Molay's Estate, In re

• Decision Date: 31 March 1970
• Docket Number: No. 179,179
• Citation: 175 N.W.2d 254,46 Wis.2d 450
• Parties: In re ESTATE of Mike A. MOLAY, Decd. J. R. LONG, gdn. ad litem for Toni Lynn Molay et al., Appellant. v. Sue E. MOLAY et al., Respondents.
• Court: Wisconsin Supreme Court

Page 254

175 N.W.2d 254

46 Wis.2d 450

In re ESTATE of Mike A. MOLAY, Decd.

J. R. LONG, gdn. ad litem for Toni Lynn Molay et al., Appellant. v. Sue E. MOLAY et al., Respondents.

No. 179.

Supreme Court of Wisconsin.

March 31, 1970.

This is an appeal from a judgment of the county court of Rock county, probate branch, holding that Sue E. Molay was an accommodation party or a surety for her husband on two notes and, as such, was exonerated from any liability on such notes to the estate of her deceased husband, Mike A. Molay.

It appears that Mike A. Molay operated a restaurant and supper club near Beloit, Wisconsin. The business was incorporated, and Mike A. Molay was the sole stockholder. Molay died in 1964, leaving an estate that was apparently solvent. Among his liabilities were debts to the Beloit State Bank. To the extent that the debts are pertinent to this appeal, they arose out of loan transactions in September, 1962, and October, 1963. Fifty-eight thousand dollars was borrowed in 1962, and fifty thousand dollars was borrowed in 1963. On each of these occasions the decedent and his wife, Sue E. Molay, executed a joint and several promissory note to the Beloit State Bank in the amount of the loan.

Following Molay's death in 1964, the Beloit State Bank filed a claim against the estate of Molay for the amount that remained unpaid. Sue E. Molay then filed a 'claim' against the estate, alleging that she was merely an accommodation maker, and that her claim arose 'out of a right of contribution or a right of complete restitution against said estate,' and as between her and the deceased the primary liability was that of the deceased.

The executor petitioned the probate court for a declaration of rights. The proceedings that ensued resulted in a judgment exonerating Sue E. Molay of liability to the estate.

From this judgment the guardian ad litem of the children of the deceased and Sue E. Molay has appealed.

J. Richard Long, Blakely & Long, Beloit, for appellants.

William F. Donovan, Noll, Donovan & Bolgrien, Beloit, for Sue Molay.

HEFFERNAN, Justice.

No attempt has been made by the creditor, Beloit State Bank, to collect any portion of the indebtedness from Sue E. Molay, who was, with her husband, a signatory to the notes. It is apparent, however, that, if the surviving wife has an obligation to the estate by reason of being a co-maker of the notes, the executor is obliged to seek contribution from her; and it is particularly the duty of the guardian ad litem to preserve the estate for the benefit of the children.

Sue E. Molay acknowledges the fact that the Bank would have the right to proceed against her for the total amount of the indebtedness, but she contends that she was an accommodation maker only and, in the event of being held to her obligation, would be entitled to full restitution from the estate of Mike Molay. On the converse, she argues that the estate has no right to seek payment or contributions from her. Her position was, she alleges, merely that of a surety.

The jural relationship between an accommodation maker, the accommodated party, and the payee is not disputed by the parties.

The Negotiable Instruments Law was in effect at the time of the making of the notes in question. It has since been superseded by ch. 158 of the Laws of 1963, the Uniform Commercial Code. 'Accommodation maker' was defined by the Negotiable Instruments Law, sec. 116.34, Stats. (1963), as:

'* * * one who has signed the instrument as a maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person 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.'

It is thus clear and undisputed that Sue Molay, even though only an accommodation maker, was liable to a holder for value, by virtue of her being a signatory on the note. Perry v. Riske (1957), 2 Wis.2d 377, 86 N.W.2d 429; Beyer Lumber Co. v. Brooks (1969), 45 Wis.2d 262, 172 N.W.2d 654. Accordingly, the Beloit State Bank could have proceeded against Sue Molay without seeking payment from the estate of Mike Molay, even though, as the accommodating party, she did not receive consideration for the transaction. Perry v. Riske, supra.

In the event an accommodation maker is obliged to pay the note, the accommodation maker has the right of recovery from the accommodated party to the extent of the payment as indemnification. The relationship is that of a surety, and the right of the accommodation maker to recover from the person accommodated arises, not out of the note on which both are makers, but upon the implied promise of the accommodated party to indemnify. In the event the accommodated party pays the entire debt, he has no right of action against the accommodating party. Halbach v. Halbach (1951), 259 Wis. 329, 48 N.W.2d 617; Estate of Onstad (1937), 224 Wis. 332, 271 N.W. 652, 109 A.L.R. 630; Beutel's, Brannan Negotiable Instruments Law, 7th ed., sec. 29, p. 561; 5 Uniform Laws Annotated, Uniform Negotiable Instruments Act, part 1, sec. 29, note 81, pp. 428--430, and Cumulative Annual Pocket Part, pp. 173, 174; Britton, Bills and Notes (hornbook series, 2d ed.), sec. 267, p. 646.

The appellant takes the position, which legally is unassailable, that a party who receives consideration for the execution of the instrument cannot be considered an accommodation maker. He would acknowledge that Sue Molay would be an accommodation maker under the definition of the Negotiable Instruments Law, sec. 116.34, Stats. (1963), supra, in the event she received no consideration for the transaction. He contends, however, that she did in fact receive consideration and, hence, cannot claim to be a mere surety.

His initial contention is that the note was under seal and recited that it was for a valuable consideration, and hence Sue Molay will not be heard to make claim to the contrary. He refers to sec. 116.29, Stats. (1963):

'Presumptions. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.'

The construction urged by the appellant is consonant with the purpose of the law--to further the ready negotiability of commercial paper and to protect subsequent holders--but it is not consonant with reason to give literal interpretation to the statute when the dispute is between the makers of the instrument.

It has been established that parol evidence is admissible to show that the person claiming to be merely an accommodation maker signed only as a surety and not for the purpose of receiving consideration from the transaction itself. While parol evidence is not admissible to vary the terms of an instrument, the question at issue here is not the obligation created by the note to the payee or subsequent holders, but the existence of an implied promise of suretyship between the signatories to the note. As a consequence the relationship between an alleged accommodation maker and the accommodated party can be shown by parol. Perry v. Riske, supra, 2 Wis.2d p. 384, 86 N.W.2d 429; Garlie v. Rowe (1928), 197 Wis. 257, 261, 221 N.W. 749, 223 N.W. 93.

In the event of an attempt by the executor to claim contribution from Sue Molay, a contingency sought to be avoided by the adjudication of this claim, Sue Molay could clearly assert the defense of no consideration. Beyer Lumber Co. v. Brooks (1969), 45 Wis.2d 262, 172 N.W.2d 654; Perry v. Riske (1957), 2 Wis.2d 377, 384, 86 N.W.2d 429; Garlie v. Rowe 1928), 197 Wis. 257, 221 N.W. 749, 223 N.W. 93. We conclude that Sue Molay is not barred by the statute from asserting that she received no consideration from the transaction.

The trial court properly permitted the admission of parol evidence for the purpose of showing that under the terms of sec. 116.34, Stats. (1963), she lent her name as an accommodation to her husband and without receiving value therefor. After hearing the evidence, the trial court concluded:

'* * * Sue E. Molay signed the notes in question and the mortgages for the sole purpose of lending her name to her husband to enable him to obtain the loans.'

This conclusion was based upon findings that Sue Molay had no part in negotiating the loans and that her name appeared only because the bank required the wife's signature in the event of any loan to a married man. It also found that Sue Molay received no consideration from any of these loans, and the sums involved did not concern her separate property or business. These findings if not contrary to the great weight and clear preponderance of the evidence must be sustained.

While an attempt is made to question the weight of the testimony, it cannot be seriously argued that the testimony adduced at the hearing does not support the findings. The objection chiefly urged is not that the evidence is insufficient, but that certain witnesses were incompetent to testify because of the prohibition of sec. 885.16, Stats., the Deadman's statute. That statute provides:

'Transactions with deceased or insane persons. No party or person in his own behalf or interest, and no person from, through or under whom a party derives his interest or title, shall be examined as a witness in respect to any transaction or communication by him personally with a deceased or insane person in any civil action or proceeding, in which the opposite party derives his title or sustains his liability to the cause of action from through or under such deceased or insane person, or in any action or proceeding in which such insane person is a party prosecuting or defending by guardian, unless such opposite party shall first, in his own behalf, introduce testimony of himself or some other person concerning such transaction or communication, and then only in respect to such transaction or...