Court Opinion

ID: 4011004
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:13:34.501741+00
Date Added: 2024-06-11T07:44:44.526992
License: Public Domain

December 30, 1940, H. Phillips Company filed a claim against the estate of James Peterson, deceased.  From a judgment that the promissory note on which the claim was based was null and void and that it be delivered to the court for cancellation, the claimant appeals.
Claimant is the holder of a promissory note made by Arthur Sierck, Lodice Sierck, and W. C. Prebbanow, and indorsed by the deceased, James Peterson, among others.  It is undisputed that Arthur Sierck was employed by the claimant and embezzled $2,021.73 from his employer, that on October 5, 1937, he pleaded guilty to the charge in the circuit court for Wood county and was sentenced to a term in the state prison. His application for probation and parole was denied October 19, 1937.  During the period from October 5th to October 19th the note in question was executed under circumstances which are the subject of dispute.  The trial court found that the note was made for the sole purpose of making restitution of the amount embezzled on the condition that Arthur Sierck be paroled and with the understanding that, if he was not paroled, the note was not to be delivered to the payee.  The note was given to Arthur Sierck's attorney to keep with that understanding.  Appellant contends that the note was made in order to make unconditional restitution of the amount embezzled with the hope that if this was done the trial court might *Page 450 
be moved to grant probation.  After the execution of the note, Walter Sierck, the brother of Arthur and one of the indorsers, telephoned Lodice Sierck, the wife of Arthur, and told her to come to Wausau and bring the note.  Walter had talked to the attorney for the present claimant who had told him that Arthur would be paroled that afternoon.  Mrs. Sierck got the note from a stenographer without the attorney's permission or knowledge.  Mrs. Sierck was in an automobile accident on her way to Wausau, but Walter got the note and delivered it to the claimant's attorney.  Subsequently probation was refused and Arthur served his term.
The trial court adjudged the note null and void because the delivery was unauthorized or at least conditional and also because the consideration was against public policy.
The dispute in this case arises between the payee of a negotiable promissory note and the estate of one of the indorsers.  These were the only parties before the court and it had jurisdiction of the parties to this controversy only. Therefore the direction that the note be surrendered was in excess of jurisdiction.
The findings of the trial court tend to show that the makers and indorsers of the note in question signed it with the clear understanding and agreement that it was not to be delivered to the payee and was not to become a present obligation unless Arthur Sierck was granted probation.  The trial court found as a fact that this agreement was known to the payee company and that the note was delivered to it only because Walter Sierck had been told that his brother would be paroled that afternoon.  Appellant claims that the note was given unconditionally to make restitution of the embezzled money, but the trial court found that the delivery was conditional and the evidence amply supports this conclusion. *Page 451 
Sec. 116.20, Stats., governs the delivery of completed negotiable instruments.  Respondent's evidence rebuts the presumption of "a valid and intentional delivery."  It establishes that the delivery on which appellant relies was contrary to the intent of the respondent's decedent and that appellant had notice of the conditions under which the indorsement was executed. This being true, respondent's defense is good.  SeeHodge v. Smith, 130 Wis. 326, 110 N.W. 192; Murphy v.Drum  Bugle Corps, 53 Ga. App. 448, 186 S.E. 444; Barochv. Greater Montana Oil Co. 70 Mont. 93, 225 P. 800.  The finding that the payee understood the condition destroys the possibility of its claiming as against the respondent to be a holder in due course.
The facts as found show that the consideration for the note was to be Arthur's release.  There was a complete failure of consideration which is a defense under sec. 116.33, Stats.
By the Court. — Judgment dismissing the claim against the estate of James Peterson, deceased, is affirmed; but reversed as to the requirement that the note be delivered to the court for cancellation, appellant to have costs.