Nelson v. Onstad (In re Onstad's Estate)

• Decision Date: 09 February 1937
• Parties: In re ONSTAD'S ESTATE. NELSON v. ONSTAD.
• Court: Wisconsin Supreme Court

224 Wis. 332

271 N.W. 652

In re ONSTAD'S ESTATE.^*NELSON

v.ONSTAD.

Supreme Court of Wisconsin.

Feb. 9, 1937.

Appeal from a judgment of the County Court for Dane County; E. H. Naber, Judge.

Proceeding by Robert N. Nelson on a claim against the Estate of P. C. Onstad, Jennie Onstad, executrix, wherein claimant also filed objections to items of the final account of the executrix, and moved for an order requiring the executrix to pay his claim. From a judgment adverse in part, claimant appeals.-[By Editorial Staff.]

Affirmed in part; reversed in part and remanded, with directions.

Robert N. Nelson filed a claim in the county court against the estate of P. C. Onstad. He also filed objections to items of the final account of the executrix of the will of the deceased and moved for an order requiring the executrix to pay his claim. From a judgment allowing his claim at less than claimed, denying his motion, and affirming the final account, the claimant appeals. The material facts are stated in the opinion.Curkeet & Van Wolkenten, of Madison, for appellant.

Bull, Biart & Bieberstein, of Madison, for respondent.

FOWLER, Justice.

The appellant appeals (1) from the allowance of his claim at less than the amount he claims (2) from the allowance of items of the final account of the executrix to which he filed objections, and (3) from the denial of a motion for an order of the court directing the executrix to pay his claim. The three branches of the case will be treated separately.

(1) The appellant filed a claim against the estate of P. C. Onstad for the amount of a promissory note with interest and attorney fees for collection according to its terms. The note was for $800. The payee was the Bank of Wisconsin. Appellant was an accommodation maker of the note for Onstad. The note was dated July 30, 1929, was due in 90 days, bore interest at 7 per cent. until maturity, and after maturity until paid at the highest rate permissible by law, and obligated the maker to pay an attorney fee of 10 per cent. incurred in collection.

Onstad died August 24, 1929. The bank demanded payment from appellant. The appellant paid to the bank $814. There was no indorsement or written assignment of the note by the bank to the appellant, and the county court found that the appellant did not purchase the note, but merely paid it. The appellant claims to be the owner of the note by reason of his payment and to be entitled by subrogation, under the law of suretyship, to all the rights of the bank, and therefore to be entitled to recover the full amount of the note according to its terms, as the bank might have done had he not paid it. The court allowed the claim at the amount paid and interest from the time of payment.

[1] The appellant, though a maker of the note, was an accommodation maker and was a surety for Onstad. As surety he is entitled by subrogation to whatever security the bank had for the enforcement of its claim against Onstad. Arrant, Suretyship, p. 364; Stearns, Suretyship, p. 449; Clifford v. West Hartford Creamery Co., 103 Vt. 229, 153 A. 205; 79 University of Pa.Law Rev. 976; Fox v. Kroeger, 119 Tex. 511, 35 S.W.(2d) 679, 77 A.L.R. 663. The Negotiable Instrument Law (Stat. 1929) § 116.01, which declares a person absolutely liable to pay the instrument “primarily” liable, does not change the law of suretyship. 10 Texas Law Rec. 519; Windhorst v. Bergendahl, 21 S.D. 218, 111 N.W. 544, 130 Am.St.Rep. 715;O'Neal v. Stuart (C.C.A.) 281 F. 715;Wakonda State Bank v. Fairfield, 53 S.D. 268, 220 N.W. 515; Clifford v. West Hartford Creamery Co., supra; State Bank of La Crosse v. Michel, 152 Wis. 88, 139 N.W. 748, 1131;Mueller v. Jagerson Fuel Co., 203 Wis. 453, 233 N.W. 663, 72 A.L.R. 1059.

[2][3] The above rule as stated does not afford the appellant any rights by subrogation, as the bank had no security to enforce against Onstad. The appellant claims that the rule gives him the right to recover the full amount of the note, because the bank might have so recovered had it filed the note against the estate. The rule does not reach so far. This is made clear by consideration of the decisions of this court relied on by appellant. These cases are German-American Savings Bank v. Fritz, 68 Wis. 390, 397, 32 N.W. 123, and Mason v. Pierron, 63 Wis. 239, 23 N.W. 119. In the former Blankenburg and Fritz signed a note as surety for Servatius. The payee of the note in a suit upon it recovered judgment against all three. The judgment was a lien on land of Fritz. Servatius was insolvent. Blankenburg was compelled to pay the payee the full amount of the judgment, and the bank assigned the judgment to him. Blankenburg sought contribution against Fritz, and by subrogation claimed the right of the lien of the judgment against the land of Fritz. This lien was a security which the bank acquired on rendition of the judgment, and the court held that Blankenburg was entitled by subrogation to a lien on the land for one-half the amount of the judgment paid by Blankenburg. The latter case was of the same nature. Judgment was procured against Pierron as principal and others as sureties on his bond. One of the judgment debtors was Lallier, and the judgment was a lien on his land. Some of the judgment debtors paid the judgment and assigned to one of them so paying their claim against Lallier for contribution. The judgment lien against Lallier's land was a security to the judgment creditor for the enforcement of its judgment when Lallier's codefendants paid the judgment. The plaintiff in a suit for contribution against Lallier was held entitled by subrogation to the lien of the judgment against his land. The security that the sureties who paid the judgments in these cases obtained by subrogation was a lien against the land for the landowner's proportional liability to contribution. The extent of his liability was to pay his proportional share of the amount paid by his cosurety upon the judgment. To make this rule applicable to the instant case let us assume that another had signed Onstad's note with appellant as surety, and appellant was seeking to hold the other signer in a suit for contribution. In that situation equity would award contribution for one-half the amount paid by the appellant with interest thereon at the legal rate from the time of the payment, not for one-half the amount of the note. It is true that there are cases holding that an accommodation maker paying a note is entitled to recover on the note itself. However, the weight of authority and in our opinion of reason clearly is that the surety paying recovers, not upon the note itself, but on the implied promise to indemnify. According to notes in 36 A.L.R. 575, and 77 A.L.R. 672, such is the rule. Cases to this effect are there cited by courts of the United States, fifteen of the states and England. We consider that the county court was correct in limiting appellant's recovery to the amount paid by him with interest.

(2) (a) The final judgment approving the account of the executrix showed a balance on hand for distribution of $434.47. This was only sufficient to pay creditors 7 per cent. of their claims. The account as approved contained the following items of credit to the allowance of which and others the appellant objected: Loss by depreciation through operation of business of decedent by executrix, $7,953.29; loss by depreciation of fixtures, $811.50; loss on sale of stock of goods below inventory, $2,148.93; loss on accounts, $1,314.86.

The claim of the appellant that the credits objected to should have been disallowed entirely or in great part rests upon the fact that the decedent at his death was operating a general store in the village of Cambridge and the executrix continued to operate the business from his death in August, 1929, to April, 1932.

The executrix did not obtain any order of court authorizing her as executrix to conduct the business, and did not obtain any order of court extending the time for closing the estate beyond sixty days after the expiration of the time for adjusting claims as required by section 313.13, Stats. 1929, as a condition of which extension it must satisfactorily appear to the court that some specified or other “good and sufficient cause for delay” existed. If a cause for delay did exist, the court might extend the time for settlement of an estate one year, but no longer extension might be authorized except upon petition and notice by publication. Section 313.14, Stats.1929. No such petition was filed and no notice published. The trial court found that under these statutes, in absence of an order for extension, the time for setting the estate expired December 21, 1930, and we will assume this to be correct. No account of any sort was filed by the executrix until August 13, 1932, over two and a half years after her appointment as executrix, and three years after the death of decedent, although the statute first above cited required the filing of her account within sixty days from the time fixed for adjusting claims.

The executrix claims authority for continuation of the business of the decedent under the will of decedent which contained the following clauses: “First: I will and direct that all my just debts and funeral expenses be paid as soon as may be after my decease.” Second: a clause giving his estate to his wife during her life or widowhood and thereafter to the testator's children. “Third: It is my desire that my wife, Jennie, use her discretion as to continuing to conduct *** for the benefit of my estate” the general merchandise business conducted by the decedent. Fifth: A clause naming his wife as the executrix of his estate.

The executrix, who was “the wife Jennie” named in the will, also claims authority to continue the business under an order of the county court appointing her as “special administratrix.” She was appointed special administratrix September 5, 1929. On October 23, 1929, an order was entered authorizing her to...