Is there a statute in Wisconsin regarding collecting on money given to an heir marked 'loan' ?
Full Question:
Answer:
Issues over liabilities for loans in the deceased lifetime boil down to evidentiary evaluation in each case. It will be a matter of determination for the court, based on all the facts and evidence involved, to decide if the loan was repaid or was meant to be an advancement against a future inheritance.
The following WI cases deal with evidence of loans in estate cases:
IN MATTER OF ESTATE OF ALEXANDER, 75 Wis.2d 168 (1977)
248 N.W.2d 475
IN MATTER OF ESTATE OF ALEXANDER, Deceased: M & I BANK, and
another, Appellants, v. FIRST AMERICAN NATIONAL BANK, Respondent.
Supreme Court of Wisconsin.
No. 75-81.
Argued November 29, 1976. —
Decided January 6, 1977.
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Page 171
APPEAL from a judgment of the county court of
Marathon county: ROBERT W. DEAN, Judge. Reversed
and remanded.
This appeal is from a judgment awarding the respondent
$45,199.16, plus interest, upon a claim of respondent
against the estate of Ruth Alexander.
Ruth Alexander died on February 22, 1974 at the age
of 81. Her estate was quite substantial, including interests
in a number of corporations. Her will was admitted
to probate on April 3, 1974 and the probate court
entered an order limiting time for filing claims on
February 28, 1974. This order set a June 4, 1974 deadline
for filing claims against the estate.
On April 19, 1974 the respondent, First American
National Bank, hereinafter referred to as the bank, filed
the claim which is the subject matter of this controversy.
The bank's claim is based upon an alleged guaranty by
the deceased of certain promissory notes of Merritt Lease
Corporation. These notes evidence loans obtained in the
spring of 1973 for Merritt Lease by Leroy Tonn, the
principal owner and operating officer of that corporation.
Tonn had been employed for over eighteen years by
Ruth Alexander and her sister-in-law, Anne Alexander,
and at the time the loans were made, Tonn was the
Alexanders' accountant and manager for their business
interests and financial affairs.
In order to obtain from the bank the line of credit
upon which the loans to Merritt Lease were made, Tonn,
on March 2, 1973, delivered to the bank a written guaranty
bearing the purported signature of Ruth Alexander.
It is undisputed that Ruth Alexander did not affix her
signature to this guaranty, hereinafter referred to as the
March 2 guaranty, which purports to guarantee payment
by Ruth Alexander of all indebtedness, including future
indebtedness, of Merritt Lease to the bank.
Page 172
In June of 1973, Stanley Staples, who had been attorney
for Ruth Alexander and was then becoming involved
in her business affairs, learned of the existence of the
March 2 guaranty at a meeting with the bank's president.
Staples is a co-special administrator of the estate
and thus an appellant herein. After obtaining a broad
power of attorney from Ruth Alexander, Staples examined
the March 2 guaranty and informed the bank that
the signature thereon was not that of Ruth Alexander.
The bank immediately terminated the line of credit
extended to Merritt Lease and, in August 1973, commenced
an attachment action against Tonn, alleging that
Tonn had fraudulently obtained loans at the bank by,
among other things, forging Ruth Alexander's signature
upon the March 2 guaranty.
The bank's lawsuit against Tonn threatened to involve
Ruth Alexander as a witness, relative to her purported
signature on the March 2 guaranty, and even as a party,
for Tonn had claimed that he had been authorized by
Ruth Alexander to sign her name to the guaranty. The
lawsuit also threatened the Alexanders with embarrassment
in their personal and business affairs resulting
from the public revelation that their long-time financial
manager was being sued for improper business activities.
Therefore, the Alexanders insisted that the attachment
action against Tonn be terminated. After correspondence
with the bank, Staples met with representatives of the
bank on September 6, and an agreement was reached.
Staples took part in drafting a written contract embodying
this agreement. On September 7, 1973, this contract
entitled "Agreement," was executed by Ruth Alexander,
Anne Alexander, Alexander Properties, Inc., Leroy Tonn
and the bank. Staples and John F. Michler, one of the
attorneys for the estate, were two of the witnesses to the
September 7 agreement, which is the main issue of this controversy.
Page 173
The intent of the September 7 agreement is expressed
in paragraph III, which states:
"That it is the intention of the parties in entering into
this Agreement to assure the Bank that it shall be made
financially whole and shall not suffer any financial loss
by reason of the acts of Tonn with reference to the
Bank and that this Agreement shall be construed and
interpreted by the parties and any arbitrator if necessary,
to effect that purpose."
In order to effectuate this intent, the agreement includes
various terms assuring the bank of the repayment of
Tonn's debts. The most critical of the provisions is the
guaranty contained in paragraph VII, which provides:
"Ruth Alexander personally guarantees and does hereby
guarantee the payment of the debts due the Bank including
leases on the Merritt Lease Corporation, and
shall not be relieved therefrom by any extensions for
payment or any other action taken by the Bank in attempting
to collect the same or in repossessing the security
where available; and Ruth Alexander shall in any
event, upon demand, make said lease or any payments
periodically if the payments are not made by the Lessee,
debtor, or Merritt Lease Corporation directly to the Bank
when they are due, and Ruth Alexander shall make up
any deficiency upon foreclosure or in the event of no
foreclosure, upon determination by the Bank that all
collection efforts have been exhausted against the debtor
or Lessee; and Ruth Alexander shall have the financial
obligation of the Lessee; it being understood that most,
if not all, of said leases are now in default and the payments
by Ruth Alexander shall be made not more than
fifteen (15) days after demand by the Bank."
The bank's major obligation under the September 7
agreement, found in paragraph XI, was that:
"The action against Tonn by the Bank shall be dismissed
with prejudice and all records impounded."
After the execution of the September 7 agreement, the
indebtedness of Merritt Lease to the bank was reduced
Page 174
by payments of Merritt Lease or its chattel lessees from
time to time. The amount of indebtedness of Merritt
Lease is not in dispute, for at trial the parties stipulated
as to this amount at $43,774.49, exclusive of interest.
When filing its claim against the estate, the bank did
not attach to the claim a copy of the September 7 agreement,
but a copy of the March 2 guaranty. The bank's
claim was objected to on July 22, 1974, about one and
one-half months after the deadline for filing claims.
At trial upon this contested claim, the bank introduced
the September 7 agreement into evidence, and it was admitted,
over the estate's objection that the bank was attempting
to amend its claim after the time for filing had
expired. The trial court allowed the claim of the bank,
stating in its memorandum opinion that the estate was
estopped by the September 7 agreement from raising the
defense of forgery against the March 2 guaranty. It is
also apparent from the trial court's opinion that the allowance
of the claim was based mainly upon the September
7 agreement. The findings and conclusions were
signed and filed by the trial court on February 11, 1975.
The parties are in some dispute over the consistency of
the findings and conclusions with the trial court's opinion.
For the appellants there were briefs by F. William
Haberman and Michael, Best & Friedrick; William A.
Stearns, Robert L. Titley and Quarles & Brady, and oral
argument by Mr. Stearns, all of Milwaukee.
For the respondent there was a brief by Richard P.
Tinkham, John E. Bliss and Tinkham, Smith, Bliss, Patterson
& Richards, and oral argument by Richard P.
Tinkham, all of Wausau.
HANLEY, J.
Five issues are presented on appeal:
1. Are certain of the findings of fact and conclusions
of law entitled to no weight upon this appeal because
Page 175
they are inconsistent with the trial court's memorandum opinion?
2. Did the deceased ratify her signature upon the
March 2 guaranty by entering the September 7 agreement?
3. Did the deceased waive the right to assert the defense
of forgery against the March 2 guaranty?
4. Is the estate estopped from asserting the defense
of forgery against the March 2 guaranty?
5. Is the bank's claim allowable on the basis of the
September 7 agreement itself?
Findings of Fact
The estate contends the findings of fact and conclusions
of law prepared by counsel for the bank and signed
and filed by the trial judge are inconsistent with the trial
judge's opinion and therefore entitled to no weight. The
estate specifically objects to the findings numbered 9
and 11, which state Ruth Alexander ratified the March 2
guaranty and waived any objection to its validity. Counsel
for the estate also argue that the findings and conclusions
were submitted to the trial court and signed
without prior submission or notice to the estate.
This latter contention is somewhat disputed by the
bank, but it is not a matter of record, and therefore is
not considered. The estate could have caused facts relative
to the prior submission of findings and conclusions
to be in the record by objecting to the findings and conclusions
even after they were signed but before judgment
was entered. The estate, however, chose not to do so.
The bank concedes that the trial court's opinion makes
no mention of either ratification or waiver, but argues
that if the opinion is considered in its entirety, no inconsistency
with these findings may be found. The bank
further contends that the failure before this appeal to
Page 176
object to the findings of fact and conclusions of law
prevents the estate from now making such objection.
As a basis for its contention that the findings of fact
and opinion are not inconsistent, the bank relies upon
the statement in the opinion that "[t]he agreement of
September 7, 1973 estops the estate from raising this
[forgery] defense because of the total and complete
knowledge of the facts and funds owed by Leroy Tonn,
the Merritt Lease Corporation and Lakeside Industries,
Inc." This use of the word "estops" and the trial court's
emphasis on knowledge of those managing the estate,
the bank contends, indicates the trial court found ratification
and waiver. This contention, however, ignores the
recognized distinctions between the doctrines of ratification,
waiver and estoppel.
Ratification is the manifestation of intent to
become party to a transaction purportedly done on the
ratifier's account. Restatement (Second) of Agency sec.
82, at 210 (1957). Waiver is the voluntary and intentional
relinquishment of a known right, while estoppel is
action or nonaction of a person which induces reliance
thereon by another, either in the form of action or nonaction,
to his detriment. Von Uhl v. Trempealeau County
Mutual Insurance Co., 33 Wis.2d 32, 37, 146 N.W.2d 516,
519 (1966). Although it is said the distinction between
waiver and estoppel is difficult to demonstrate and the
terms are often used interchangeably, this is because
some of the same facts may affect both doctrines, not
because the distinction does not exist. In cases involving
claims of both waiver and estoppel, this court has recognized
the distinction by considering the claims individually.
Variance, Inc. v. Losinske, 71 Wis.2d 31,
237 N.W.2d 22 (1976); Hanz Trucking, Inc. v. Harris Brothers
Co., 29 Wis.2d 254, 138 N.W.2d 238 (1965). Thus,
although in this case conceivably all of these principles
Page 177
could operate, the trial judge's opinion must be understood
to mean what it says. Because of the distinction
between these three doctrines, the trial judge's opinion,
only finding estoppel, should not be interpreted to include
waiver and ratification. The findings of fact are
thus inconsistent with the opinion.
Even a sharp conflict between the findings of fact
and a memorandum decision, however, does not automatically
destroy the weight of the particular findings of
fact. When the trial judge signs findings of fact and
conclusions of law they become the findings and conclusions
of the trial court, and the responsibility for their
correctness is his. Karp v. Coolview of Wisconsin, Inc.,
25 Wis.2d 299, 301, 130 N.W.2d 790, 791 (1964). This
court has also held that the findings and conclusions
take precedence over a memorandum decision. Gordon v.
Gordon, 270 Wis. 332, 348, 71 N.W.2d 386, 394 (1955).
Although incomplete findings may be supplemented
by the written decision of the trial court, Breeden
v. Breeden, 6 Wis.2d 149, 150-51, 93 N.W.2d 854, 855
(1959), findings, signed by the trial judge, which include
more than the opinion are nevertheless the findings of
the court. Thus, in Guschl v. Schmidt, 266 Wis. 410,
63 N.W.2d 759 (1954), this court, considering a finding of
fact which was in sharp conflict with the trial judge's
memorandum decision, did not strike down the finding
because of inconsistency, but upon a determination that
the finding was against the great weight and clear preponderance
of the evidence. Id. at 416, 63 N.W.2d at 762.
This great weight and clear preponderance of the evidence
test is the general test upon appeal for the sufficiency
of findings of fact, Merten v. National Manufacturers
Bank of Neenah, 26 Wis.2d 181, 186,
131 N.W.2d 868, 870 (1965), and is applicable in this case despite
the inconsistency.
Page 178
Ratification
The most pertinent issue in this case is whether Ruth
Alexander, by entering into the September 7 agreement,
ratified the March 2 guaranty. The trial court found that
she did ratify the guaranty, but the estate contends that
the September 7 agreement was a completely separate
contract which did not include ratification of the guaranty.
Whether a person may ratify a forged signature is a
perplexing problem. There has been a split of authority
on the issue of ratification of an unauthorized signing
which constitutes the crime of forgery. In several states
the rule of law, although represented by very early cases,
is that there may be no ratification of a forgery, in the
absence of estoppel or a new consideration. Hartlep v.
Murphy, 197 Ind. 222, 227, 150 N.E. 312, 314 (1926);
Wilson v. Hayes, 40 Minn. 531, 538-40, 42 N.W. 467, 470
(1889); Fourth & Central Trust Co. of Cincinnati v.
Johnson, 24 Ohio App. 129, 156 N.W. 463 (1927); Funds
for Business Growth, Inc. v. Woodland Marble and Tile
Co., 443 Pa. 281, 286, 278 A.2d 922, 925 (1971).
Other states have, however, allowed ratification of
forged documents, and the trend, if any, in this area is
toward this allowance. See Common Wealth Insurance
Systems, Inc. v. Kersten, 40 Cal.App.3d 1014,
115 Cal.Rptr. 653 (1974); Coral Gables, Inc. v. Granara,
285 Mass. 565, 189 N.E. 604 (1934); Magrid v. Drexel
National Bank, 330 Ill. App. 486, 71 N.E.2d 898 (1947).
These states recognize that one whose name has been
forged to a document may have good reasons for electing
to be bound by the agreement, and therefore should be
able to do so. See Mechen, Outlines of Agency sec. 225
at 149 (1952).
The comments to the Restatement (Second) of Agency
indicate that a forged signature may be ratified. Following
section 85, subsection (1) of which states the requirement
Page 179
for ratification that the actor have purported to
be acting for the ratifier, the comments state:
"In accord with the rule stated in this Subsection,
there can be no ratification of a contract which one intends
for another, even though he believes that he is
authorized to make it on behalf of the other, unless the
intent is manifested. However, if one impersonates another,
thereby purporting to act as another, or executes
or delivers an instrument purportedly signed by another,
the rationale of ratification is applicable and the act or
transaction can be ratified by affirmance if it does not
constitute an illegal agreement." Restatement (Second)
of Agency sec. 85, comment b, at 218 (1957).
The Uniform Commercial Code expressly permits the
ratification of forged signatures upon negotiable instruments.
Sec. 403.404(2), Stats.
In Murphy v. Estate of Skinner, 160 Wis. 554,
152 N.W. 172 (1915), this court considered the question of
ratification of a forged signature. In that case Murphy
argued that the deceased had ratified his forged signature
on a promissory note payable to Murphy by failing
to assert the forgery at the time the note was presented
for payment. Skinner, the deceased, had merely refused
to pay the note. Although it found that no ratification
had occurred, the court considered the merits of Murphy's
claim, thus adopting the view that a forged signature
may be ratified.
Even among those authorities which allow ratification
of forgeries, however, there remains concern over sanctioning
this criminal act. Professor Seavey in his treatise
The Law of Agency, sec. 33D at 60 (1964): "It is
now generally recognized that one whose name has been
forged can ratify, unless he had agreed to take no proceedings
against the forger, an agreement which would
make the transaction illegal because of its tendency to
prevent prosecution for the crime." The comment to the
Restatement (Second) of Agency quoted above also includes
Page 180
the qualification: "In no event, however, is a ratification
effective in favor of one who obtained it by
promising not to prosecute the forger." Sec. 403.404(2),
Stats., of the Uniform Commercial Code specifies that
any ratification under that section may not affect any
rights of the person ratifying against the actual signer.
Here, under the September 7 agreement, the bank
agreed to dismiss its attachment action against Tonn.
Under no provision did Ruth Alexander agree not to
prosecute Tonn. The agreement contained no promises
by the parties that they would not take part in any criminal
proceedings against Tonn. We think that this contract
is not illegal or of a nature that it will stifle any
possible criminal prosecution stemming from the alleged forgery.
The September 7 agreement only served to terminate
the civil action of the bank against Tonn. Such is exactly
the result which occurs upon ratification of a forged signature
upon a negotiable instrument under sec. 403.404,
Stats. Ratification of a forged negotiable instrument
under this section relieves the signer from liability on the
instrument, but does not relieve him from liability to the
person whose name is forged, and does not relieve him
of criminal liability. 2 Anderson, Uniform Commercial
Code sec. 3-404:6, at 923 (1971). We see no reason why
this rule for negotiable instruments should not apply to
forgery of non-negotiable instruments, and therefore in
this case the September 7 agreement does not preclude
ratification of the allegedly forged guarantee because it
relieved Tonn of liability to the bank.
Having determined that one may ratify his forged
signature, and that the contract which, respondent
claims, constitutes such ratification does not preclude
ratification by illegally stifling criminal prosecution, the
question to be answered is whether the deceased actually
did ratify her signature on the March 2 guaranty by
entering the September 7 agreement.
Page 181
The essence of ratification is a definitive manifestation
of intent to become a party to the transaction done
or purported to be on his account. Restatement (Second)
of Agency sec. 93 at 240 (1957); Seavey, The Law of
Agency sec. 37A, at 67 (1964). Thus, if by the September
7 agreement Ruth Alexander ratified her forged
signature upon the March 2 guaranty, her intent to do so
must be evidenced. The best indicator of the intent of the
parties is the language of the contract itself. North Gate
Corp. v. National Food Stores, Inc., 30 Wis.2d 317, 323,
140 N.W.2d 744 (1966).
Examination of the September agreement convinces
this court that, although Ruth Alexander intended to
guarantee to the bank the debts of Tom, she did not
intend to ratify the forged signature upon the March 2
guaranty. Nowhere in the September 7 agreement is
reference made to the March 2 guaranty. The words
"ratify" or "affirm" are never used in the agreement.
If the deceased had wished to ratify the March 2 guaranty
the agreement would so state. Instead of a ratification
of the March 2 guaranty, the September 7 agreement
is a completely separate contract by which Ruth
Alexander, and also Anne Alexander, agreed to guarantee
the various debts to the bank of Tonn, Merritt Lease
Corporation and Lakeside Industries, Inc.
The bank points to paragraph III of the September 7
agreement, which states the intent of the parties in entering
the agreement, and claims that this intent may only
be achieved by finding ratification of the forged guaranty.
This contention is not correct, because the intent
of the parties is fully served by the guaranty within the
September 7 agreement itself.
This court has stated the language of a contract
must be understood to mean what it clearly expresses,
and the courts may not depart from the plain meaning
of a contract when it is free from ambiguities. Bousfield
v. Hardware Dealers Mutual Fire Insurance Co.,
Page 182
24 Wis.2d 10, 14, 127 N.W.2d 765, 768 (1964). As to the
question of ratification of the March 2 guaranty, the
September 7 agreement contains no ambiguity, for there
is absolutely no reference to that guaranty.
Furthermore, there may be no ratification after the
other party has manifested his withdrawal from the
transaction as the bank did here. Restatement (Second)
Agency sec. 88, at 226 (1957). Conduct which manifests
that the other party no longer consents to the
transaction constitutes a withdrawal, and the commencement
of action against the agent for misrepresentation of
authority is such manifestation. Restatement (Second)
of Agency sec. 88, Comment a, illustration 4, at 227
(1957). In the instant case, the bank, upon the discovery
that the signature upon the March 2 guaranty was not
bona fide, immediately cut off Merritt Lease's line of
credit, and shortly thereafter commenced an attachment
action against Tom, alleging, among other things, that
Tom had forged Ruth Alexander's signature on the guaranty.
This conduct constitutes a withdrawal from the
entire transaction. There may be no ratification after
such withdrawal.
Thus, the finding and conclusion by the trial court
that Ruth Alexander ratified her signature on the March
2 guaranty is against the great weight and clear preponderance
of the evidence and may not stand.
Waiver
The bank contends Ruth Alexander waived the right to
assert the invalidity of the March 2 guaranty by agreeing
to the terms of the September 7 agreement. We believe
the record does not support this contention.
Intention to relinquish the right is an essential
element of waiver. Hanz Trucking, Inc. v. Harris Brothers
Co., 29 Wis.2d 254, 264-65, 138 N.W.2d 238, 244
(1965). The intention of the September 7 agreement, as
Page 183
previously referred to, includes nothing in relation to the
right to assert the invalidity of the March 2 guaranty.
Furthermore, contrary to the bank's contention, it is not
necessary that a waiver be found in order to effectuate
the intent of this agreement, for the September 7 agreement
itself constitutes a guaranty of the debts in question.
Equitable Estoppel
The record in this case cannot support a finding
of equitable estoppel. The elements of equitable estoppel
were stated by this court in Gabriel v. Gabriel, 57 Wis.2d 424,
204 N.W.2d 494 (1973), as follows:
"The tests for applicability of equitable estoppel as a
defense derive from the definition by this court of such
estoppel to be: `. . . action or nonaction on the part
of the one against whom the estoppel is asserted which
induces reliance thereon by another, either in the form
of action or nonaction, to his detriment. . . .' Three facts
or factors must be present: (1) Action or nonaction
which induces (2) reliance by another (3) to his detriment."
(footnotes omitted). Id. at 429, 204 N.W.2d at 497.
Furthermore, the proof of estoppel must be clear and convincing,
and may not rest upon conjecture. Id. at 428,
204 N.W.2d at 497.
In this case the bank contends that the participation
of the deceased in the September 7 agreement induced
it to rely upon the validity of the March 2 guaranty
to its detriment. The bank's contention fails in two
respects. First, it is an accepted rule of law that a
party's reliance must be justifiable or reasonable. Chicago
& North Western Transportation Co. v. Thoreson
Food Products, Inc., 71 Wis.2d 143, 154, 238 N.W.2d 69,
75 (1976). The bank's claim cannot be considered justifiable
in light of the fact the September 7 agreement
Page 184
constituted a new, separate and valid guaranty of the
debts of Tonn and Merritt Lease upon which the bank
could rely. Furthermore, there is no intimation in the
September 7 agreement that the defense of forgery would
not be asserted. It is unreasonable to claim reliance upon
a document known to be without a valid signature where
there exists a valid document containing essentially the
same terms.
Second, any reliance upon the forged March 2
guaranty could not have been detrimental to the bank, for
the September 7 agreement makes Ruth Alexander guarantor
of the debts in question and provided adequate
protection to the bank. Whatever detriment there may
be would not result from the failure of estoppel to intervene,
but from the bank's failure to base its claim upon
the valid guaranty.
Claim Based Upon September 7 Agreement
The final question is whether the bank's claim may be
allowed on the basis of the September 7 agreement. Although
the trial court found the claim allowable upon
the March 2 guaranty through estoppel, ratification or
waiver, the trial court's memorandum opinion appears
to rely also upon the terms of the September 7 agreement
itself to validate the claim. It must be noted, however,
that the conclusions of law signed by the trial court do
not base the allowance of the claim upon the September 7 agreement.
The first contention of the estate against the
allowance of the claim upon the September 7 agreement
is that the bank did not attach that document to its claim
when filed. Sec. 859.13(2), Stats. provides that "[i]f
a claim is founded upon a written instrument which is
available, the original or a copy thereof with all endorsements
must be attached to the claim." We think, however,
that this statutory provision is properly construed
Page 185
as directory and not mandatory, and therefore the failure
to attach the written instrument is not fatal, rendering
the proceeding void.
In State ex rel. Werlein v. Elamore, 33 Wis.2d 288,
293, 147 N.W.2d 252, 254-55 (1967), this court stated:
"In determining whether a statutory provision is mandatory
or directory in character, we have previously said
that a number of factors must be examined. These include
the objectives sought to be accomplished by the
statute, its history, the consequences which would follow
from the alternative interpretations, and whether a penalty
is imposed for its violation. Marathon County v.
Eau Claire County (1958), 3 Wis.2d 662, 666,
89 N.W.2d 271; Worachek v. Stephenson Town School
Dist. (1955), 270 Wis. 116, 70 N.W.2d 657. We have
also stated that directory statutes are those having requirements
`which are not of the substance of things
provided for.' Manninen v. Liss (1953), 265 Wis. 355,
357, 61 N.W.2d 336.
"In 2 Sutherland, Statutory Construction (3d ed.),
p. 216, sec. 2802, the author observes that provisions are
normally considered directory `which are not of the essence
of the thing to be done, but which are given with
a view merely to the proper, orderly and prompt conduct
of the business, and by the failure to obey no prejudice
will occur to those whose rights are protected by the
statute.' The text further (p. 217, sec. 2804) states that
a provision is interpreted as directory where the `manner
performing the action directed by the statute is not
essential to the purpose of the statute."
Applying these standards to the requirement that any
written instrument, upon which a claim is based, be attached
to the claim, it is to be noted that probate practice
has long been held to be intended to permit summary
action as informally as possible. Estate of Beyer,
185 Wis. 23, 27, 200 N.W. 772, 773 (1924). The primary
purpose of the rules regarding the form of claims is to
apprise the administrator and heirs of the deceased of
the nature and the amount of the claim. Estate of Baumgarten,
Page 186
12 Wis.2d 212, 221, 107 N.W.2d 169, 175 (1961);
Estate of Rule, 3 Wis.2d 301, 304, 88 N.W.2d 734, 736
(1958). The probate law allows for great liberality in
the amendment of claims, 2 MacDonald, Wisconsin Probate
Law sec. 9.90, at 36 (7th ed. 1973); Estate of Rule,
supra, and the statutes further provide for the court to
require issues to be made more definite and to direct that
formal pleadings be exchanged. Sec. 859.33(2), Stats.
Thus, we conclude, sec. 859.13(2) is directory, for if
the estate is apprised of the nature and amount of the
claim, and amendment of the claim by submission of the
particular instrument may properly be made, this section
is one which is given with the view to the orderly and
prompt conduct of the business, and by failure to attach
the instrument when the claim is filed no prejudice will
occur to those claimed against. The failure to attach the
September 7 agreement to the claim in this case, therefore,
is not in and of itself fatal to the bank's claim.
In order to find that the claim here is allowable based
upon the September 7 agreement, the court must find
that the claim was properly amended to be based upon
that agreement and also that the liability of the estate
upon the claim was proven. Here the estate's liability
under the September 7 agreement is not proven. This
agreement was not considered by the trial court other
than for the purpose of determining the estoppel, ratification
and waiver issues. As the estate points out, the
September 7 agreement contains terms which appear to
be those of a guaranty of collection as opposed to a guaranty
of payment. If this agreement is indeed a guaranty
of collection then it would be necessary for the bank to
show it had exhausted other collection efforts against the
debtor. No meaningful proof exists in the record as to
these efforts by the bank. Thus, at least upon this record,
a claim based upon the September 7 agreement may not
be allowed.
Page 187
The estate objected to the admission of the September
7 agreement into evidence, claiming it constituted an
improper amendment of the claim after the time for
filing had expired. The trial court disagreed upon the
ground that the admission of the agreement was not an
amendment, but merely evidence to support the claim as
filed. This holding of the trial court is, of course, consistent
with its decision finding ratification, waiver or
estoppel. Having determined those three conclusions of
the trial court to be without merit, the question remains
whether the claim could be properly amended to be based
upon the September 7 agreement.
The general rule for amendment of claims is that
amendment is to be liberally permitted, but not after the
expiration of the time for filing claims so as to increase
the amount or materially change the nature of or basis
for the claim. 2 MacDonald Wisconsin Probate Law, sec.
9.90 at 36 (7th ed. 1973); Estate of Rule, supra at 303,
88 N.W.2d at 736.
The previous application of this rule by this court is
well illustrated by the cases of Estate of Mayer, 253 Wis. 32,
33 N.W.2d 213 (1948), and Klukas v. Linderman,
172 Wis. 388, 179 N.W. 511 (1920).
In Klukas the plaintiff filed a claim to recover money
he allegedly loaned to the deceased. The original claim
filed in the county court stated the loan was evidenced
by a promissory note. The county court allowed the
claim in full, but appeal to the circuit court was made by
the administrator, Linderman. At the circuit court the
claimant was allowed to amend his claim by alleging the
facts of the loan in a separate count without reference
to the promissory note. The circuit court concluded that
the signature upon the note was not the genuine signature
of the deceased, and he had not authorized such signature.
The circuit court further found the facts of the
loan alleged by the claimant to be unproven and untrue.
Page 188
Thus, the claim was disallowed. This court, upon appeal,
affirmed the circuit court judgment and also found the
amendment of the claim to be proper stating:
"We discover no error in so amending the claim. This,
however, did not operate to so amend the claim as to
effect a withdrawal of the claim filed and thus completely
substitute another claim for the one originally
filed in county court. If plaintiff failed to establish that
the writing as alleged was given by the decedent as
evidencing the loan, he would not be barred from recovering
on his claim the amount of a loan if it is legally
established by other evidence than the writing."
172 Wis. at 390, 179 N.W. at 512.
In Estate of Mayer the claimant filed a claim against
the estate upon three promissory notes. After the time
for filing had expired the claimant moved to amend the
claim by substituting a fourth note for one of the first
three. Apparently the note for which substitution was
sought had been lost. The trial court refused to allow
this amendment, and this court, upon appeal, affirmed.
The court stated:
"The trial court was correctly of the opinion that the
proposed amendment, if allowed, would materially alter
the claim as filed. The dates of the notes are different.
The amounts are different, and even the interest rate is
different. The original claim was based upon a certain
promise to pay and the note to be introduced by amendment
was based upon a different promise to pay a different
amount at different times." 253 Wis. at 33, 33 N.W.2d at 214.
Although the parties in the instant case respectively
argue that the facts here are either just like those in
Klukas or Estate of Mayer, we find this case to have
similarities to both of those cases. Amendment of the
claim here would technically change its basis from the
March 2 guaranty to the September 7 agreement. On the
other hand, the claim is for the guaranty of the same
Page 189
notes, and the original claim, with the March 2 guaranty
attached, had some basis upon the September 7 agreement,
although on the erroneous grounds of estoppel,
ratification or waiver. Furthermore, the two instruments
in this case, although distinct individually, represent
closely related transactions which combined in the
same situation of circumstances. The September 7 agreement
was entered into as a direct result of the March 2 guaranty.
In addition, a factor we think significant is the total
knowledge of the estate as to the true nature of the
claim, even as originally filed. One of the co-special administrators
of the estate, an appellant here, Stanley F.
Staples, Jr., intimately participated in all the transactions
culminating in the September 7 agreement. He took
part in drafting that agreement and witnessed its execution.
There can be no doubt that when the claim here
was filed, only about seven months after the September 7
agreement was entered into, to obtain payment of the
notes of Merritt Lease, the estate understood completely
the nature and basis for this claim.
Thus, due to the knowledge of the estate regarding the
claim, the factual relationship of the instruments in question,
and the policy of liberality in the amendment of
claims, we hold that this claim may be amended to be
based upon the September 7 agreement without any prejudice
to the estate.
As previously stated, a valid claim based upon
the September 7 agreement has not been proven. This
resulted from the failure of the parties and the trial
court to consider liability under that agreement alone.
Therefore the real controversy in this case was not fully
tried. When this happens, this court may reverse and
remand the case to the trial court for a new trial pursuant
to sec. 251.09, Stats. Merco Distributing Corp. v.
O & R Engines, Inc., 71 Wis.2d 792, 797, 239 N.W.2d 97,
Page 190
100 (1976). Upon remand, formal amendment of the
claim should be permitted.
By the Court. — Reverse and remand for further proceedings
not inconsistent with this opinion.
DAY, J., took no part.
ESTATE OF GUTENKUNST, 232 Wis. 81 (1939)
286 N.W. 566
ESTATE OF GUTENKUNST: KOHLS, Receiver, Appellant, vs.
PRASSER and another, Trustees, Respondents.
Supreme Court of Wisconsin.
June 5, 1939 —
June 21, 1939.
Page 82
APPEAL from a judgment of the county court of Milwaukee
county: L. E. LURVEY, Judge, Presiding. Affirmed.
In the matter of the estate of William Gutenkunst, deceased.
This is an appeal by E. Eugene Kohls, receiver for Edwin
W. Gutenkunst, from a judgment of the county court of
Milwaukee county in the above estate, dated June 18, 1937,
disallowing upon its merits the objections of the receiver to
the allowance of the account of trustees filed February 18,
1936, in said estate. The material facts will be stated in the
opinion.
For the appellant there were briefs by Bitker & Puchner
of Milwaukee, attorneys, and William H. Page of Madison
of counsel, and oral argument by Irving A. Puchner.
For the respondents there was a brief by Friedrich &
Hackbarth, attorneys for the trustees, Hammersley & Torke,
attorneys for the Lillian A. Winkler estate, and Eugene
Wengert, guardian ad litem, all of Milwaukee, and oral
argument by Mr. Otto G. Hackbarth, Mr. Wengert, and
Mr. Norton A. Torke.
WICKHEM, J.
On March 23, 1932, Edwin W. Gutenkunst
executed a promissory note to George F. Rowe, in the
sum of $1,500 due October 15, 1933. On May 13, 1936,
Rowe obtained a judgment against Guntenkunst [Gutenkunst] for the
amount of principal and interest of this note. In a supplementary
proceeding thereafter Waller Carson was appointed
receiver and was succeeded by E. Eugene Kohls. Gutenkunst
was one of the executors and trustees of the estate of
his father and was heir to a one-eighth interest in the residue
of the estate. The estate was appraised at $791,857.42.
Gutenkunst was also a stockholder and president-treasurer
Page 83
of the Oakton Country Club, a corporation engaged in running
a hotel and golf course. Between the dates of October
15, 1931, and July 1, 1932, Gutenkunst, as executor, invested
between sixty and sixty-four thousand dollars of the
funds of the estate in bonds of this corporation. In 1933
these bonds became worthless because of an adjudication that
a large number of mechanics' liens absorbing the value of the
property had priority over the bond issue. On May 20, 1932,
all of the heirs except Gutenkunst and one other obtained an
order from the county court directing the executors to produce
an itemized list of all loans made by the executors to
themselves or to any copartnership or corporation in which
they were interested. On March 22, 1932, the petition and
final account of the executor was filed showing $15,000 of
Oakton Country Club bonds on hand. On July 7, 1932, an
order was obtained to show cause why the executors should
not be removed, it being alleged that the executors purchased
and dealt in stocks of doubtful value, resulting in squandering
and depleting the assets of the estate. By stipulation
between the parties these orders were dismissed and consent
to allowance of the account given because the parties had
"adjusted, compromised, and settled" their differences.
Thereafter, the executors filed a supplemental account on
July 27, 1932, the final showing being that $48,000 of Oakton
Country Club bonds were in the hands of the executors
at this time. Gutenkunst and two others were appointed
trustees on July 29, 1932, and the trustees took over the
property and executed a receipt therefor. On December 13,
1933, Gutenkunst resigned as trustee and was discharged
December 29th of the same year. Meantime, as heretofore
indicated, the bonds had become worthless by reason of the
fact that they were held junior to large numbers of mechanics'
liens against the Oakton property. Under date of
July 1, 1932, shortly after the value of the Oakton bonds
and the propriety of investing funds of the estate in them
had been seriously questioned by the heirs, the agreement
Page 84
which gives rise to this controversy was executed under seal
by E. W. Gutenkunst. The agreement recites a consideration
of $1 and other good and valuable consideration. Gutenkunst
agrees "for the purpose of guaranteeing to all of the
heirs of the estate of William Gutenkunst, deceased, full payment
of their share and interest in and to said estate and to
the end that they shall not, or shall either of them, suffer any
loss or damage in any amount whatsoever by reason of the
estate of said William Gutenkunst, having purchased and
now in its possession any bond or bonds issued by the Oakton
Country Club Company," that in the event any portion of the
estate is in bonds of the Oakton company at the time of final
distribution, he will purchase these bonds at par with accumulated
interest, and that his share in the estate may stand as
a security for this agreement. Subsequently, Gutenkunst
accepted payment of his share of the estate in Oakton Country
Club bonds, the last payment so made being in 1935.
This matter comes up upon objections by the receiver under
supplementary proceedings to the allowance of account of
remaining trustees Florence Prasser and F. C. Seideman.
The objections urged below which constitute appellant's
contentions here may thus be summarized: (1) That the
agreement of July 1st was without consideration and is unenforceable
as to the undistributed portion of the estate
because as to that it is executory; (2) that the agreement
is in fraud of creditors; and (3) that the agreement is void
as an attempt to change the distribution of the estate provided
for in the will. The contention that the assignment
was without consideration is based upon, (1) the recitation
of purpose above quoted, which is claimed to rebut any presumption
of consideration and demonstrates that there was
none; (2) the claim that the order to show cause dated July 7,
1932, which postdates the agreement and which sought to
remove the executors, indicates that the agreement was not
made to compromise differences between Gutenkunst and the
heirs; and (3) the assertion that there was no liability on his
Page 85
part arising out of the investments in Oakton bonds since
the bonds were first-mortgage bonds and only lost priority
because of a delay in recording, culpability in respect to
which was not fixed upon Gutenkunst. The contentions cannot
be sustained. The recitation purports to state the purpose
and not the consideration for the agreement. The latter
is stated in the opening paragraph of the agreement as, "One
($1) dollar and other good and valuable consideration to me
in hand paid, the receipt whereof is hereby confessed and
acknowledged." What makes up this consideration is not
further disclosed by the agreement.
Respondents contend that the record indicates that Gutenkunst
executed the agreement as part of a compromise of
claims of the other heirs based upon his investment in the
worthless bonds of the Oakton Country Club. Appellant's
reply is that evidently it settled nothing because after its date
an effort to remove him was made, and that at all events
there was never any valid claim against him arising out of
the investment. While appellant's argument is ingenious and
ably put, we think it must be rejected. The agreement was
under seal, and under sec. 328.27, Stats., was presumptively
supported by a sufficient consideration. In connection with
this see Singer v. General Acc., F. & L. Assur. Corp.
219 Wis. 508, 262 N.W. 702. We conclude that the evidence
adduced does not rebut this presumption. It merely suggests
the possibility that the consideration was insufficient. It
appears from the evidence that Gutenkunst was an officer
of the Oakton Country Club at the time when as executor he
made or participated in the investment of estate funds in the
bonds in question. This presumably resulted in a liability on
his part and rendered the transaction voidable at the option
of the other heirs. See Matter of Filardo, 221 Wis. 589,
267 N.W. 312; Hutson v. Jenson, 110 Wis. 26,
85 N.W. 689; Shaw v. Crandon State Bank, 145 Wis. 639,
129 N.W. 794. Aside from this fact, there is no evidence that
the bonds constituted a lawful investment under sec. 231.32,
Page 86
Stats. 1931, now sec. 320.01, which provides in part that
investments may be made "in obligations secured . . . by first
real-estate mortgages . . . on improved farm property or
improved urban property . . . in this state . . . the amount
of which mortgages . . . does not exceed one half of the
actual value of the property covered thereby." There is no
evidence that the value of the property was such as to warrant
the investment, and this being true, we do not deem it
necessary to consider whether the bonds were in fact first
mortgages.
In addition to this, it appears that Gutenkunst indorsed
upon these bonds his personal guarantee. The bonds are not
in evidence, and the form of guarantee is not before us, so
that we cannot say that this was not a legally binding contract
on the part of Gutenkunst. With this background of
facts it can hardly be said appellant has shown that there was
no liability to discharge or dispute to compromise. That the
heirs contended for such a liability is evident from the contents
of the orders to show cause. The agreement which is
here attacked was executed shortly after the propriety of the
investment was questioned, and this was followed within less
than a month by the discharge of Gutenkunst as executor
upon a representation to the court that the parties had compromised
their differences. While the order to show cause
of July 7th follows rather than precedes the agreement, there
is no evidence that excludes the possibility that the agreement
of July 1st was made effective by delivery subsequent
to that date. We think that the reasonable inference is that
the agreement was in consideration of a promise by the heirs
not to press the liability of Gutenkunst as executor or guarantor.
Even if it were to be held that the evidence is not sufficient
affirmatively to support such an inference, it would be
far from supporting the inference contended for by appellant,
namely, that such was not the consideration for the
agreement. It was for appellant to rebut the presumption of
consideration in this case, and it is plain to us that he failed
Page 87
to bring the issue out of the field of speculation and conjecture.
This being true, the presumption stands and the trial
court correctly concluded that the agreement was not unenforceable
as to its executory features for want of consideration.
It is next contended that the agreement was in fraud of
creditors. Reliance is had upon sec. 242.04, Stats.,
which declares fraudulent as to creditors every obligation incurred
by a person who is or will be thereby rendered insolvent
without respect to, the actual intent of the debtor, and upon
sec. 242.07, Stats., which condemns as fraudulent every
obligation incurred with actual intent to, hinder, delay, or defraud
present or future creditors. With respect to sec. 242.04,
Stats., the cornerstone of the contention is that the effect of
the agreement was to render Gutenkunst insolvent. We have
carefully examined the evidence and conclude that it does not
sustain the conclusion that this was the effect of the agreement.
Having already determined that there is no proof
that the agreement was without consideration, it is evident
that appellant's claim under sec. 242.04, Stats., must fail.
Appellant's theory under sec. 242.07, Stats., is that
respondents concealed the existence of the agreement in question; that
they consented to Gutenkunst's discharge as executor
and trustee when they believed him guilty of misconduct,
and also consented to the allowance of his accounts when they
believed them to be incorrect; and that this evinced an intent
on their part to hinder, delay, and defraud creditors.
We think this claim cannot be sustained. The proof is insufficient
to indicate that this is not at most a mere matter
of preferring the heirs to his other creditors. There is no
evidence that other creditors were deceived or that any of the
dealings between the heirs and Gutenkunst were calculated to
have this effect or intended to defraud creditors.
The final contention is that the agreement of July 1st modified
the provisions of the will relating to distribution. Will
of Rice, 150 Wis. 401, 136 N.W. 956, 137 N.W. 778;
Page 88
Will of Reynolds, 151 Wis. 375, 138 N.W. 1019; Graef v.
Kanouse, 205 Wis. 597, 238 N.W. 377, and other cases are
cited to the well-established proposition that a contract
between the heirs and the next of kin to the effect that an estate
shall be distributed upon a different basis than that provided
by the will of the testator is against public policy and void.
The difficulty with the contention is that the agreement was
in terms nothing more than a promise to purchase bonds from
the estate at par and put in their place cash to be distributed
to all of the heirs including the executor. Furthermore, the
agreement took effect after the court had finally distributed
the estate to the trustees in accordance with the will. After
the worthlessness of the bonds was demonstrated, which was
not until sometime after the agreement in question, the parties
adopted the short cut of having Gutenkunst accept the
bonds themselves in discharge of his share of the estate. We
see nothing in this involving a contract to make a distribution
other than that prescribed by the will.
By the Court. — Judgment affirmed.