James Emp. Credit Union v. Hawley

• Decision Date: 07 January 1958
• Citation: 87 N.W.2d 299,2 Wis.2d 490
• Parties: JAMES EMPLOYEES CREDIT UNION, a Wis. Corporation, Appellant, v. Marion HAWLEY et al., Respondents.
• Court: Wisconsin Supreme Court

Page 299

87 N.W.2d 299

2 Wis.2d 490

JAMES EMPLOYEES CREDIT UNION, a Wis. Corporation, Appellant, v. Marion HAWLEY et al., Respondents.

Supreme Court of Wisconsin.

Jan. 7, 1958.

Concurring Opinion Jan. 8, 1958.

Hobe & Lampert, Fort Atkinson, Robert J. Gunnis, Milwaukee, of counsel, for appellant.

Bernard Goldstein, Whitewater, Gerald L. Bass, Milwaukee, of counsel, for respondents.

STEINLE, Justice.

A promissory note for $801.07 dated September 14, 1954 was given by the defendants to the plaintiff in consideration of a loan for such sum by the plaintiff to the defendant Hawley. The note was signed by Marion Hawley as 'Maker' and by Dr. Frank W. Schneider as 'Co-maker.' After having been induced by Hawley to sign the note and before signing it, Dr. Schneider communicated with a representative of the plaintiff credit union and learned that payments would be made by pay roll deductions from Hawley's wages at the rate of $20 per week. Hawley terminated his employment with James Manufacturing Company on or about December 31, 1954. He defaulted in payments on the note on March 28, 1955. On April 21, 1955 Hawley requested the plaintiff to extend the time for payment. Such extension was granted until June 1, 1955 on condition that he pay $40 then, and a like sum each month thereafter until the obligation was satisfied. After the plaintiff had agreed with Hawley for the extension of time for payment, its treasurer sent a letter on May 12, 1955 to Dr. Schneider advising him of Hawley's request for the extension of time and as to its action in having granted such request. Dr. Schneider had not theretofore been aware of Hawley's negotiations with the plaintiff for an extension of time of payment. He had not consented to the extension arrangement. He made no response to the letter. The note was not paid on the extended due date. Cognovit judgment was entered against both defendants in the sum of $512. After the cognovit judgment had been re-opened, Hawley did not appear in the action.

In its decision the trial court pointed out that sec. 186.09, Stats., provides that all loans to an individual member by a credit union exceeding $500 shall be secured by such collateral as the credit committee shall approve. The court interpreted the term 'collateral' as used in the statute, to mean more than the signature of a co-maker, accommodation maker, surety, or guarantor. It held that the term implied the pledging of some tangible or intangible property, in the nature of bailment, to insure payment of the loan. It declared that Dr. Schneider was entitled to assume that the plaintiff had secured a pledge of property from Hawley,--the the loan being in excess of $500,--and that had such been done, Dr. Schneider would have been entitled to subrogation in event he was compelled to pay the note. The court concluded that plaintiff violated sec. 186.09, Stats., by not exacting a pledge of property as collateral.

The trial court also determined that there was ambiguity with reference to the status of Dr. Schneider as a signer of the note, and that pursuant to the provisions of sec. 116.21(6), Stats., he was to be deemed an indorser thereof. The court also held that the agreement between the plaintiff and Hawley for an extension of time for payment of the note constituted an unauthorized alteration in the note as to Dr. Schneider, and that, as a consequence, being an indorser of the note, Dr. Schneider was relieved of all liability to the plaintiff.

It is the position of the plaintiff on this appeal that (a) Dr. Schneider was an accommodation maker and that there is no ambiguity as to his status so as to justify a finding that he was an indorser as provided in sec. 116.21(6), Stats.; (b) that since the legal issue as to whether the signature of Dr. Schneider as an accommodation maker was 'collateral' within the meaning of that term as it is used in sec. 186.09, Stats.1953 in relation to loans of $500 or more, had not been raised and properly presented for review in the trial court, it cannot be raised for the first time here. In the alternative, however, and notwithstanding such position, the plaintiff contends that Dr. Schneider's participation in the note as an accommodation party was 'collateral' within the purview of said statute; (c) the agreement between Hawley and the credit union for an extension of time of payment of the note was not a material alteration within the meaning of secs. 117.42 and 117.43, Stats.1953 so as to relieve Dr. Schneider of liability.

Sec. 116.21, Stats. of 1953 provides in part:

'Where the language of the instrument is ambiguous, or there are omissions therein, the following rules of construction apply: * * *

'(6) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is deemed an indorser.'

This provision was construed in Germania Nat. Bank v. Mariner, 1906, 129 Wis. 544, 547, 109 N.W. 574, 575. It was there said:

'This provision, by its very terms, applies only to a case of doubt arising out of the location of the signature upon the instrument. Names are sometimes placed at the side, on the end, or across the face of the instrument, and thus a doubt arises as to whether the signer intended to be bound as a maker or an indorser, or perhaps as a guarantor, and to solve these doubts the section in question was evidently framed. It was to settle a doubt fairly arising from the ambiguous location of the name, and applies to no other.'

For similar rulings see also 5 Uniform Laws Anno. Part I, Negotiable Instruments, p. 198, sec. 17(V) Note 121.

In the case at bar the form of the note was printed. The signature 'Frank W. Schneider' appears at the foot of the note opposite the printed word 'Co-Maker' which appears immediately below the printed word 'Maker' and after which the signature 'Marion Hawley' is written. In a space to the left of such designations and signatures appear the signatures of three other persons written immediately below the printed word 'Witness.'

The trial court's finding of ambiguity was predicated upon evidence that Dr. Schneider was not a borrower of the funds covered by the note; that the loan was made to Hawley; that the note did not carry a designation of 'accommodation maker' or 'surety' in connection with Dr. Schneider's signature; that Dr. Schneider had not known the difference between primary and secondary liability on the note, nor the liability of an accommodation maker or indorser thereof.

Sec. 186.01, Stats. of 1953 provides that a credit union may only loan its funds to its members. However, it does not appear that there is any provision in the statutes prohibiting a person not a member to become an accommodation maker of a note given for a loan to a member who is a maker of the note.

An accommodation maker is one who has signed the instrument as maker without receiving value therefor, and for the purpose of lending his name to some other person. He is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party. Sec. 116.34, Stats.1953.

In Marling v. Jones, 1909, 138 Wis. 82, 87, 119 N.W. 931, 933, it was said:

'No consideration moving to the accommodation maker is necessary to uphold an accommodation note. The very name of the paper suggests this. The consideration in such case which supports the promise of the accommodation maker is that parted with by the person taking the accommodation note and received by the person accommodated.'

One who signs a note as a co-maker, to accommodate a maker, assumes the primary obligation as to the payee, and is a co-maker rather than a surety. Rosendale State Bank v. Holland, 1928, 195 Wis. 131, 217 N.W. 645, Bosworth v. Greiling, 1934, 213 Wis. 443, 250 N.W. 856. See also 11 C.J.S. Bills and Notes pp. 289, 290, § 739(b).

Sec. 116.21(6), Stats.1953 (supra) does not refer to an ambiguity of intention of the signing party as to his liability on the instrument. In the case at bar the note by its terms conclusively establishes that Dr. Schneider was a co-maker. The evidence reveals that he accommodated Hawley in such capacity. It appears without dispute that the plaintiff credit union was a holder for value. We are obliged determine that under provisions of sec. 116.34, Stats.1953 (supra) Dr. Schneider was primarily liable to the plaintiff as an accommodation maker.

The plaintiff has challenged the action of the defendant Schneider in presenting to this court the issue of illegal collateral. It contends that such issue was not raised by the pleadings, nor was it presented for consideration upon the trial. The plaintiff submits further that the matter originated with the trial court when deciding the cause, and that no opportunity was afforded to contest it. Both parties, however, by brief and oral argument here presented their views with respect to the matter. The trial court's conclusion of law in relation thereto was based upon facts of record. It appears without dispute that the note in question was for an amount in excess of $500. Sec. 186.09, Stats., requires that loans in excess of $500 by credit unions to its members shall be secured by collateral. Ordinarily questions not raised and properly presented for review in the trial court will not be reviewed upon appeal. However, there are exceptions to such rule. Cappon v. O'Day, 1917, 165 Wis. 486, 162 N.W. 655, 1 A.L.R. 1657; Braasch v. Bonde, 1926, 191 Wis. 414, 211 N.W. 281. For instance it has been determined that questions as to the legal effect of a deed or other instrument may be raised for the first time in this court. Hartung v. Witte, 1884, 59 Wis. 285, 18 N.W. 175 and Nighingale v. Barens, 1879, 47 Wis. 389, 2 N.W. 767. The matter at bar is within the exceptions to the rule, and we are aware of no valid reason for not determining the question of law presented.

We are of the...