Mergener v. Fuhr , 189 Wis. 571 ( 1926 )

Doerfler, J.

Is the release of the plaintiff’s mortgage, which purports to have been executed on July 2, 1918, and recorded on February 4, 1920, a genuine document, or is it a forgery? This inquiry lies at the very threshold of this case, and presents a vital question, which, when solved, acts as a master key, opening up and disclosing whatever mystery there may exist in this case.

Upon the trial of the action the release was unavailable. It was not-disclosed by a search, and a demand upon the representative of Habhegger’s estate and upon his widow did not result in its production. It was evidently destroyed, and the destruction of such an important document, under the circumstances existing herein, in itself constitutes a circumstance which has strong probative force tending to the conclusion that the release was a forgery. Had the release been in existence at the time of the trial its production would have afforded a basis from which it could be readily ascertained whether the signature of the plaintiff appearing upon the document was genuine or spurious. In modern times a system of detection of spurious documents has been developed by handwriting experts which has proven itself so effective as to lead to a correct and satisfactory solution of many a mystery involved in such documents. Such system has been of great aid to the courts in the administration of justice, and the Reports contain numerous instances of such cases. The copy of the spurious instrument spread upon the recorder’s records, in logic affords but little if any aid in determining the genuineness of the instrument. Under the system, however, that prevails in the various states, the record in the recorder’s office is constituted presumptive evidence of the genuineness of the instrument, and in this state, bjr sec. 327.17 of the Statutes, provision in that behalf has been made by the legislature, so that unless it appears from the evidence in the case that this presumption has been overcome, the record must be deemed controlling whenever and wherever it is offered and received. Such statutory rule has been adopted as a wise provision, tending to establish the security of real-estate titles, and such rule is both practical and wise, for, were it non-existing, the subject of titles would be thrown into a condition of absolute uncertainty and confusion.

To entitle an instrument involving the title or an inferest in property to record, the instrument, among other things, must be acknowledged before a proper officer authorized by law to take and certify an acknowledgment. Such acknowledgments are ordinarily taken and certified by a notary public. The rule that a public officer has performed his duty and that he acted honestly and in good faith is universal, and it is this rule that forms the foundation for the presumptive evidence that is created by such statutes as sec. 327.17 of our Statutes. By reason, therefore, of the great importance of the recording acts upon which owners of property have a right to rely for the stability of titles, the presumption created by the statute cannot be lightly overcome. Where, therefore, an original release like the one here in question has been destroyed, the rule prevails that the presumption arising from the record can only be overcome by clear, satisfactory, and convincing proof; and this rule is only relaxed when it appears that the acknowledging officer has been guilty of a fraud, a crime, or a gross irregularity. Seidl v. Paulu, 174 Wis. 403, 183 N. W. 246; Vesey v. Solberg, 27 S. Dak. 618, 132 N. W. 254; 1 Corp. Jur. 886.

We have carefully examined the evidence in the case and have considered all the surrounding facts and circumstances, and are convinced that it has been shown by clear, satisfactory, and convincing evidence that the release is not only a spurious instrument but that it was forged by Habhegger.

We have heretofore discussed the circumstance which we deem of great weight, consisting of the destruction of the alleged spurious release. This circumstance, however, is but one of a number, all of which are persuasive that the recorded document is a forgery. Habhegger at all times herein mentioned, until he entered into the land contract with the defendants Fuhr and wife, was the real owner of the property described in the complaint. He was such real owner when the trust company mortgage was executed, which was subsequently assigned to Wegell. He was such owner when the plaintiff’s mortgage was executed. He was in fact such owner at and prior to the time when Zipter and wife conveyed to him the record title by warranty deed in 1920. Zipter concededly was a mere tool of Habhegger, who permitted his name to be used to promote the latter’s fraudulent schemes, and who was a party to the creation of a situation where innocent third parties were led to believe that he was in fact the real owner of the property, whereas in truth Habhegger was such owner. Whether, therefore, Zipter and wife were innocent of any fraudulent intent, their acts, as shown by the undisputed evidence in this case, were such as to place them in a position in a court of equity where they are entitled to little or no consideration. This false showing and holding out to the public of a record title in the Zipters, in which Habhegger actively and intentionally participated, adds another link of great importance m the fraudulent scheme of Habhegger, which has a tendency to and actually does modify the general rule which ordinarily prevails as above indicated, and which has considerable probative force in proving not only the irregularity which consists of the acknowledgment by Habhegger of a document like the release in question, but also strongly tends to establish the forgery. In 1921, when the extension agreement, which was drafted by Habhegger, was executed, Zip'ter had parted with his title to the property and Habhegger had executed his land contract to the defendants Fuhr and wife. When this extension agreement was delivered to the plaintiff, Habhegger represented to her that the Zipters were still the owners’ of the property.

But over and above all as a convincing and satisfying circumstance, there exists the bold, outstanding, and convincing fact that at the very time when plaintiff’s mortgage was executed Habhegger represented this mortgage as a first-mortgage lien upon the property, whereas, in truth and in fact, another and first-mortgage lien for the sum of $4,000 upon a property worth in the neighborhood of $8,000 had been created by the trust company mortgage. Fraud, deception, and trickery were therefore resorted to by Habhegger at the very inception of the transactions involved herein.

These various circumstances, standing alone, would be convincing to the ordinary person, beyond a reasonable doubt, that the release was a forgery and that Habhegger was the forger. But in arriving at this conclusion we are fortunately not dependent solely upon circumstantial evidence. The plaintiff, whose testimony herein stands unim-peached and who placed implicit confidence in the honesty and integrity of Habhegger, testified positively that she never signed a release of this mortgage; that she knew nothing of a release of record until after Habhegger’s death; and that she at no time received a dollar of the principal amount. No one reading this record can fail to reach the irresistible conclusion that the instrument in question was a forgery; and whether we apply the relaxed rule referred to in Seidl v. Paulu, 174 Wis. 403, 183 N. W. 246, or the one pronounced in Vesey v. Solberg, 27 S. Dak. 618, 132 N. W. 254, or the ordinary rule applicable to cases of this kind, we are convinced that the findings of the court are amply sustained by tine evidence.

There is no evidence to show that either Habhegger or his wife had paid the principal of plaintiff’s mortgage. Zipter and wife disclaim such payment. The defendants Fuhr and wife take the position that they were unaware of' plaintiff’s mortgage until after Habhegger’s death, and no claim is made that they paid the same. Schroeder and Richter, subsequent incumbrancers, insist that they relied upon the record title, and no claim is made that they paid the plaintiff’s mortgage. It .would therefore appear conclusively that the mortgage is still outstanding and unpaid and that Habhegger forged the instrument to promote his own interests.

Great reliance is placed upon the case of Seidl v. Paulu, supra. Two releases were received in evidence in that case, the one admittedly being a forgery and the other genuine. Neither the plaintiff, Mrs. Seidl, nor her business agent, Best, could testify with any degree of certainty whether she signed the release to the mortgage which contained the proper description or the one which contained the improper one. Under such facts this court held that the plaintiff failed to prove by even a preponderance of the evidence that the release of the mortgage containing the proper description was spurious. This case, therefore, is not an authority for the instant case excepting only in so far as it approves of the doctrine and logic of the Vesey Case, which establishes a relaxation of the ordinary rule.

The plaintiff’s mortgage being a valid and subsisting lien, duly recorded, 'and securing an existing and bona fide indebtedness, can therefore be enforced and must be enforced unless it has been outlawed by the statute of limitations, which is not claimed, or unless plaintiff has been guilty of inequitable conduct to the detriment and damage of subsequent owners of the property or holders of incumbrances thereon.

In the second point strenuously urged in the argument and brief of defendants’ counsel it is contended that, admitting that the release was a forgery, nevertheless plaintiff has been guilty of such neglect as to bar her from recovery under the evidence and facts and circumstances of this case. It is conceded that she placed implicit confidence in Habhegger, who was recommended to her as an honest and capable real-estate and loan agent. When she made the investment she made no demand for an abstract and she permitted Hab-hegger to retain the insurance policies. She did not personally examine the records, and she engaged no one to perform such a service for her. Had she taken these precautions she would have been apprised of the existing prior mortgage lien to the extent of $4,000. In other words, in common parlance, she “took a long chance,” which under ordinary circumstances might have resulted disastrously to her interests. She became the ready victim of Habhegger’s fraud and deception at the very moment she opened up business relations with him. When, however, the $3,000 was paid to Habhegger for the Zipter mortgage (Zipter being a mere tool of Habhegger) and her security was duly recorded in the proper office, her lien upon the property described in the complaint became fixed as a valid second-mortgage lien both as against the Zipters and Habhegger and the. rest of the world, which was superior to every other interest or title excepting only the prior subsisting mortgage of the trust company. This lien attached many years before the defendants Fuhr and wife and the subsequent incumbrancers had any title to or lien on the property. As has heretofore been shown, such lien became fixed and permanent as to all the world, and could be defeated solely by the statute of limitations or by plaintiff’s neglectful or inequitable conduct.

It is true that the defendants Fuhr when they purchased the property exercised every reasonable precaution which a reasonably prudent man would exercise under the same or similar circumstances. They demanded and received an abstract of title and obtained the opinion of an attorney with respect to the same. Both Schroeder and Richter exercised similar precautions, and it must be admitted that if the Fuhrs and Schroeder and Richter be adjudged to stand the loss' it burdens them with an unusual hardship. We also fully appreciate the practice universally in vogue of purchasers of real estate and lenders of money to place reliance upon the title of property as it appears of record. The largest loaning companies in the world, such as the Northwestern Mutual Life Insurance Company and Eastern companies, ordinarily take no further precaution than that which was exercised by Schroeder and Richter, and this practice seems to be warranted by experience; for it is only in extremely rare cases, like the one here presented, that losses are sustained. But it is firmly established in every jurisdiction that a lien of a mortgage, properly recorded, cannot ordinarily be destroyed by a forged release; nor can a thief obtain title to personal property; neither can he convey title; and where property is stolen, many innocent purchasers in good faith for value become victims, to their sorrow, and the number so victimized is infinitely greater than those who suffer loss under circumstances like those involved in the instant case. But the mere fact that an innocent purchaser in good faith for value of personal property sustains loss is no reason why the old established rule as to title to stolen property should be modified or abandoned.

Our recording system is the result of years of development and is the product of the best thought and effort of experts in their line; and, notwithstanding that, it is far from being perfect and is still open to many’ improvements. The defects and shortcomings of the system have of recent years been disclosed, and, in order to meet a situation like the one here presented, title guaranty companies have been chartered to do business for the express purpose of indemnifying those who have become the victims of criminal operations or of the ignorance or negligence of the recording officers. For a trifling percentage, such a policy of indemnity may be readily procured everywhere, and such guaranties as a title company affords could readily have been procured by those who will be obliged to suffer the loss in the instant case.

The rule applicable to the instant case is well stated in 2 Jones, Mortgages (7th ed.) § 971&„ where it is said:

“A forged discharge is not effectual as a discharge even in favor of one who has purchased the mortgaged premises in the honest belief that the discharge as it appeared of record was genuine. That title to property cannot be taken away by theft is a principle well settled. The seller can convey no greater title than he himself possesses. It is equally well settled that an owner of property will not be deprived of his right to the same by the commission of a forgery; and this is true even where the claimant under the forged instrument had no notice of the forgery, and honestly believed that it was honest and genuine.” '

But it is further asserted by the learned counsel for the defendants Fuhr, that, conceding that the plaintiff’s mortgage when duly recorded constituted a valid and subsisting lien upon the property described in the complaint, nevertheless she was guilty of negligence in not causing an investigation of the title to be made at a subsequent period, and particularly at the time when, on January 2, 1921, she procured an extension of the mortgage for a period of three years, with a provision increasing the rate of interest from five per cent, to six per cent. Had she not procured such extension, the lien of plaintiff’s mortgage would have continued until barred by the statute of limitations. The extension merely 'continued her rights as they existed when she received and recorded her mortgage for an additional period. As is said in 2 Jones, Mortgages (7th ed.) § 942, “The extension of the time of payment of a mortgage in no way impairs the security as against subsequent incumbran-cers, even if this be effected by a renewal of the mortgage note.” See, also, the following authorities cited in the brief of the learned counsel for the plaintiff: 2 Jones, Mortgages (7th ed.) §§ 924, 925; Burchard v. Frazer, 23 Mich. 224; Bassett v. McDonel, 13 Wis. 444.

Of course, the change in the rate of interest by an increase in such rate cannot affect the right of subsequent purchasers or incumbrancers, and plaintiff’s counsel, in recognition of this doctrine, make no claim as to the increased rate of interest. If, therefore, the plaintiff’s rights could not have been affected had no extension agreement been entered into, and-if an extension in law has the effect laid down in the foregoing authorities, then it is difficult to perceive how the plaintiff can be deprived of her rights by what the defendants’ counsel denominate as negligence on her part. Had she been apprised of the forged release before the Fuhrs had obtained title to the property a different situation would have been presented, and a court of equity might then have been justified in -burdening her with this loss. This would equally be trae with Schroeder and Richter under the same or similar circumstances. But she did not discover the forgery until after Habhegger’s death and until the defendants Fuhr and the subsequent incumbrancers obtained their interest in the property.

On the trial of the action defendants’ counsel attempted to prove that the Zipters were mere accommodation makers and signers of the note and mortgage and that they received no part of the loan. Whether they received any part of the loan or not appears to us to be entirely immaterial, and surely the other defendants who obtained their interests through Habhegger and his successors are in no position to gain an advantage thereby. Constructively at least, the Zipters were guilty of a gross fraud, for upon the strength of their title and their personal liability the plaintiff relied.

Neither can it be successfully maintained that because Habhegger was the agent of the plaintiff, with authority to negotiate loans for her, it may be inferred that he had authority to execute a release of her mortgage. The release in question does not purport to have been executed by Habhegger as an agent, and nowhere is there any evidence in the case which either proves, or from which an inference can be drawn, that Habhegger ever had the right to execute this release as an agent.

We therefore conclude that the judgment of the lower court must be sustained.

By the Court. — Judgment affirmed.