
    Franklin, Respondent, vs. Killilea, Administrator, and another, imp., Appellants.
    
      October 7
    
    October 24, 1905.
    
    
      Claims against decedent: Presentation: Mortgages: Release fraudulently obtained: After-accrued claim: Evidence: Witnesses: Transactions with person since deceased: Escrow: Validity: Wrongful delivery by depositary: Fraudulent record of release of mortgage: Innocent purchaser.
    
    1. Where no claim upon a note is filed against the estate of the deceased maker within the time limited for that purpose hy the court, all recovery thereon against said estate is harred hy sec. 3844, Stats. 1S98. . ' •
    2. The fact, appearing in an action to foreclose a mortgage, that thej.mortgagor, prior to her death, had fraudulently obtained and recorded a release of the mortgage, did not warrant a judgment against the administrator of the deceased mortgagor for the amount due on the secured note, where no claim on such note had been filed against her estate within the time limited for that purpose. • The fraud, in such case, would not constitute a basis for a right to recover the amount of the debt which could be filed as a subsequently accruing claim against the estate under sec. 3860, Stats. 1898.
    3. A loan agent to whom a mortgagee had intrusted a release of the mortgage, to be delivered only upon full payment of the debt, and from whom the mortgagor by fraud obtained such release, is not incompetent under sec. 4069, Stats. 1898, to testify, in an action- to foreclose the mortgage, to personal transactions and communications with said mortgagor, since deceased, regarding the delivery of the release, such agent not being a party to the action nor a person from, through, or under whom either party derives his interest or title or sustains any liability.
    4. In an action to foreclose a mortgage a finding that the mortgagor unlawfully and without payment of the mortgage debt obtained possession of a release of the mortgage which had been deposited by the mortgagee with a loan agent, and recorded the same for the fraudulent purpose of discharging plaintiffs mortgage lien, is held to be sustained by the evidence.
    •5. To constitute a valid deposit of the release in escrow upon condition that it be delivered only when the mortgage note should be paid in full, it was not necessary that the mortgagee part with all control over the instrument for all time. It was sufficient that he parted with control at the time he deposited it, so that his right of possession could only be restored upon nonperformance of the condition.
    !6. Where in such case there was no negligence in the selection of the depositary, his delivery of the release contrary to the condition of the deposit did not give it any force or legal existence and, though recorded, it was no protection to subsequent innocent purchasers of the land for value.
    Appeal from a judgment of the circuit court for Milwaukee county: LaweeNCe W. Halsey, Circuit Judge.
    
      Be-■versed in part. ‘
    
    This is an action for the foreclosure of a mortgage and the •sale of the premises for the payment of a balance of $1,090 •due on a note, with the interest thereon and the costs of this action, which at the time of the entry of judgment, November 26, 1904, aggregated the sum of $1,580.16. Upon the trial the following material facts were shown by the evidence and found by the court:
    On November 25, 18 9Í, Thomas Hanlin and Margaret Hanlin, his wife, gave their promissory note to Clinton H. Walworth, or order, for the sum of $7,000, due,on or before five years after date, with interest at five per cent, payable semiannually. The note provided that the makers might pay $100 or more at any time they elected. As security for the payment of this note the Iianlins executed a mortgage on real estate owned by them, which was recorded in the office of the register of deeds for Milwaukee county. On June 14, 1894, all the interest then due on the note and all the principal excepting $1,090 was paid. On April 30, 1895, Clinton FL. Walworth sold the note to John FI. Franklin of Newark,. Ohio, and transferred it by the following indorsement:
    “Pay to the order of John FI. Franklin. Notice of nonpayment and protest waived. CliNtoN Ii. WalwoRtii.”
    The mortgage was never formally assigned. Elizabeth 8. Franlclin became the owner of this note and the mortgage under the will of her deceased husband. No assignment of the mortgage was ever recorded in the office of the register of' deeds.
    Thomas Hanlin died before the year 1895, and his wife became the sole owner of the'lands covered by the mortgage. In the latter part of the year 1895 Margaret Hanlin desired to pay the balance of this note, then not due. One T. W. Byrnes, a real-estate and loan agent residing in the city of Milwaukee, had acted for Clinton FI. Walworth in collecting; the money due on the note. At the request of Mrs. Hanlin,, T. W. Byrnes in the latter part of 1895 but before November 25th corresponded with John H. Franklin, informing him that Mrs. Hanlin wished to pay the note in full. Mr. Franklin consented to receive payment, and forwarded the note and mortgage to the First National Bank of Milwaukee with directions to receive payment of the amount due on November-25, 1895, and upon payment to surrender the papers as fully paid. He also on October 28, 1895, communicated by letter with Mr. Walworth, informing him of the intended payment by Mrs. Hanlin, and suggesting that, if necessaiy, a release showing payment of the mortgage could probably be indorsed on the back of the mortgage in the blank over Mr. Walworth’s; signature, which he had appended at the time of its transfer. Mr. Walworth, who resided in Florida during the cold season, after receiving the letter from Mr. Eranldin on November 9, 1895, executed a release, acknowledging full payment of the mortgage, and deposited it with T. W. Byrnes, upon the express condition and agreement with him that Byrnes should hold the release and not deliver the same until the-note and mortgage and the interest due thereon had been fully paid. Margaret ITanlin omitted to pay the note on November-25, 1895, as she had contemplated, and on account of this nonpayment the note and mortgage were returned to Frank-lims bank by the First National Bank of Milwaukee. John TI. Franklin and this plaintiff were never informed that Clinton EL Walworth had executed a release of this mortgage and that he had placed it in the hands of T. W. Byrnes, to-be by him delivered to Mrs. Elanlin when the note and mortgage were fully paid. John El. Franklin died at Newark, Ohio, February IS, 1896.
    Clinton ET. Walworth returned to Milwaukee in May, 1896, and as soon as he learned from Mr. Byrnes that the-note and mortgage had not been paid as contemplated he demanded the return of the release which he had executed and left with Bymes, but Bymes informed him that he was unable to find it because he (Byrnes) had misplaced it. Wal-worth at different times during the summer season demanded return of the release from Byrnes, and was informed by" Byrnes that he was unable to do so on account of his inability to find it. The court found:
    “(12) That the said Margaret Elanlin, by deceit and in-defraud of the rights of this plaintiff, and without the authority, knowledge, or consent of this plaintiff, . . . and without paying said note and mortgage, unlawfully obtained' possession of said purported release . . . from said T. W. Bymes on or prior to the 3d day of February, 1897, and unlawfully delivered the same to the register of deeds of Milwaukee county, Wisconsin, for record, and unlawfully caused tbe same to be recorded ... on tbe 3d day of February, 1897, . . . without tbe knowledge, authority, or consent of tbe plaintiff . ,
    At tbe time of tbe maturity of tbe note, November, 1896, T. W. Byrnes, at tbe request of Mrs. Hanlin, obtained an •extension of the time of payment of tbe debt for one year, and payment was thus extended by tbe plaintiff from year to year at tbe request of T. W. Byrnes, until two years after tbe death of Mrs. Hanlin, which took place in January, 1899. T. W. Byrnes paid all tbe instalments of interest to May, 1902, out of money received by him from Mrs. Hanlin. Mrs. ITanlin never paid the balance of $1,090, tbe principal, and the interest due thereon, after tbe execution and deposit of the release by Clinton H. Walworth with T. W. Bymes, and this balance of tbe principal of the note, with tbe interest thereon from May 25, 1902, was due plaintiff at tbe time of tbe trial of this action.
    Tbe defendant Henry J. Killilea was appointed administrator of tbe estate of Margaret Hanlin, deceased, and is now acting as such administrator and has charge of tbe estate. Tbe time for filing claims against tbe estate of Mrs. Hanlin was duly fixed by order of tbe court and expired on tbe first Tuesday of March, 1902. Plaintiff did not file a claim ■against the estate for tbe amount due on tbe note in question. It also appears that Mrs. Hanlin conveyed the lots covered by the mortgage — lot 13 to her daughter Alice Foley in May, 1896, and lot 14 to her daughter Mary Jane Hayes in January, 1898, — and that these grantees have conveyed the titles so acquired from their mother by various mortgages for a valuable consideration to various parties, who have received the titles without notice of an assignment of tbe mortgage by Walworth to Franklin and without notice of any fraud as to tbe release in question.- Tbe title and interests so conveyed by them are held and owned by tbe other defendants to this action as assignees of tbe mortgage interests and as grantees ■of tbe remaining equities.
    
      Tbe appellant Albert Gibbs requested tbe court to find that-plaintiff or John H. Franklin authorized Clinton IT. Wal-worth to execute and deliver a satisfaction of the mortgage;, that plaintiff bad notice of tbe fact of tbe death of Mrs. ITan-lin prior to tbe payments of interest and tbe extension for' tbe payment of tbe debt, which were granted after Mrs. Hamlin’s decease; that this appellant is a subsequent purchaser of a part- of tbe premises for a valuable consideration and without notice that Walworth had assigned the mortgage; that be relied on the release as recorded as good and valid;- and that Clinton IT. Walworth retained direction and control over tbe release left in tbe bands of T. W. Bymes. It-appears that this appellant is the assignee of a mortgage securing tbe payment of $3,500, transferred to him by Henry-Herman and given by Alice Foley and husband in February-18 97, after the release executed by Walworth had been recorded. These requests for findings were refused by the-court, and exception is alleged to such refusal.
    Tbe court held upon these facts that there is due tbe plaintiff tbe sum of $1,090, tbe balance of tbe note, with interest from May 25, 1902; that tbe release was deposited with T. W. Bymes by Clinton IT. Walworth upon condition that it should not be delivered as a satisfaction of the mortgage-until after this note, with interest, bad been fully paid; that its delivery by Bymes to Mrs. Hanlin,- or any one for her, and tbe recording thereof, was a fraud on the plaintiff; thafr there never was a valid delivery of tbe release, and that it is not a valid and binding instrument as between tbe parties, and that its execution and tbe recording of it in tbe register-of deeds’ office afford no protection to subsequent purchasers-for a valuable consideration; and that the estate of Mrs. Han-lin is liable for plaintiff’s claim on tbe note — and the court-awarded judgment accordingly.
    This is an appeal from tbe judgment by the administrator-of tbe estate of Margaret Hanlin, deceased, and by Albert-Gibbs, as assignee of one of tbe subsequent mortgages.
    
      
      Adolph Iluebschmann, for the appellant Killilea as administrator.
    For the appellant Gibbs there was a brief by Markham, Hamilton & Markham, and oral argument by Tallmadge Hamilton.
    
    
      JE. M. McVicker, for the respondent. *
   SiEBEcaasat, J.

The court awarded judgment for the full ■amount due on the note against Henry J. Killilea, as administrator of the estate of Margaret Haulin, deceased. It is without dispute that administration of decedent’s estate was ■properly instituted, and that the time limited by order of the court for presenting claims against the estate expired the second Tuesday of March, 1902. This limit of time for the filing of claims against the estate was not extended by the •court. The plaintiff filed no claim against the estate on the note in question. It has been repeatedly held that all claims against estates must be made and exhibited to the court within the time limited by the court, and under sec. 3844, Stats. 1898, a person failing to so present a claim is to be “forever barred from recovering such demand or setting off the same in any action whatever.” Carpenter v. Murphey, 51 Wis. 541, 15 N. W. 798; Winter v. Winter, 101 Wis. 494, 17 N. W. 883; Pereles v. Leiser, 119 Wis. 347, 96 N. W. 799. Such a bar is as effectual as a payment. It cuts off any remedy for its enforcement, and extinguishes the right of action on a claim which might have been presented against the estate. Eingartner v. Illinois S. Co. 103 Wis. 373, 79 N. W. 433. The time for exhibiting a claim against an estate, to fix personal liability on a note, comes within the provisions of this section.

It is asserted that this is an after-accrued claim, and that it could therefore be presented within one year after it accrued, under sec. 3860, Stats. 1898. How this claim can be treated ;as having, accrued after the time limited for creditors to present claims against tbe estate is not suggested. Tbe note became due in November, 1896. Payment of it under tbe most favorable view of tbe evidence was not extended beyond November, 1899, while tbe time for presenting claims against tbe estate of tbe maker did not expire until March, 1902, leaving a period of over a year wherein it could have been presented against tbe estate before tbe time for presenting it expired.

Some claim is made that, if tbe deceased was guilty of a fraud by wrongfully obtaining and recording the release, a recovery of tbe amount of this debt could be based on this fraud. It is perfectly obvious that tbe claim .upon which recovery is based is tbe debt evidenced by tbe note and mortgage, and that tbe alleged fraudulent conduct of tbe debtor in securing tbe release is only involved as showing that the mortgage given to secure tbe payment of the debt is still a valid and subsisting lien on which plaintiff can rely to enforce payment of her claim. Under these circumstances the provisions of sec. 3860, Stats. 1898, can have no application to this case, and tbe failure to file a claim based on tbe note against tbe estate of Margaret ITanlin, deceased, within tbe time limited by the order of tbe court, extinguished all right to a claim against tbe estate of tbe deceased, and no judgment could properly be rendered against Henry J. KiUilea, as administrator of her estate. Judgment dismissing tbe complaint as against tbe administrator should have been awarded.

It is contended that tbe evidence of T. W. Byrnes is incompetent under sec. 4069, Stats. 1898, in respect to any personal transactions and communications with Margaret Han-lin, since deceased, regarding tbe execution and delivery of tbe release, upon tbe ground that be is the person through, from, or under whom tbe parties derived an interest or title to tbe subject matter of tbe litigation. He is not a party to tbe action, nor is be in any sense connected with- tbe subject of tbe action, as a person from, through, or under whom either party derived any interest or title or sustains any liability. I-Ie is a stranger to the action, and bears no such relationship to the cause of action as to bring him within the disqualifying terms of the statute. The court properly received his evidence of the transactions covered by his testimony.

Error is assigned upon the findings of the court to the effect that Byrnes acted for Mrs. ITanlin in securing extensions of time for the payment of the balance on the note and in making interest payments for her, that the release was delivered by Walworth to Byrnes upon condition that it should not be delivered by him until the debt evidenced by the note and mortgage was paid in full, and that the release was executed and placed in the custody of Byrnes without authority or knowledge thereof by the plaintiff. The evidence bearing on these findings is not involved in any serious conflict, and plainly warrants the inferences given it by the court, and affords no basis for the claim that these findings are against the clear preponderance of the evidence.

It is also strenuously insisted that the evidence produced is not sufficient to clearly establish the invalidity of the release. In support of this contention it is claimed that the evidence of 'Byrnes is substantially the only proof on the subject and that he is discredited by his misconduct and the facts and circumstances of the case. True, this witness is not free from criticism in his dealings with the deceased and the breach of confidence as custodian of the release. His evidence of the transaction is, however, strongly corroborated by direct testimony and by circumstantial evidence bearing on the transactions involved. It clearly appears that plaintiff and her husband in his lifetime did not know that a release had been executed and delivered to Byrnes upon the condition specified, and the proof is without dispute that Wal-worth executed- and delivered it to Byrnes without authority from Franklin. The facts that the release was put on record and that Mrs. Hanlin’s daughter, immediately after it was recorded, mortgaged the premises, and that Mrs. Hanlin bad abundant means wbicb sbe could readily apply to tbe payment of tbe note, are all in corroboration of Byrnes’s version of tbe transactions and bis dealings with Mrs. Hanlin and of tbe delivery of tbe release at her request upon tbe promise that sbe would soon pay tbe note in full out of other funds available to her. Under this state of tbe facts tbe court would not be justified in disregarding bis evidence. Tbe finding that tbe release was obtained from Byrnes and recorded without payment of tbe debt and for tbe fraudulent purpose of discharging plaintiff’s mortgage lien on this property is abundantly supported by clear and convincing proof. It must stand as a fact in tbe case.'

It is urged that tbe judgment is contrary to tbe law of tbe case, upon tbe ground that tbe proof does not show that Wal-worth parted with tbe possession of the document and all right and authority to control it forever. To constitute a valid deposit of tbe release with Byrnes, upon tbe condition that be deliver it when tbe note was paid in full, it was not required that Walworth should then part with all control over tbe document for all time. Tbe essential requirement is that he who makes tbe deposit

“part with all present or temporary right of possession and!, control, until the happening of some future event or tbe performance of some future condition, upon tbe happening or-not happening or performance or nonperformance of wbicb his right of possession may return and bis dominion and| power over [it] be restored, in wbicb case the delivery is said! to be contingent or conditional. An essential characteristic and indispensable feature of every delivery, whether absolute or conditional, is that there must be a parting with tbe possession of tbe power and control over tbe [paper] by tbe grantor for tbe benefit of the grantee, at the time of delivery Prutsman v. Baker, 30 Wis. 644.

We think tbe evidence sustains tbe conclusion that Wal-worth parted with tbe power and control of the release at tbe time lie delivered it to Byrnes, and bis right of possession could only be restored upon the nonperformance of the condition of the deposit. It is clear that the paper was delivered by Byrnes contrary to the condition of the deposit, and it therefore never had any force or effect, and “no right under •the same . . . [could] be acquired by any one, however innocent, or for value, unless the signer’s conduct . . . [was] so characterized by negligence as to estop him against an innocent holder from denying responsibility upon the paper.” Rehbein v. Rahr, 109 Wis. 136, 85 N. W. 315. There is nothing in the evidence characterizing Mr. Walworth’s acts as negligent in selecting the custodian. Walker v. Ebert, 29 Wis. 194. Since Walworth is free from fault in selecting Byrnes as custodian, the fact that the custodian subsequently acted fraudulently in disregarding his obligations can in no way affect the original conditions upon which he received the paper. Rehbein v. Rahr, supra; Beloit & M. R. Co. v. Palmer, 19 Wis. 574. From the foregoing it results that the release obtained no legal existence, and the recording of it is no more a legal protection to subsequent innocent purchasers for value than the recording of any paper that has never come into legal existence.

By the Gouri. — The judgment is reversed on the appeal of 'Henry J. Killilea, as administrator of the estate of Margaret Hanlin, deceased, as to that part which awards judgment for -the recovery of the sum of $1,580.16 against him as such administrator, and affirmed on the appeal of Albert Gibbs in all 'other respects, and the cause is remanded for further proceedings according to law.  