Opinion
Filed 23 September, 1953.
1. Courts 14 — In a suit on a transitory cause of action arising in another state, the substantive rights of the parties are governed by the lex loci, while procedural matters are governed by the lex fori.
2. Same: Constitutional Law 18: Limitation of Actions 1, 8 — In action instituted here on cause arising in another state between non-residents, G.S. 1-21 tolling statute of limitations applies. A resident of another state there executed a note not under seal to a corporation having its principal place of business in such other state. The maker thereafter moved to this State. The corporation instituted action against the maker here more than three years after the maturity of the note but less than three years after the latter had moved to this State. The cause of action was not barred by the applicable statute of such other state at the time the action was instituted here. Held: Our statute of limitations, as well as applicable provisions tolling the running of the statute, are applicable as matters of procedure, and therefore G.S. 1-21 tolls the running of the statute, and the nonresident plaintiff is entitled to the benefit of its provisions as a privilege guaranteed by Art. IV, sec. 2, of the Constitution of the United States.
APPEAL by defendant from Armstrong, J., February Term, 1953, of FORSYTH.
Ratcliff, Vaughn, Hudson, Ferrell Carter for plaintiff, appellee.
Deal, Hutchins Minor for defendant, appellant.
BARNHILL, J., concurring in result.
This is a civil action to recover on a promissory note.
The defendant Appleyard, on 6 December, 1947, executed and delivered to the plaintiff a promissory note, not under seal, in the sum of $6,000, payable sixty days after date, to wit: 4 February, 1948. At the time the note was executed, the defendant was a resident of the State of Texas, and the plaintiff, a national bank, was duly organized and engaged in the banking business at Sherman, Texas, where its principal office and place of business is located. The defendant prior to 1946 was a resident of North Carolina. He returned to this State in December, 1951, and again became a resident thereof.
The statute of limitations on a note, not under seal, in the State of Texas, is four years. This action was instituted on 29 January, 1952, a few days prior to the expiration of four years from and after the maturity of the above note.
The defendant in his answer plead the three-year statute of limitations as provided in North Carolina by G.S. 1-52, as a bar to plaintiff's cause of action.
When this cause came on for hearing, the plaintiff moved for judgment on the pleadings on the ground that the only defense raised by the defendant in his answer was the legal defense of the statute of limitations. The defendant admitted, through his counsel, that the only issue raised by his answer was his plea to the effect that the plaintiff's cause of action was barred by the North Carolina three-year statute of limitations. Whereupon, the court, after hearing argument of counsel, allowed the plaintiff's motion and entered judgment accordingly. The defendant appealed, assigning error.
The note in question having been executed in the State of Texas, the substantive rights of the parties are subject to the lex loci. However, since the plaintiff has instituted an action in this jurisdiction for the enforcement of its substantive rights against the defendant, its remedial rights are governed by the lex fori. McIntosh, North Carolina Practice and Procedure, section 103, page 104; Restatement, Conflict of Laws, section 603 (1934); 53 C.J.S., Limitations of Actions, section 28, page 972; Wells v. Simonds Abrasive Co., 345 U.S. 514, 97 L.Ed. . ., 73 U.S. Rep. 856; Sayer v. Henderson, 225 N.C. 642, 35 S.E.2d 875; Webb v. Webb, 222 N.C. 551, 23 S.E.2d 897; Clodfelter v. Wells, 212 N.C. 823, 195 S.E. 11; Smith v. Gordon, 204 N.C. 695, 169 S.E. 634; Tieffenbrun v. Flannery, 198 N.C. 397, 151 S.E. 857, 68 A.L.R. 210; Vanderbilt v. R. R., 188 N.C. 568, 125 S.E. 387, 52 A.L.R. 287; Patton v. W. M. Ritter Lumber Co., 171 N.C. 837, 73 S.E. 167; Arrington v. Arrington, 127 N.C. 190, 37 S.E. 212, 52 L.R.A. 201, 80 Am. St. Rep. 791; Haws v. Cragie, 49 N.C. 394. Therefore, it must be conceded that the plaintiff's cause of action is barred unless section 1-21 of our General Statutes is applicable. This statute in pertinent part reads as follows: "If, when the cause of action accrues or judgment is rendered or docketed against a person, he is out of the state, action may be commenced, or judgment enforced, within the times herein limited, after the return of the person into this state, . . . the time of his absence shall not be a part of the time limited for the commencement of the action, or the enforcement of the judgment."
The plaintiff is not now and never was a resident of the State of North Carolina. The defendant was a resident of North Carolina for approximately thirteen years before moving to the State of Texas in 1946. However, he was a nonresident of this State on 6 December, 1947, when he executed and delivered the note in controversy to the plaintiff and remained so until December, 1951.
The defendant was a resident of the State of Texas when the note was executed and when it matured. Therefore, he was not a resident of North Carolina when the cause of action arose; and the fact that the defendant had formerly lived in this State has no bearing on the interpretation or construction to be placed on the above statute.
The crucial question to be determined is whether the above statute is applicable to causes of action that arise out of the State and between parties who were nonresidents of this State when such actions arose, or whether the statute is applicable only to causes of action that arise in this State in favor of creditors residing therein. It appears that this precise question has not been decided by this Court. In our decisions in which the statute has been construed and applied by this Court, the creditors, or at least some of them, were residents of the State at the time the respective obligations were created and the causes of action arose. Armfield et al. v. Moore, 97 N.C. 34, 2 S.E. 347; Alpha Mills v. Engine Co., 116 N.C. 797, 21 S.E. 917; Lee v. McKoy, 118 N.C. 118, 24 S.E. 210; Williams v. Building and Loan Association, 131 N.C. 267, 42 S.E. 607; Love v. West, 169 N.C. 13, 84 S.E. 1048; Cuthbertson v. Bank, 170 N.C. 531, 87 S.E. 333; Hill v. Lindsay, 210 N.C. 694, 188 S.E. 406.
In Armfield et al. v. Moore, supra, the defendant executed a note under seal to the plaintiffs in the town of Monroe, in this State, and at the time of its execution, the maker thereof, the defendant, was a nonresident of this State and remained so thereafter. The plaintiffs instituted an action to recover on the note more than ten years after its maturity, and the Court held that the defendant being a nonresident of the State would not be permitted to take advantage of the ten-year statute of limitations which he pleaded, in view of the provisions of the Code 162 (now G.S. 1-21). The Court, in considering the statute, said: "The purpose is, to prevent defendants from having the benefit of the lapse of time — the statute of limitation — while they permit debts against them, past due, to remain unpaid, or other causes of action against them to remain undischarged, and keep beyond the limits of the State and the jurisdiction of its courts, and thus prevent the person having the right to sue, from doing so. It is not the policy or purpose of the State, to drive its citizens, directly or indirectly, to seek their legal remedies abroad, or to encourage nonresidents to keep out of it and beyond the jurisdiction of its courts, as would in some measure be the case, if by keeping out of the State, the debtor or person against whom a cause of action exists, could avail himself of the lapse of time during his absence. The counsel for the appellant insisted in the argument, that the statute under consideration does not embrace nonresidents of this State. We cannot so interpret it. The words 'any person,' employed to designate the persons to be affected and embraced by it, are very comprehensive, and there is nothing in its scope or purpose that excludes them."
We think it must be conceded that the statute under consideration was enacted for the primary purpose of tolling the statute of limitations in favor of the citizens and residents of this State whenever a cause of action arises in their favor, and the debtor, either resident or nonresident, is beyond the reach of process of our courts. Even so, this does not mean that our courts should not be open to a nonresident plaintiff to enforce a claim on a cause of action that is not barred in the jurisdiction where such cause of action arose, where the debtor has not been a resident of this State for the statutory time necessary to bar the action. Statutes like ours and those substantially and essentially in accord therewith, have been held to toll the statute in such cases where neither the plaintiff nor the defendant was a resident of the state of the forum at the time of the institution of the action and never was, as well as in those cases where the obligation arose out of the state of the forum and the debtor had not resided in the state of the forum for a time sufficient to bar the action by the lex fori. Steen v. Swadley, 126 Ala. 616, 28 So. 620; Western Coal Mining Co. v. Hilvert, 63 Ariz. 171, 160 P.2d 331; McKee v. Dodd, 152 Cal. 637, 93 P. 854, 14 L.R.A. (N.S.) 780, 125 Am. St. Rep. 82; Cvecich v. Giardino, 37 Cal.App.2d 394, 99 P.2d 573; Simon v. Wilnes, 97 Colo. 78, 47 P.2d 406; Newton v. Mann, 111 Colo. 76, 137 P.2d 776, 147 A.L.R. 767; Hatch v. Spofford, 24 Conn. 432; Jones v. Wells, 7 Del. 209, 2 Houst 209; Van Deren v. Lory, 87 Fla. 422, 100 So. 794; West v. Theis, 15 Idaho 167, 96 P. 932, 17 L.R.A. (N.S.) 472, 128 Am. St. Rep. 58 (Idaho now has a provision in its statute which prevents recovery on a claim in that State, if barred in the jurisdiction where the cause of action arose, Idaho Code 5-239; Ross v. Rees, 55 Iowa 296, 7 N.W. 611; McNamara v. McAllister, 150 Iowa 243, 130 N.W. 26, 34 L.R.A. (N.S.) 436, Ann. Cas. 1912d 463; Bonifant v. Doniphan, 3 Kan. 26 (Kansas has amended its statute so as not to toll the statute of limitations where the plaintiff and defendant were nonresidents of the State when the cause of action accrued and such cause of action is barred in the State where it arose, Bruner v. Martin, 76 Kan. 862, 93 P. 165, 14 L.R.A. (N.S.) 775, 123 Am. St. Rep. 172, 14 Ann. Cas. 39); Thompson v. Reed, 75 Me. 404; Frye v. Parker, 84 Me. 251, 24 A. 844; Mason v. Union Mills Paper Co., 81 Md. 446, 32 A. 311, 29 L.R.A. 273, 48 Am. St. Rep. 524; John v. John, 307 Mass. 514, 30 N.E.2d 542 (it is pointed out in this case that the statute contains a provision to the effect that an action cannot be maintained in Massachusetts on a cause of action arising out of the State, if such cause of action is barred in the State where it arose); Belden v. Blackman, 118 Mich. 448, 76 N.W. 979; Tagart v. Indiana, 15 Mo. 209 (statute in Missouri has been changed so as to apply only to any debtor who is a resident of that State, Roppel v. Rowland, 319 Mo. 602, 4 S.W.2d 816); Hartley v. Crawford, 12 Neb. 471, 11 N.W. 729; Paine v. Drew, 44 N.H. 306; In re Goldsworthy, 45 N.M. 406, 115 P.2d 627, 148 A.L.R. 722; Ruggles v. Reeler (N.Y.), 3 Johns. 263, 3 Am. Dec. 482; Meyers v. Credit Lyonnais, 259 N.Y. 399, 182 N.E. 61, 83 A.L.R. 268 (this case expressly disapproves Garrison v. Newman, 222 A.D. 498, 227 N.Y.S. 78, which held that where the creditor and debtor were nonresidents and the cause of action accrued outside the State of New York, that the exception to the statute did not apply); Bean v. Rumrill, 69 Okla. 300, 172 P. 452; Crocker v. Arey, 3 R.I. 178; McConnell v. Spicker, 15 S.D. 98, 87 N.W. 574; Raymond v. Barnard, 71 S.D. 630, 28 N.W.2d 700; Kempe v. Bader, 86 Tenn. 189, 6 S.W. 126 (overruling Barbour v. Erwin, 14 Lea 721); Burnes v. Crane, 1 Utah 179. See Annotations 83 A.L.R. 271; 148 A.L.R. 732 and 17 A.L.R.2d 502.
In the recent case of Howle v. Express, Inc., 237 N.C. 667, 75 S.E.2d 732, Winborne, J., assembled our decisions to the effect that a nonresident has the right to bring an action in our courts as one of the privileges guaranteed the citizens of the several states by the Constitution of the United States, Article IV, section 2. A nonresident is entitled to the benefit of statutory provisions such as those contained in G.S. 1-21, and may bring his action in the state of the forum under the same terms and conditions which would have been applicable to him if he had been a resident thereof at the time the action arose.
Let us consider carefully that part of G.S. 1-21 which is applicable to this case. A casual examination of the statute might lead to the conclusion that the debtor must have been a resident of this State or temporarily. residing therein at the time the obligation was created and upon which the cause of action arose, since we usually do not speak of returning to a place we have never been. The origin of the statute and the construction placed upon some of the words and phrases contained therein, by other courts, may be helpful to us in answering the question posed on this appeal. The Statute of 4 5 Anne, chapter 16, section 19, provided in substance that if any person against whom there should be any cause of action was, at the time such action accrued, beyond the seas, the action might be brought against him on his return within the time limited for bringing such action. 65 C.J.S., Limitations of Actions, section 208, page 229, et seq. The original English statute may be found in English Statutes at Large, Volume 4, page 207. The term "beyond the seas," used in the English statute, was construed by the English courts to be synonymous with "beyond the realm," or "out of the realm." Since we have the several states, each with its own judicial system, each state is a separate realm in the sense in which the term "beyond the seas" was used in the English statute. But with our citizens constantly engaged in interstate commerce among the several states, and nonresident debtors contracting with citizens of the several states, the term "out of the state," having been substituted for the term "beyond the seas," in most of the statutes now in effect in the several states; the courts, generally, in effect and in some cases expressly, have held that the words "return of the person to this state," or "into the state," mean "return to the state," or "come into the state." Likewise, the words "absence" and "return" do not restrict the operation of the exception to those only who have been in the state. Otherwise, the pertinent provisions of the statute which we are considering would not toll the statute of limitations and stop it from running in favor of a nonresident debtor who had never been a resident of this State. Steen v. Swadley, supra; Van Deren v. Lory, supra; West v. Theis, supra; Paine v. Drew, supra; Meyers v. Credit Lyonnais, supra; Cvecich v. Giardino, supra; Anno. 17 A.L.R.2d 506; 34 Am. Jur., Limitations of Actions, section 215, page 172, et seq.; 54 C.J.S., Limitations of Actions, section 210 (b), page 231. The last cited authority states: "The word 'return,' used in the statute to indicate the starting point of the running of the time, cannot restrict the operation of the exception to those only who have been in the state."
In the early case of Ruggles v. Reeler, supra, Chief Justice Kent used this language: "Whether the defendant be a resident of this state, and only absent for a time, or whether he resides altogether out of the state, is immaterial. He is equally within the proviso. If the cause of action arose out of the state, it is sufficient to save the statute from running in favor of the party to be charged, until he comes within our jurisdiction." This Court reached a similar conclusion in Green v. Insurance Co., 139 N.C. 309, 151 S.E. 887; Williams v. Building and Loan Association, supra, and Cuthbertson v. Bank, supra.
Likewise, with respect to actions accruing out of the state of the forum, the Supreme Court of Arizona, in the case of Western Coal Mining Co. v. Hilvert, supra, stated the majority view in the following language: "To construe the act as limited to claims arising in this state would be a strained and narrow construction. It would require us to add to the broad scope of the act applying to any 'person against whom there shall be a cause of action' the limiting words 'arising in this state.' If the action was not barred by the law of the place of the breach or residence of the defendant, we see no reason in justice or policy why we should construe this act to extend the tolling provisions of the statute only to causes of action arising within this state, the legislature having declared no such purpose." The Arizona Court, in its opinion, quoted with approval what was said in the early case of Hartley v. Crawford, supra, to the effect that to hold that the statute "applies only to causes of action accruing in this state, 'or in behalf of one of our citizens' would be exceedingly forced, and entirely unsupported, as we think, by reason or authority. The language of the statute is general, and applies to all personal causes of action to which a bar is provided in the preceding sections."
The States of Mississippi and Pennsylvania have limited the tolling of their statutes of limitation by amending statutes similar to the one under consideration so as to make them applicable only to causes of action arising within those respective States. Wright v. Mordaunt, 77 Miss. 537, 27 So. 640, 78 Am. St. Rep. 536; United States Fidelity G. Co. v. Ransom, 192 Miss. 286, 5 So.2d 238; Shaffer's Estate, 228 Pa. 36, 76 A. 716; Continental Illinois Nat. Bank T. Co.. v. Holmes (D.C.), 21 F. Supp. 309.
The State of Minnesota has enacted legislation to the effect that where a cause of action has arisen out of the State, an action thereon cannot be maintained within that State if it is barred by the laws of the State or foreign country where it arose, unless the cause of action from the time it accrued had been in favor of a citizen of Minnesota. Powers Mercantile Co. v. Blethen, 91 Minn. 339, 97 N.W. 1056. The State of Oregon, by legislative action, has likewise limited actions that may be brought on causes of actions arising outside of the State to those that are not barred in the jurisdiction where they arose. McCormick v. Blanchard, 7 Or. 232; Re Wemple, 92 Or. 41, 179 P. 674. In line with this view, New York's Civil Practice Act, section 13, provides: "Where a cause of action arises outside of this state, an action cannot be brought in a court of this state to enforce such cause of action after the expiration of the time limited by the laws of a state or country where the cause of action arose, for bringing an action upon such cause of action, except where the cause of action originally accrued in favor of a resident of this state." Thompson's Laws of New York (1939, Part II).
The statute in Illinois, in pertinent part, is identical with ours; however, it contains this proviso: "But the foregoing provision of this section shall not apply to any cause, when, at the time the cause of action accrued, or shall accrue, neither the party against nor in favor of whom the same accrued, or shall accrue, were or are residents of this state." Mitchell v. Comstock, 305 Ill. App. 360, 27 N.E.2d 620.
The minority view, holding that a statute similar to ours, does not apply to actions accruing outside the state between a nonresident creditor and a nonresident debtor, has been followed by New Jersey and Texas. Shapiro v. Freedman, 132 N.J.L. 456, 41 A.2d 10; Stone v. Phillips, 142 Tex. 216[ 142 Tex. 216], 176 S.W.2d 932.
In the case of Shapiro v. Friedman, supra, the Court said: "These statutes, in our view, are predicated on the idea of saving a resident creditor's action against a debtor who is nonresident when the action accrues or who leaves the state after the accrual and before the statute of limitations has run. It is true that the majority of the states have construed statutes of similar import differently on this point. See 83 A.L.R., p. 273; also Id., p. 276; 148 A.L.R., p. 732, p. 736. Some of the statutes, we gather from reading the reports, are quite different from our own. Meyers v. Credit Lyonnais Co., 259 N.Y. 399, 182 N.E. 61, 83 A.L.R. 268."
Other states have also added provisions to their statutes which take them out of the majority or minority line of cases, among them being Georgia, Kentucky, Vermont, and Wisconsin. Moore v. Carroll, 54 Ga. 126; Sword v. Scott, 293 Ky. 630, 169 S.W.2d 825; Troll v. Hanauer, 57 Vt. 139; National Bank v. Davis, 100 Wis. 240, 75 N.W. 1006. It will also be noted that many jurisdictions, while adhering to the majority view, have adopted legislation which may prevent recovery on a cause of action arising out of the state of the forum, if such action, at the time of its institution, was barred in the jurisdiction in which it arose. Whether we should take similar action is a matter for the Legislature. Be that as it may, the cause of action involved herein was not barred in the jurisdiction in which it arose at the time the present action was instituted.
After a careful review and consideration of the authorities bearing on the question presented, we are inclined to follow the majority view.
The judgment of the court below is
Affirmed.