223 P. 959 | Cal. | 1924
Defendants appeal from a judgment in favor of plaintiff in an action upon a promissory note. The sole *199 contention urged by them upon this appeal is that the cause of action was barred by the statute of limitations.
After the former decision of this case a rehearing was applied for by the respondent upon the ground that we had failed to consider one of the points made by her upon the oral argument and that we had, in effect, overruled the case ofMore v. Hutchinson,
On August 5, 1905, George K. Porter executed and delivered to O.H. Bogart, plaintiff's assignor, the note here sued on, which is for the sum of $2,575.20. The instrument is made payable eighteen months from the date thereof, to wit, March 5, 1907. After the execution of the note, and about September 10, 1906, Porter caused the incorporation of the George K. Porter Company. This company was formed principally to take over, hold, own, manage, and control the properties of Porter. In pursuance of this plan Porter a few days thereafter granted and conveyed to the company all of his real and personal property wheresoever situated. The company, as part of the consideration for this conveyance and transfer, agreed to and did assume the payment of all the outstanding indebtedness of Porter existing at the time of said conveyance. This agreement was never rescinded. Shortly thereafter, on November 16, 1906, Porter died. The claim of Bogart upon the note was duly presented within the statutory period to the executors of the estate of Porter. It was rejected, and a suit was duly commenced upon the note, which action is still pending and undetermined. On January 27, 1909, Bogart assigned, transferred, and set over to his wife, the plaintiff herein, all of his right, title, and interest in and to the said note and in and to the action based thereon for its collection, then pending against the executors of Porter's estate. About this time the affairs of the George K. Porter Company became involved and litigation resulted. A settlement was effected *200 under which a division of the assets of the corporation was made among its stockholders. In pursuance of this settlement the company conveyed all the real property located in the county of Los Angeles, valued at the sum of $750,000, in equal parts to its three principal stockholders, Kate C. Boruff, one of the defendants, and Estelle C. Christin and Benjamin F. Porter, interveners herein. At this time there still remained in the company undistributed certain lands situated in different counties of the state, which, together with certain personal property, amounted in value to about $65,000. On September 30, 1911, this property was transferred and conveyed to the Merchants Bank and Trust Company, a corporation, now the Hellman Commercial Trust and Savings Bank, defendant herein, for the purposes of sale, and for the payment out of the proceeds thereof of the taxes thereon and other incidental expenses connected therewith, and also for the payment of all the indebtedness of the Porter Company. Thereafter this last-named company failed to pay its license tax and forfeited its charter, and its directors, Kate C. Boruff, Fred L. Boruff, Louis P. Boardman, and J.E. Pearce, became its trustees by operation of law. Under all of these circumstances, and upon the promise of the Porter Company to pay all of the outstanding indebtedness of George K. Porter, this action was commenced January 20, 1917, against the George K. Porter Company, its trustees, above named, and against the Hellman Commercial Trust and Savings Bank, as the holder of certain assets of the Porter Company charged with the payment of its indebtedness under the conveyance, as above indicated. The facts, as above stated, are interpreted in the light most favorable to respondent's contentions and in support of the judgment.
[1] Appellants contend that whether the gist of plaintiff's action be considered to be upon the original note which matured in 1907, or upon the assumption thereof by the George K. Porter Company in 1906, or upon the implied assumption thereof by the bank in 1911, in either event it is barred by the statute of limitations, this action having been commenced more than four years subsequent to all of those dates. Respondent contends that her cause of action rests upon the agreement of the George K. Porter Company in 1906, whereby it assumed and agreed to pay all of the outstanding indebtedness of the said George K. Porter; that *201
under the well-recognized rule of equity, which has been enacted as a rule of law in section
[2] It is the theory of some of the decisions that the right of action thus recognized finds its source in the agreement of the immediate parties thereto (George K. Porter and the George K. Porter Company) from which the law operating upon the acts of the parties creates the duty, establishes a privity and implies the promise and obligation on which the action is founded. (Washer v. Independent M. D. Co.,
Under the rule of the cases which hold that the right of action "finds its source in the agreement of the immediate parties thereto" it is apparent that the obligation from the promisor (grantee) to the third person (creditor) arises at once upon the making of the agreement. The law instantly "creates the duty, establishes a privity and implies the promise and obligation on which the action is founded." The cause of action therefore arises at once and the right of action thereon accrues when the obligation is breached. If the original indebtedness does not mature until after the assumption thereof by the promisor (grantee), the breach would occur and the right of action accrue when, upon the maturity of the original indebtedness, the promisor failed to pay the same. (Roberts v. Fitzallen,
Under the rule of the cases which proceed upon the theory that the grantee (promisor) becomes the principal debtor and the grantor (promisee) his surety and that the creditor (third person) is entitled to equity to enforce that obligation and apply it to the satisfaction of his claim, it is clear that the basis of his action is the obligation from the grantee to his grantor. That obligation is fully created when the contract to assume the debt is entered into, and the right of action thereon would accrue at the time and under the conditions *203
as above stated. This conclusion is supported by a consideration of the provisions of section
[3] The obligation herein was kept alive by the commencement of the action upon the note against the estate of George K. Porter, deceased, which suit is still pending and undetermined. This undoubtedly has the effect of keeping the right of action alive as against that estate, but not as against any other parties liable upon the note. Conceding that the indebtedness evidenced by this note was a part of the indebtedness assumed and agreed to be paid in 1906 by the George K. Porter Company, the latter became, in effect, a joint and several obligor upon that note, the same as if it had been a signer thereof, and the rule would apply that the pendency of an action against one of several joint obligors stops the running of the statute of limitations only as to him who was the party defendant at the time it was filed. (Jeffers v. Cook,
[4] Respondent relies upon the rule stated in 3 Pomeroy's Equity Jurisprudence, fourth edition, page 2888, as follows: "That a grantee who thus assumes payment, in whole or in part, of a mortgage as a portion of the purchase price of the land conveyed to him, cannot contest the validity of the mortgageon any ground and thus evade the liability which he has assumed." Respondent construes this rule to mean that such a grantee cannot defend against the enforcement of such a mortgage even upon the ground that the *204
action thereon is barred as to him by the statute of limitations. But the rule does not go thus far either in its language or in its meaning. It means only this: that a grantee who thus assumes payment of a mortgage cannot contest the validity thereof as a valid and subsisting obligation at thetime he assumed it; or, in other words that he will not be heard to claim that it was not at that time a valid and subsisting obligation. That this is the extent and the limitation of the rule is made manifest by an examination of the numerous cases which are cited by the author to this portion of his text. All of those cases, with the exceptions hereafter noted, were cases wherein the grantee sought to contest the validity of the mortgage upon a ground which, if successful, would have established its invalidity at the time he assumed it, such as failure or want of consideration therefor, fraud, undue influence, nonexecution, usury, etc. The rule is but a particular application of the general rule of estoppel by deed. A grantee who by a covenant in his deed expressly recognizes the existence and validity of a particular debt or other obligation and assumes and agrees to pay the same is estopped thereby to claim that such debt or obligation was not valid or subsisting at the time he so recognized and assumed it, but the estoppel this arising goes no further than the admissions of the covenant out of which it arises. This is apparent from the cases cited by the author. For example, inSherman v. Goodwin,
"The nature of a creditor's right against one who has promised the debtor to pay the debt is also involved in determining when the statute of limitations bars the creditor's action. On principle the creditor must have a claim that has not been barred against the original debtor [see, also,Daniels v. Johnson, 129 Cal., at page 418 [79 Am. St. Rep. 123,
No case has been cited herein, nor have we found any, whichdecides that the statute of limitations will not run in favor of a grantee, upon his contract to assume a debt, *206
or that a grantee who is sued upon a debt, the payment of which he has assumed by a covenant in his deed, is estopped to defend upon the ground that the statute has run upon his obligation
since the maturity thereof. There are cases in which language is used which seems to support this conclusion, but upon analysis it is found that such language goes beyond the points decided and is irrelevant to the facts there under consideration. For example, in Davis v. Davis, supra, the court cites a Michigan case as holding "that where a vendee assumes the payment of a mortgage indebtedness, he waives all defenses thereto except payment." That question was not involved in the Davis case. The sole question there was whether such a vendee could defend on the ground that the indebtedness was not a valid obligation at the time he assumed it, and the court correctly held that he could not. The Michigan case there cited (Terry v. Durand Land Co.,
It is to be noted that there is no element of trust in the instant case, so far as the question of the liability of the George K. Porter Company is concerned, and the respondent so concedes. There is neither allegation nor evidence nor finding which would support the inference that a trust relationship existed on the part of that defendant. It clearly appears that the conveyance of property from Porter to the Porter Company was not upon any trust, but, on the contrary, passed to the grantee upon a valuable consideration, not merely the legal title, but the entire beneficial interest in the property conveyed, and the trial court found that "the said corporation thereupon became the owner of all the said property."
In the case of More v. Hutchinson, supra, it was held that the rule that suit may be brought by the third person upon a contract entered into for his benefit immediately upon the execution of the contract arises from the fact that the suit itself is deemed an acceptance of the contract, and until such acceptance there is no liability on the part of the person making the contract, but such contract, as far as the third person is concerned, amounts to a mere offer or proposal. On the authority of that case it is now argued that the assumption by the George K. Porter Company of the debts of Porter was a mere offer or proposal which did not give rise to any obligation in favor of plaintiff until the acceptance thereof by plaintiff; that plaintiff never accepted it until the commencement of this action, and, therefore, the statute of limitations could not have run. This point was not made nor was that case cited in any of the briefs on file herein, although the case had been briefed three different *208 times by both parties upon this appeal; first, upon the original appeal, then upon application for rehearing in the district court of appeal, and again upon application for hearing by this court after decision by the district court of appeal. The point was mentioned and the More case cited for the first time in the oral argument at the hearing by this court after decision by the district court of appeal, but nothing was said to indicate that the point was not discussed or that case cited in the briefs on file. The former opinion was written in response to the arguments presented in the briefs, and, therefore, did not dispose of the point now urged.
The case of More v. Hutchinson was dealing with the peculiar statute of limitations applicable to stockholders' liability which forms an express exception to the general rule with respect to the time when the statute begins to run. (Code Civ. Proc., sec. 359.) The general rule is that the statute runs from the time when the cause of action accrues (Code Civ. Proc., sec. 312), or, in other words, when the creditor is entitled to commence and maintain an action thereon. But the statute under consideration in the More case runs from the time when the liability was created, which may be, and frequently is, an entirely different point of time. This distinction was pointed out in the case of Hunt v. Ward,
[6] It is argued that the instant case is not governed by the rule last mentioned because it is not a case wherein the acceptance is required merely to perfect a right of action upon a cause of action already existing, but presents a situation, as in the More case, wherein the acceptance is necessary to create the obligation itself which constitutes the cause of action. So, also, was the case of Thomas v. Pacific Beach Co.,supra, but granting this contention, and giving full application herein to the rule of the More case, and conceding that the contract of the George K. Porter Company, whereby it assumed and agreed to pay Porter's debts, was, as to the plaintiff, nothing more than a mere offer or proposal, which could not give rise to an obligation unless and until accepted by plaintiff, it follows that the duty rested upon the plaintiff to accept such proposal within a reasonable time, and upon her failure to do so the proposal was revoked by operation of law. (Civ. Code, sec.
It cannot be said that an acceptance after an unexplained delay of more than six years was within a reasonable time. (6 Cal. Jur., pp. 56, 57, and cases cited.) It follows that plaintiff is not entitled to recover herein in either view of the case. If it be deemed that the contract of assumption by the George K. Porter Company, ipso facto, created the cause of action here sued upon, the action is barred by the statute of limitations. If it be deemed that such assumption constituted a mere offer or proposal, the same was revoked by operation of law before its acceptance by plaintiff and therefore never gave rise to the obligation here sought to be enforced.
With respect to the question of the liability of the Hellman Commercial Trust and Savings Bank, it is to be noted that this defendant did not assume, or agree, or promise, or offer to pay any indebtedness whatsoever. The George K. Porter Company conveyed to it certain property in trust for certain specified purposes, among which was the payment of the debts of the grantor, and it still holds said property under said trust. It follows that if the respondents were entitled to recover herein as against the Porter Company, she would also be entitled to have her claim satisfied out of the assets held by the bank in trust for that company. But having no enforceable claim as against the Porter Company, she has none against the bank.
The judgment is reversed.
Wilbur, C. J., Waste, J., Seawell, J., and Lawlor, J., concurred.
Rehearing denied.
All the Justices concurred. *212