises to other parties which was subject to their mortgage and pray for an accounting. The plaintiff Jeske asked that he be permitted to redeem from the lien of defendants’ mortgage. The trial court made no findings with reference to an accounting between Jeske and defendants and made no disposition as to Jeske’s right to redeem from the lien of defendants’ mortgage by paying the balance due with accrued interest. There is no testimony in the record from which this court could determine the issue as to an accounting. However, we are of the view that Jeske should be permitted to redeem by paying defendants the balance due on the mortgage with accrued interest at seven per cent to date of redemption.

The trial court found upon the undisputed evidence that at the time Aderman purchased from Jeske the timber specified in Exhibit 3, no timber within the specifications of

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Exhibit 2 remained upon the land in question except poplar (Exhibit 3 excluded poplar). This being true, if upon the return of the record to the circuit court, Jeske fulfils his contract with defendants by delivering to them the balance of the poplar as provided in Exhibit 2 and pays defendants the balance of the $500 on their mortgage with interest, then, in that event, Aderman will be entitled to receive the balance due from H. Iwen Box Veneer Company and shall also be entitled to cut and remove all the merchantable timber of every kind measuring four inches and over in diameter standing, lying, or being on the real estate in question.

If Jeske does not deliver to the defendants the remaining poplar covered by Exhibit 2 and pay to the defendants the balance of the $500 and interest within such reasonable time as the trial court may fix therefor, then, in that event, Aderman, if he so chooses, shall have the option, right, and privilege to out and deliver the remaining poplar upon said premises within the calls of Exhibit 2 to defendants, and shall also have the right to redeem from the lien of defendants’ mortgage by tender to defendants the balance due with interest at seven per cent per annum to date of tender. If neither Jeske nor Aderman makes delivery of the poplar to defendants or pays defendants the balance due with interest as above indicated, the court shall order an accounting and also determine any damages which defendants may have sustained by reason of a breach of the contract.

By the Court. — Judgment affirmed in part, modified in part. Record remanded for further proceedings in accordance with the opinion. Neither appellants to have costs on this appeal. Appellant Aderman to pay the clerk’s fees.

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