117 Mo. App. 385 | Mo. Ct. App. | 1906
Lead Opinion
This is a suit in equity to enforce the right of subrogation. A demurrer to the petition was sustained upon the ground that the action pleaded is barred by limitation and the case is before us upon plaintiff’s appeal.
Jacob Bowlin was the creditor of William Weese in the sum of three hundred and fifty dollars and plaintiff and defendant Cook were sureties for the debtor: On September 20, 1886, Bowlin recovered judgment upon the debt in the circuit court of Jackson county against all three obligors. Weese, the principal, was and is insolvent and for many years has been a non-resident of the State. Before the judgment was recovered, Cook, to evade his liability, fraudulently conveyed his property to his brother. On June 25,1888, plaintiff, compelled to pay the full amount of the judgment, procured from Bowlin a written ássignment thereof, but did not have it made of record. Shortly after this Bowlin died and the administration of his estate has long since been closed. Cook refused to discharge his liability as plaintiff’s co-surety and plaintiff, having no reason to doubt the bona lides of the conveyance made by Cook, and believing in the reality of his apparent insolvency, made no effort to enforce contribution. This suit followed the discovery of Cook’s fraud. Plaintiff conceding that no other remedy is open to him, because all others are barred
The principal questions for solution are these:
1. As the judgment creditor, Bowlin, held no securities for his debt, did the payment of the judgment by plaintiff operate, in equity, to substitute him in the place of Bowlin and thereby invest him with all of the rights and remedies against his co-surety that Bowlin would have had under the judgment, had the payment thereof not been made?
2. If this question should be answered in the negative, plaintiff cannot recover, for, under the statute, any action predicated alone upon the fact of payment, and not upon that of the equitable ownership of the debt would have to be brought within five years from the date of payment to escape the bar of limitation. But should the preceding question be answered in the affirmative, another arises. Under the statute then in force, the judgment was not devitalized until after the lapse of twenty years from the date of its rendition. Is plaintiff, as the equitable substitute for Bowlin, the judgment creditor, the successor to all of all the rights the latter would have possessed under the judgment as its owner to the extent of being vested with the full right of exercising them for the compulsion of contribution from his co-surety, or should he be curtailed in the enjoyment of these rights by limitations that would not have affected them, had they remained with the original judgment creditor? If, by the payment of the judgment, plaintiff’s substitution for Bowlin became complete, his action upon the judgment is timely under the statute then in force, but if the substitution was partial, there may be room for saying that the limitations applicable to the statutory action for contribution (which is based upon the fact of
The subject now before us was considered in all of its essential features in the case of Brewing Co. v. Jordan, 110 Mo. App. 286, and the conclusion reached that the fact of the payment of the debt by a surety conferred upon him, not only the ■right to assert his statutory cause of action within the period of time prescribed, but also, through the medium of an equitable assignment of the debt itself, clothed him with all of the rights and remedies possessed by the creditor, so that two separate and distinct remedies or rather causes of action were open to him — one in the nature of assumpsit predicated upon the fact of payment and the other an equitable action founded upon the .implied ownership of the obligation. In that case, as in this, the creditor held no collateral security, but notwithstanding this fact, we held that the debt had been assigned in equity and that in an action brought upon the note, by which it was evidenced, the surety could enforce his equitable right in the same period of time given by the statute for the assertion by the creditor of his legal right. A careful reconsideration of the principles discussed and a re-examination of the authorities consulted convinces the writer of this opinion that, both upon reason and authority, the conclusions there reached are in furtherance of substantial equity and should be sustained and followed, but as we now are confronted With a divergence of opinion among the members of the court relative to the questions decided in the Heim case, and which now confront us, their further discussion appears to be necessary.
The right of subrpgation, that is, the substitution for the common creditor of a surety, who has been compelled to pay his principal’s debt, originated in the civil law, and, though unknown to the common law, was in time adopted and applied in a modified form by the courts of chancery in England. The doctrine recognized
This clearly gave to the debtor, who paid the debt of himself and his co-debtors, the “actions” of the creditor, that is, his rights and remedies, regardless of all considerations relating to liens or securities. The substitution was intended to be complete and to afford the debtor, who paid, the right to use his creditor’s hand for the enforcement of contribution from his co-debtors.
In the application of this principle by the English •courts, an obstacle was encountered in the rule of the ■common laAV that makes the payment of a debt, either by the principal obligor or a surety, operate as an absolute extinguishment thereof and denies the right to a surety, who pays, to prevent the destruction ■of the debt, either by a direct assignment thereof from the creditor, or by any other means. When the debt is paid by one bound in law to pay, it •ceases to exist. Therefore, the English courts of equity, under the maxim that “Equity follows the law,” recognized this principle of the positive law and, treating the
This was the state of the law at the beginning of our national existence and, leaving here the civil and English law, we will turn to the consideration of what has been termed the American doctrine. In all of the states where the common law is followed, the English rule of substitution has been recognized and enforced. That is, under the hypothesis that payment by a surety extinguished the debt, he has been permitted to found a cause of action upon the implied promise of his principal or co-sureties to reimburse him for the amount expended by him in their behalf and, by the operation of law, has been substituted for the creditor as to all liens and securities held by the latter as indemnity against the default of his obligors.
But many courts have found that the English rule is inadequate to meet the requirements of equity and justice in all cases. There are rights, remedies and liens so indissolubly bound up with the debt itself that their destruction attends that of the debt. Therefore, in many cases, a strict adherence to the rule that payment extinguishes the debt means the withholding from the surety,, who pays the debt of another, of a substantial indemnity,, to which in real equity and good conscience he is entitled. To obviate such injustice, resort was had to the-civil law for a principle upon which to found an independent cause of action that would meet the deficiencies of that borrowed from England. Accordingly, the rule-
From an examination of the authorities, it will be discovered that, independently of statutory enactments, the courts in those jurisdictions, where the American doctrine is upheld, also enforce causes of action founded upon the English rule, notwithstanding the two principles are essentially antagonistic in fundamental particulars. In both, the end to be attained is the same — the indemnity of the surety — and both are set in operation by the same fact, the payment of the debt. But at this point they diverge: One depends for its existence upon
There is no room here for saying that payment does not ‘ipso facto assign the debt at the election of the surety, who pays it, and the better rule, the one more consonant with equity and reason, treats the surety upon his election to assert his equitable ownership of the debt as having succeeded to the rights of the creditor
But it is said that as the rights of the surety, under either action, begin with the payment of the debt, limitation begins to run then, and, as the statute fixes the period for the statutory action, it must result that equity “will follow the law” by holding that period applicable to the equitable action upon the debt. The trouble with this argument is that it starts with a wrong premise. It assumes that the statutory and equitable remedies under consideration are concurrent remedies for the enforcement of the same cause of action. In a certain way, they may be regarded as concurrent remedies, for both reach back to the same right and have in view the same purpose, but they are not concurrent in the sense that both depend upon the same cause of action. Attention has been called to the antagonistic elements that serve to differentiate and separate them into remedies pertaining to different causes of action. That two or more independent causes of action may exist for the enforcement of the same right cannot be disputed, and that
Further, it is said that, if the surety who pays the debt is to be vested with all of the rights, liens and remedies of the creditor, the door is opened for him to profit at the expense of his co-obligors. That, by inducing the creditor to accept in full payment a less amount than that due, he, as the equitable owner of the debt, could force from his co-sureties contribution upon the full amount, and thereby avoid or lessen his own just burden at the expense of his co-sureties. It must not be overlooked that the “cession of the creditor’s actions” is in equity and not in law, and that it is implied for the accomplishment of a specific purpose — the indemnity of the surety. When that purpose is served, the equity ceases and the equitable title falls with it. The equitable assignee must sue in equity and must allege and prove the facts that entitle him to reimbursement from his principal or to contribution from his co-sureties. In seeking equity, he must do equity, and if he reaches for more, the court will stay his hand and give him nothing more than his due.
Considering now the cases in this State, we find
The surety’s action may be under the statute or it may be grounded upon his equitable ownership of the debt. In the one case, the debt is treated as being extinguished by payment; while, in the other, it is kept alive for the benefit of the equitable assignee. In Furnold v. Bank, 44 Mo. 336, the principal announced in Enders v. Brune, supra, is adopted and followed. In Berthold v. Berthold, 46 Mo. 557, the right of substitution is recognized as applying to cases where no securities are in the hand of the creditor: “It would be altogether superfluous to give the multitude of cases all pointing in the same direction, where it is held that a surety, who has paid the debt of another, is subrogated to all the rights of the creditor as to other securities in his hands . . . So in the United States, though not in England, it is held that a surety, who pays the debt of the principal, is entitled to an assignment of the instrument paid . .
Lord Eldon held in Copis v. Middleton that the payment of the obligation by the surety extinguished it. So it does, so far as the creditor is concerned, but it should not be extinguished as to any right the surety has acquired by its payment. It should still subsist with its liens and priorities to enable him to recover of the principal, as well as to compel contribution by his co-sureties, or to avail himself of any securities turned out by the principal.” In Burton v. Rutherford, 49 Mo.
This language conclusively answers the point supported by the Supreme Court of Texas in Faires v. Cockerell, 88 Texas 428, where it is held that no substitution as to the ownership of the debt takes place except when the creditor holds independent securities. It also answers the argument that the equitable title to the res does not vest in the surety by the fact of payment and that he acquires nothing more than the mere right to ask the court to make him the assignee of the debt.
In the Missouri cases, the intent to regard the right as springing from the broad principles of equity and justice is made manifest and the purpose of giving the surety, not only every right bestowed upon him by the statutory law, but also every right enjoyed by the creditor of benefit to him, is clearly expressed. ■ ■ •
In giving logical effect to these principles, it must be held that the creditor’s rights and remedies should be continued in equity for the benefit of plaintiff and that, as his’suit is brought within the period in which the creditor could have sued, had he continued in the ownership of the judgment, the action is timely.
Dissenting Opinion
(dissenting). — In dissenting from the view which my colleagues have taken, I have concluded to go over the whole record and state what I conceive to be the law involved in the case; remarking first upon the fact, that notwithstanding the extended examination made by them, they have not cited a case (save the one decided by this court) which involved the statute of limitations of the surety’s right to sue, or in which that question was even referred to.
Plaintiff instituted the action by filing a petition seeking to recover from a co-surety one-half the amount he paid for their principal. The defendant demurred to the petition which was sustained by the court and judgment entered for the defendant, whereupon plaintiff appealed.
The petition alleges that plaintiff and defendant Cook were sureties on a note given by William Weese to Jacob Bowlin. That Bowlin, on September 20, 1886, obtained judgment on that note against all three parties for $355 with interest. That defendant then and there became legally bound as co-surety with plaintiff for one-half of said judgment. That Weese, the principal, has failed and refused to pay the judgment and has become a non-resident and insolvent. That the defendant Cook, with the purpose of avoiding the payment of any part of the judgment, prior to the rendition thereof, fraudulently, and without consideration, conveyed all his property to his brother and thereby rendered himself insolvent. That by reason of the insolvency of Weese and defendant Cook, he (plaintiff) was compelled to pay the full, amount of the judgment on the 25th of June, 1888, and on that day, Bowlin, the plaintiff in the judgment, assigned the same to him. That by virtue of such assignment, plaintiff became subrogated to all the rights of -Bowlin in the judgment and became the equitable
I. The ground of demurrer is that the petition shows upon its face that the claim or cause of action is barred by the Statute of Limitations. It is first contended by plaintiff that the Statute of Limitations cannot be invoked by means of a demurrer. We, however, are satisfied that the benefit of the statute may be had in that way. Whenever as in this case, the face of the petition discloses that the bar has become, complete, a demurrer stating that as the ground is proper. [Henoch v. Chaney, 61 Mo. 129; State to use v. Bird, 22 Mo. 470; State ex rel. v. Spencer, 79 Mo. 314.] And, if the cause of action is such that it may be obviated by some exception in the statute, the facts stated in the petition should show such exception. In other words, the exception relieving plaintiff from the statute should be pleaded by him. [Humbert v. Trinity Church, 7 Paige 195.]
It will be noticed that in the cases cited (State to use v. Bird, and State ex rel. v. Spencer), the expression is used that a demurrer may be adopted as a mode of invoking the Statute of Limitations where the statute creates an absolute bar, “without any exceptions.” As our statute has many exceptions to its application, the plaintiff relies on those cases. The expression was perhaps in
II. It appears by the petition that plaintiff, as co-surety with defendant, paid the judgment in 1888, Avhile the suit was not brought until 1903. The question presented is: When did the period of limitation begin to run against plaintiff; at the date of his payment of the judgment, for one-half of which he asks to recover; or at the date of the rendition of the judgment? or (stated in a different way), is the surety, who has failed to assert his right to the judgment, entitled to the full period of limitation for suit on the judgment? If the former, the period of limitation would be five years, and the action is therefore barred. If the latter, the period of limitation would be twenty years (as the statute then read), and the action would be therefore not barred. The question, as it relates to a principal and his surety, was presented to this court in Brewing Co. v. Jordan, 110 Mo. App. 286. That case was where a surety paid the principal’s' note, and more than five years afterwards, but within the ten-year limitation period for notes, brought
But it is said that the decisions in this State on ' that subject were in actions at law and that, therefore-they are not applicable to the present, or the Brewing Co. case, which are equity cases for subrogation. Some-of the decisions were in law cases, but others were not.
But, if all those cases had been actions at law, they would be of equal controlling authority in this case in equity. For the rule is well understood that equity follows the law and applies the same period of limitation. [Rogers v. Brown, 61 Mo. 167; Bauer v. Gray, 18 Mo. App. 164; Darrow v. Summerhill, 93 Texas 105; Junker v. Rush, 136 Ill. 179.] It is conceded that, in cases of this nature, courts of equity and of law have concurrent jurisdiction. What may be termed the right to the action and its ultimate object are the same, and the foun-dation of the action, as well as the amount of recovery, whether asserted at law or in equity, are the same. It is universally held that in all cases of concurrent jurisdiction, equity “will no more disregard the statute than a court of law.” [Wood on Lim., sec. 58; 19 Amer. and Eng. Ency. of Law, 155.] “Statutes of limitation, . . . when they are addressed to the courts of equity as well as courts of law, as they seem to be in controversies of concurrent jurisdiction, they are equally obligatory in both forms as a means of promoting uniformity of decision.” [Godden v. Kimmell, 99 U. S. 201; Murry v. Coster, 20 Johns. 585; M’Crea v. Purmort, 16 Wend. 460, 476; 2 Story Eq. Jur., sec. 1520; 1 Pomeroy Eq. Jur., sec. 419.] So it is said that the doctrine of substitution “will not be enforced at the expense of a legal right.” [Rittenhouse v. Levering, 6 Watts & Serg. 198-200.]
In Brewing Co. v. Jordan, we treated the question as having been frequently decided by the Supreme
In thus asserting what the rights of a surety are, the Supreme Court did not say when nor within what time the surety should assert those rights. The statute itself has done that. The general law of the surety’s rights on payment of his principal’s debt, or more than his share as between him and his co-surety, was well recognized when the statute limiting the time when such rights should be asserted was enacted: so that, the general law and the statute taken together amount to this: that a surety, upon payment of the debt, has a right to the instrument upon which he is surety, with all the rights, secur
“Where a surety who has paid the debt does not act before his claim is barred at law by the Statute of Limitations, manifesting his intention to put himself in the place of the original creditor, and thereby subrogating himself to the creditor’s rights, equity will not subrogate him to those rights.” [1 Brandt on Suretyship (3 Ed.), sec. 339.] Before a right to subrogation accrues to a surety, he must have paid the debt (in case of co-surety, more than his portion of the debt) and it must have been a valid debt at the time of his payment. Furthermore, as stated by Judge Story, other issues “of a very complicated nature may arise, from counter equities between some or all of the parties, resulting from contract or from equities between themselves, or from peculiar transactions regarding third persons, ... or from the very nature of the transaction [there may be] an exemption of one surety from becoming liable to contribution in favor of another.” The learned author then proceeds to set out several apt illustrations of his statement. [1 Story’s Eq. Jur., sec. 498.] These various issues of fact may be the subject of sharp dispute, and their solution will greatly depend upon oral testimony and the life and memory of witnesses. He should be required to establish his right within the period of its own limitation and not the period of the limitation of the original indebtedness, or of a judgment rendered thereon, for these periods might cover a great length of time; in this case, it is said, the space of twenty years. When he has thus established his right, while memory is less treacherous and witnesses are yet alive, then he becomes entitled to a period of limitation of the instrument itself.
So it is held that a surety, on payment of the debt, does not become, ipso facto, subrogated to the rights of the creditor, but only acquires a right to such subrogation (Hull v. Sherwood, 59 Mo. 172), which he must as
In undertaking to defend the position that subrogation of a surety operates to place him literally in the creditor’s shoes, with all the rights of the creditor, and to make him literally the owner of the creditor’s claim (a note for instance) as though he were an ordinary assignee, and therefore entitled to the period of limitation prescribed for a note, one is led into the most unreasonable, illogical and inconsistent positions. Thus a creditor has the right, of course, to recover the full amount of the note, but the surety is not permitted “to speculate off his principal” nor his co-surety, and can recover no more than he has been compelled to pay for him. As, if the surety should compromise or otherwise adjust the note at less than its face, he can recover no more than he pays. [Hearne v. Keath, 63 Mo. 84, 89; 1 Brandt on Suretyship, sec. 233; Stone v. Harmel, 83 Cal. 547; 27 Am. and Eng. Ency. of Law, 480; Sinclair v. Redington, 56 N. H. 146; Tarr v. Ravencroft, 12 Gratt. 642.] So the indebtedness, for which he is surety, may draw the highest contractual rate of interest permitted by law and yet the surety (in absence of a statute) will only recover the legal rate on the sum he pays from the time of payment. [Bushnell v. Bushnell, 77 Wis. 435; Smith v. Mason, 44 Nebr. 610, 621.]
The fact is the surety, in some instances, has longer time than the creditor and, in some, shorter. Thus, if
In an extended examination, I have not been able to find an authority against the position herein expressed save that of Sublett v. McKinney, 19 Texas 439, and Hull v. Meyers, 90 Georgia 674. The former was overruled in Faires v. Cockerell, and Darrow v. Summerhill, supra, and the latter, besides being based on Sublett v. McKinney, was mere obiter dictum, since the action brought, as announced by the court, was not such as to permit an application of the creditor’s period of limitation; on the contrary, was on the implied promise of the principal debtor, and therefore held to be barred. So, in consequence, all remarks of the court on the other branch were not on the point in judgment. In this connection, there are two cases, one in Ohio (Neal v. Nash, 23 Ohio St. 483) and the other in Wisconsin (Bushnell
When the question is looked at from the standpoint of the surety’s right of action, it is quite a plain one. His right of action, as a matter of course, is the foundation upon which he must recover. His right to subrogation is merely an aid to his right of action. His right of action is not based on an actual contract or promise of the principal debtor, or his co-surety, for none has been made. It is based on an implied promise, which the law raises up from principles of natural justice and right, that is, a promise which the law implies has been made to him when he becomes surety, that he, the principal, will reimburse him for what he may have to pay, or, in case of a co-surety, for what he pays over his proportion, by reason of the suretyship. His right to subrogation is only one of the means of obtaining reimbursement. It is an incident to his main right. Without such obligation, there would not, of course, be a right to subrogation. So when the obligation is no longer effective, the right to subrogation is destroyed. The statute reads that it shall not be an effective obligation unless asserted within five years. And this is true whether the right of the surety arises from an implied contract, or from natural justice and equity;
That the surety, upon payment of the indebtedness, may, when necessary to his reimbursement, become, in equity, the assignee of the note or judgment evidencing such indebtedness, is everywhere recognized in this country. In many instances, it may serve him a highly
III. The petition alleges, and we must therefore accept it as a fact, that this plaintiff took an assignment of the judgment when he paid it. But that can make no difference in the limitation period, [Johnson v. Belden, 49 Iowa 301; Harrah v. Jacobs, 75 Iowa 72.] The St. Louis Court of Appeals has decided that an assignment of a note to the surety did not alter the rights of the parties, nor give him a cause of action on the note itself. [Williams v. Gerber, 75 Mo. App. 18, 30.] The substantive facts, which give a surety a cause of action against his principal or his co-surety, remain the same. Some courts state that the surety’s right of action is based on an implied promise which is raised up by the law against the principal when the surety enters into his obligation, that the'principal will reimburse
IY. Plaintiff, however, sets up fraud on the part of Cook in avoidance of the statute. A part of our Statute of Limitations (section 4290, Revised Statutes 1899), provides that if a party by improper conduct prevents the commencement of an action, it may be begun within the proper period of limitation after the commencement of the action shall have ceased to be so prevented. But the fraud charged in the petition did not prevent the beginning of an action. It only went to defeat an execution on a judgment which might be obtained in such action. The statute has no application to such case. The fraud must be of such character as prevented the complaining party from bringing the suit. [19 Am. and Eng. Ency. of Law (2 Ed.), 247.] It is not material to inquire (as plaintiff wishes done in this case) whether a suit would have resulted in collecting the debt. [Simpson c. McPhail, 17 Ill. App. 502.] I must therefore conclude with the trial court that plaintiff’s action is barred and that the demurrer to the petition was properly sustained.
