Regan v. Williams, 84 S.W. 959

PER CURIAM.

This cause comes to this court on a certificate by the St. Louis Court of Appeals that the opinion of said court herein is in conflict with an opinion by the Kansas City Court of Appeals in Bender v. Markle, 37 Mo. App. 234.

The statement and opinion by Goode, J., of the St. Louis Court of Appeals is as follows:

“March 21, 1887, the respondent executed to Timothy Regan, the father of. the appellant, a promissory note for $4,000, due two years after date and bearing compound interest at the rate of eight per cent. The note was given for part of the purchase price of some land in Springfield, and to secure it a deed of trust was executed and delivered on the same day, by the defendant and wife, to Charles H. GofEe, trustee for said Timothy Regan, beneficiary. It contained the usual covenants and powers to the trustee to sell in case of default, ‘and receive the proceeds of the sale, out of which should be paid, first, the costs and expenses of this trust and next all amounts expended for taxes and other purposes, and next the amount that may remain unpaid on said note and the interest thereon.’ November 29, 1887, the defendant and wife conveyed the real estate covered by said deed of trust to the Scott Investment Company, which, with the full consent and approval of the payee, Regan, assumed and agreed to pay the note as part of the purchase price of the land. Interest was paid at the end of each year to March 21, 1890, on which date not only the interest, but $1,000 of the principal, was paid by the Scott Investment Company. The following indorsement was put on the note: ‘Paid on the within, $1,000 as principal in part, and $320 as interest to March 21, 1890, and time on balance of note extended one year.’ September 4,1890, the Scott Investment Company conveyed the land to A. W. Carey, who likewise assumed and agreed to pay the encumbrance on it.' Interest was paid to March 21, 1892. Afterwards, defaults occurred, and on the seventeenth day of May, 1894, the trustee, Goffe, at the request of the beneficiary, sold the property under the deed of trust for $2,000, and after deducting the expenses of the sale credited the remainder, $1,984.80, on the note. The present plaintiff was the owner and holder of the instrument when this action was commenced, but is affected by whatever equities exist against the payee. The defenses are that Williams was released by extensions given by Timothy Regan, and that the' debt was barred by the statute of limitations. There is testimony tending to prove that the Scott Investment Company purchased the property with an understanding with Regan that the time of payment should be extended, and would not have purchased without it. The trial court made a special finding of the facts, in which it found against the view that there was an agreement as to the extension of time when Williams sold to the Scott Investment Company. It also found that the defendant had neither made, nor caused to be made, any payment on the note except .that the trustee, under the authority of the deed of trust, credited thereon the amount received at the sale. This finding is supported by the evidence. The action was instituted on the fourth day of May, 1900.

“I. The sale of the land by the original mortgagor, Williams, to the Scott Investment Company, and the. assumption of the encumbrance by the latter, converted said company into the principal debtor with reference to the encumbrance, and the defendant into a surety. [Wayman v. Jones, 58 Mo. App. 313; Nelson v. Brown, 140 Mo. 580; Pratt v. Conway, 148 Mo. 291.] Timothy Began, who then held the note and knew all about the arrangement, was bound thereafter to recognize said parties in those capacities. [Nelson v. Brown, supra.]

‘ ‘We must be controlled by the finding of the lower court that there was no agreement for an extension of the time of payment, either between Williams and the Scott Investment Company, or between the latter and Timothy Regan, at the time the company purchased the land. When the extension was entered on the note, the entire principal and one year’s interest were due. The accrued interest and $1,000 of the principal were paid. It is the law in this State that a contract like that, for the extension of the time of payment, is without consideration and not binding, so that the creditor may, if he chooses, immediately press for payment despite his agreement to extend; that therefore a surety is nót released by such a transaction between the maker and payee. [Brown v. Kirk, 20 Mo. App. 524; Owings v. McKenzie, 133 Mo. 323.] In some jurisdictions the rule is otherwise where there is not simply an agreement to forbear proceedings to collect, but a formal, executed stipulation to postpone the maturity of the instrument. [Benson v. Phipps, 87 Tex. l. c. 580, and many cases cited.] The decisions of the court to which we owe fealty must be followed and we approve the ruling of the learned trial judge that the extension did not discharge the defendant as surety. .

“II. In reply to the defense that the statute of limitations had run against the note before 'this action was begun, plaintiff asserts that the payments of interest by the Scott Investment. Company and Carey to March 21, 1892, prevented the running of the statute, not only in favor of said parties but of the defendant as well. The ruling that payment by a principal will suspend the statute as to a surety, is invoked as applicable, because by operation of law, the subsequent grantees of the land covered by the deed of trust became principals and the defendant a surety. The proposition contended for is sound enough, generally speaking. [Craig v. Callaway Co. Ct., 12 Mo. 94; McClurg v. Howard, 45 Mo. 365; Block v. Dorman, 51 Mo. 31; Vernon County v. Stewart, 64 Mo. 408; Bennett v. McCanse, 65 Mo. 194.] These payments were made while the note was still alive, and the rule is well established that payments made by the principal, or by one of several joint obligors, before tbe debt is barred, will stop tbe statute. But tbe reason wby a.payment by the principal stops it as to a surety, is, not because' one is principal and tbe other surety, but because both are usually joint promisors; that is, tbe surety is affected by tbe act of tbe principal in bis capacity as a joint promisor. . Tbe idea is that persons who jointly bind ■ themselves are all liable to tbe promisee by virtue of their original agreement, so that performance or part performance by one is tbe act of all. [Sigourney v. Drury, 14 Pick. 387; Brandram v. Wharton, 1 Bar. & Aid. 463; Atkins v. Tredgold, 2 Bar. & Cres. 23.] Tbe principle only applies where tbe payment was made by one originally liable. [Sigourney v. Drury, supra.]

“ "Whether or not tbe statute ceased to run in favor of the defendant when tbe payments were made by tbe » subsequent grantees, depends, then, on whether be can be considered a joint promisor with them. Undoubtedly be was not. They were not parties to tbe note when it was made, and only became obligated to pay it by subsequent contracts between themselves and tbe maker, "Williams. Their responsibility, far from resting on a promise by them given in conjunction with "Williams to tbe payee, Regan, rests exclusively on tbe promises they made afterwards to assume tbe debt. In no sense were they joint obligors with him. Their promises neither coincided with bis in point of time, nor were made with tbe same person, nor based on tbe same consideration. They were separate and distinct undertakings. [Maddox v. Duncan, 143 Mo. l. c. 621; Corbyn v. Brokmeyer, 84 Mo. App. 649.] Those cases bold that a payment made by one whose promise is collateral, does not interrupt tbe statute as to tbe original obligor. Tbe precedents are all against this contention of'the appellant. [Trustee of Old Almshouse v. Smith, 52 Conn. 434; Cotterell v. Shepherd, 86 Wis. 649; Harlock v. Ashberry, 19 Ch. D. 539; Home Life Insurance Co. v. Elwell, 111 Mich. 689; Princeton Savings Bank v. Martin, 53 N. J. Eq. 463-465; Underwood v. Patrick, 94 Fed. 468.] Zoll v. Carnahan, 83 Mo. 35, is in point by analogy. We hold that the payments of interest made by the Scott Investment Company and by Carey did not prevent the statute from running in favor of the defendant.

“III. It is insisted by the appiellant, in the second place, that the case is taken out of the statute by the credit Goffe, the trustee, put on the note, of the proceeds arising from the foreclosure sale of the land. The trustee, it is claimed, was the agent of both the mortgagor and mortgagee, and for certain purposes he was; not for that one, however. It was his duty to protect the interests of both’ parties in the performance of his office, and he was liable to either for damages resulting from his misfeasance. [Sherwood v. Saxton, 63 Mo. 78.] We do not find in the deed of trust any clause authorizing the trustee to enter a credit on the note of the proceeds of sale in case of foreclosure, but such an act was in the scope of his legal authority. To say that he was empowered by Williams to make such a credit on the latter’s behalf, or that it was contemplated or expected he should do so when the deed of trust was executed, would be, in our estimation, a very strained deduction. Notes secured by deeds of trust are commonly paid and the trustee not called on to act; often the land passes from the mortgagor before the debt falls due, under an agreement by the purchaser to assume and pay the encumbrance, as happened here. Williams had no control over the trustee, whose agency, as far as it went, was irrevocable. It is going too far then, we think, to hold the trustee first named, or his possible successors in the persons of different sheriffs, was or were empowered or appointed by the mortgagor to bind him at any subsequent date by crediting-the proceeds of a foreclosure on the note. As has well been said, it is not the indorsement of a credit but the payment that operates as a renewal of a promise and removes the har of the statute of limitations. [Curtis v. Nash, 88 Me. 476.] The party relying on a payment to stop the statute must not only establish that it was made, but made by the authority of the defendant. [Murdock v. Waterman, 27 L. R. A. 418; Bender v. Blessing, 31 N. Y. Supp. 48.] ‘Part payment does not take a debt out of the statute unless made under such circumstances as to warrant the inference that the debtor thereby recognized the debt and signified his willingness to pay it.’ [1 Wood on Limitations (3 Ed.), sec. 99.] The payments must be made by or with the consent of the payor. [Gardner v. Early, 78 Mo. App. 346; Phillips v. Mahan, 52 Mo. 197.] If credits are entered by the holder, without the knowledge or consent of the payor, they are ineffective to check the statute. [Goddard v. Williamson’s Admr., 72 Mo. 131; Loewer v. Haug, 20 Mo. App. 163.] The prima facie showing, from the fact that the credits were entered when it was against Regan’s interest to do so, is overcome by the positive proof that the defendant had nothing to do with them and knew nothing about them. . •

“The credit made by the trustee, instead of being the result of a payment directed by Williams expressly or by necessary, implication, was made in invitum. It was a collection enforced by foreclosing the security.

“The question we are considering has been several times passed on by the courts and we believe, with one exception, the judgment was that such an application by the trustee or mortgagee of the money obtained by sale did not stop the statute. It was so held by this court in Leach v. Asher, 20 Mo. App. 656. The Kansas City Court of Appeals ruled differently in Bender v. Markle, 37 Mo. App. 234, without noticing the previous case. These opposing decisions were commented on by the Supreme Court of Nebraska in a controversy rs to the effect of such a credit, by the trustee in a deed of trust on lands in Missouri. The proposition is ably discussed in that opinion and the view of this court adopted on the ground, ‘that such payment was not a voluntary one on the part of Carr (the mortgagor) but one made in invitum and by operation of law. ’ [Moffitt v. Carr, 48 Neb. 403.] To the same purport is the impressive voice of the Supreme Court of Massachusetts in a recent case. The opinion says:

“ ‘The ground upon which a part payment is held to take a case out of the statute is, that such payment is a voluntary admission by the debtor that the debt is then due, which raises a new promise by implication to pay it or the balance. To have this effect, it must be such an acknowledgment as reasonably leads to the inference that the debtor intended to renew his promise of payment. [Roscoe v. Hale, 7 Cray 274; Stoddard v. Doane, 7 Gray 387; Richardson v. Thomas, 13 Gray 381.] In the case at bar, the plaintiff executed a mortgage in which he gave to the mortgagee a power to sell the estate and to appropriate the proceeds to the payment of the mortgage debt. But this cannot fairly be construed as an authority to the mortgagee to make a new promise on behalf of the mortgagor to pay the debt, so as to avoid the statute of limitations. At the time of the sale, the plaintiff had no interest in the property. He had no right to the proceeds of the sale. The money which, it is claimed, was applied in part payment of the note, was not his money. It would be applied by law to the extinguishment' pro tanto of his debt, but the application was not under his control and involved no action of his mind. It does not appear that he had any knowledge of the sale. It is absurd to say that the facts in this case would fairly lead to the inference that the plaintiff intended to renew his promise to pay the note.’ [Campbell v. Baldwin, 130 Mass. 199.]

“It is noteworthy that the law in Massachusetts and Nebraska is that a sale by a pledgee of collateral security and the application of the paoney in part payment of the debt will toll the statute. But the Supreme Courts of those States did not think such instances analogous to this one, which they likened rather to transactions in which credits are given for dividends declared by an assignee, that are always held not to stop the course of the statute in favor of the debtor. [Marienthal v. Mosler, 16 Ohio 566; Stoddard v. Doane, 7 Gray 387; Pickett v. King, 34 Barb. 193; Roosevelt v. Mark, 6 John. Ch. 266; Light’s Estate, 136 Pa. St. 211.] Involuntary payments are, we believe, usually held not to take the case out of the statute. [Whitney v. Chambers, 17 Neb. 90; Roscoe v. Hale, 7 Gray 274; Stoddard v. Doane, 7 Gray 387; Battle v. Battle, 21 S. E. 177.]

“In Hughes v. Boone, 114 N. C. 54, it was ruled that a partial payment of a judgment made on execution would not interrupt the running of the statute. It is held that the credit is applied by the assignee as a legal duty and not by direetiorf of the assignor. So it is of the'credit by a trustee or mortgagee. The proposition that such an act by either affects the statute as to the mortgagor, is incompatible with the principle on which payments are given suspensive effect. This principle, as stated, is that the payments, whether made by the mortgagor in person or by his accredited deputy, are a recognition by him of his debt and a tacit promise to discharge it. The reasoning which deduces such a conclusion from the credit made by the trustee or mortgagee is extremely artificial, in fact opposed to common knowledge. Is it consistent with the ordinary conduct of men to think that Williams desired or empowered Goffe to bind him to pay his note by the • credit which the latter endorsed ?

“The decisions have gone quite far enough towards defeating the purpose of the limitation law. [Woonsocket Inst. v. Ballou, 1 L. R. A. 555.] The inhospitable reception accorded by the courts to the two great legislative policies embodied in the státutes of limitations and of frauds has often provoked regret,, and a disposition more favorable to them has supervened. We have no inclination to encroach further on the limitation law or create fresh exceptions to it, and rule, therefore, that the credit made by Goffe does not impair the defense of the statute, and affirm the judgment. ’ ’

The foregoing opinion of the St. Louis Court of Appeals correctly announces the law upon the facts of this case and is in all things approved and adopted as the opinion of this court, and the views expressed by the Kansas City Court of Appeals in Bender v. Markle, 37 Mo. App. 234, in conflict therewith, are disappro'íágd and will no longer be followed.

For the reasons assigned by the St. Louis Court of Appeals, the judgment of the circuit court is affirmed.

All concur except Judge Lamm, who was not a member of the court when the cause was submitted.

Case Details

Case Name: Regan v. Williams

Court Name: Supreme Court of Missouri

Date Published: Jan 21, 1905

Citations: 84 S.W. 959; 185 Mo. 620; 1905 Mo. LEXIS 237

Court Abbreviation: Mo.