|
COURT OF APPEALS DECISION DATED AND RELEASED August 31, 1995 |
NOTICE |
|
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-0506-FT
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT IV
WILBERT HERRLING,
Plaintiff-Appellant,
v.
CYRIL TILSEN, and
ARTHUR HOHLSTEIN,
Defendants-Respondents.
APPEAL from a judgment
of the circuit court for Dane County:
PAUL B. HIGGINBOTHAM, Judge. Affirmed.
Before Eich, C.J.,
Gartzke, P.J., and Sundby, J.
PER CURIAM. Wilbert Herrling appeals from summary
judgment dismissing his suit against Cyril Tilsen.[1] Herrling argues that the circuit court
incorrectly applied the law of novation when it found that Tilsen was no longer
liable on a promissory note executed between the parties in 1983. Because we find that a valid novation
occurred, we affirm the order.[2]
STANDARD OF REVIEW
Construction
of a contract is a question of law, Lambert v. Wrensch, 135
Wis.2d 105, 115, 399 N.W.2d 369, 373-74 (1987), and we determine questions of
law independent of the circuit court. Ball
v. District No. 4, Area Bd. of Vocational, Technical & Adult Educ.,
117 Wis.2d 529, 537, 345 N.W.2d 389, 394 (1984).
BACKGROUND
In
1983, Cyril Tilsen and Arthur Hohlstein, and H-T Corporation (a company jointly
owned by them) entered into an agreement with Wilbert Herrling. Tilsen, Hohlstein and H-T agreed to acquire
the assets of a business formerly run by Herrling, and to lease property owned
by Herrling. Their agreement was
evidenced by an Installment Sale and Security Agreement and a Sale Agreement,
as well as a promissory note. By the
promissory note, Tilsen, Hohlstein and H-T agreed to pay Herrling $51,600 plus
interest, with the unpaid principal balance due on October 1, 1993.
In 1986, Tilsen desired
to leave H-T. He approached
Hohlstein. Between themselves, they
agreed that Hohlstein would take over H-T's liabilities, and in exchange,
Tilsen would transfer all his H-T stock to Hohlstein. Tilsen and Hohlstein approached Herrling, and after various
negotiations, the parties wrote the following agreement:
WHEREAS, Tilsen is divesting himself of
any interest whatsoever in H-T Corporation effective upon execution of this
agreement by all parties and wishes to be released from liability under said
note and lease, and
WHEREAS, Herrling, Hohlstein and H-T
Corporation have reached agreement on certain amendments to the above-mentioned
note and lease and have incorporated said amendments into the note and lease
...
NOW THEREFORE, in consideration of the
mutual promises of the parties and other good and valuable consideration, it is
agreed as follows:
1. Herrling agrees that upon execution of this
agreement by all parties, and upon the execution of the amended note and
amended lease, copies of which are attached ..., Tilsen shall be released from
all liability on the promissory note ... and from any liability under the terms
of the lease ....
....
3. Tilsen agrees to assign and transfer to
Hohlstein ... shares of stock of H-T Corproation [sic] stock in his name, so
that Hohlstein shall thereafter be the sole shareholder of H-T Corporation, and
shall also deliver to Hohlstein his resignation as an officer and director of
said corporation effective as of the date of the full execution of this
agreement by all parties.
Herrling, Hohlstein,
H-T, and Tilsen all signed the agreement on November 6, 1986. The amended promissory note referred to by
the agreement was never signed. By its
terms, the amended note was to be signed by H-T and by Hohlstein, who were to
pay the sum of $51,600 to Wilbert Herrling and his wife, Adeline Herrling. However, no provision was made for Tilsen's
signature, and Tilsen later testified that he had never seen the promissory
note before it was made an exhibit in litigation.
The amended note made
provisions for payment of certain amounts in a certain manner, for a new rate
of interest, for the payment of principal in addition to interest, and
contained various other provisions by which it differed from the 1983 note. Hohlstein made the required payments to
Herrling in the manner specified by the amended note, and Herrling looked only
to Hohlstein for payment of amounts past due.
Neither Hohlstein nor Herrling communicated further with Tilsen, who
appears to have moved to California. In
1994, after Holstein had defaulted, Herrling commenced this suit, contending
that Tilsen remains liable under the original 1983 note.
ANALYSIS
Herrling
argues that under the agreement quoted above, Tilsen was to be released from
liability "upon execution of this agreement ... and upon the execution
of the amended note ...."
(Emphasis supplied.) Because the
note was never executed, Herrling argues that Tilsen was never released from
liability. We disagree. Herrling's argument elevates form over substance.
Under Wisconsin law, a
promissory note does not constitute the debt itself, it is merely evidence of
it. Mortgage Assocs. v. Monona
Shores, 47 Wis.2d 171, 180, 177 N.W.2d 340, 347 (1970). Thus, failure to sign the note is not fatal
where, as here, the note and other evidence memorialize the debt. Stated otherwise, the parties may become
bound by the terms of a contract, even though they do not sign it, where their
intention to do so is otherwise indicated.
Consolidated Papers, Inc. v. Dorr-Oliver, Inc., 153 Wis.2d
589, 599, 451 N.W.2d 456, 461 (Ct. App. 1989) (contract binding where buyer
signified assent by issuing purchase order).
By
his signature on the November 6, 1986, agreement, Herrling consented that
"Tilsen shall be released from all liability on the promissory note
...." Thereafter, his course of
dealing with Hohlstein only, even when amounts became past due, indicates his
intent to remain bound by the agreement.
Herrling argues that Navine
v. Peltier, 48 Wis.2d 588, 180 N.W.2d 613 (1970), mandates a contrary
result. We disagree. As stated in Navine, "The
issue ... is whether the actions of the parties constituted a novation
...." Id. at 592,
180 N.W.2d at 614 (emphasis supplied).
Stated otherwise, whether the parties' actions constitute a novation is
a question of fact. Id.
at 596, 180 N.W.2d at 616. At least two
major factors distinguish these cases on their facts.
First, unlike in Navine,
Herrling agreed in writing (by the November 6, 1986, agreement) to relieve
the alleged obligor of his obligation.
Second, unlike in Navine, where one year passed without
demand on the alleged obligor, Herrling permitted many years to go by before he
attempted to collect from the alleged obligor (1986 to 1993). Because the actions here, unlike those in Navine,
indicate that the substituted note was a novation, Navine does
not control.
Herrling also argues
that any possible novation is invalid because it is unsupported by
consideration. We reject this argument
also. Under the novation, Herrling
received accelerated payments of principal.
We reject Herrling's argument that he would "ultimately" have
received these payments under the 1983 note as well. It is beyond need of citation that the current and future value
of money differ and that an obligation to pay in the future is not the same as
accelerated payment in hand.
By the Court.—Judgment
affirmed.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.