Opinion
(Decided 22 December, 1899.)
Promissory Note — Payments by Maker — Endorser — Surety — Act 1827, The Code, Sec. 50 — Statute of Limitations.
1. A payment by the principal on a note, before the bar of the statute, operates as a renewal as to himself, the sureties and endorsers.
2. The Act of 1827, Code, sec. 50, renders an endorser liable as surety.
3. Where the payee, before maturity, endorses and transfers the note, and the maker makes successive payments, the first before the bar of the statute as to the endorser, and each succeeding one within three years of the preceding one, the liability of the endorser, as well as that of the maker, is renewed at each payment.
4. A payment made by the maker, after the bar of the statute, operates as a renewal as to himself only.
CIVIL ACTION upon a promissory note against the makers and endorser, tried before Coble, J., at Fall Term, 1899, of the Superior Court of HAYWOOD County.
(530) Smith Valentine and Moody Welch for appellant.
W. T. Crawford and G.S. Ferguson for appellee.
The note was payable twelve months after date, March 20, 1886, to defendant Francis, and before maturity was endorsed and assigned to another, who transferred it by endorsement to the plaintiff. A number of payments were made upon it by A. J. Reeves, the principal maker, beginning with April 21, 1887, and ending December 23, 1896. Three years had not elapsed between any two successive payments. This suit was commenced September 12, 1898. No defense was made to the action, except by Francis, who pleaded the statute of limitations. His Honor held that the action was barred as to him. Verdict and judgment accordingly. Plaintiff excepted and appealed.
On the 20th day of March, 1886, A. J. Reeves, Mrs. L. McD. Reeves, K. Reeves, and W. T. Reeves, made and executed their promissory note under seal to the defendant T. L. Francis (therein called Leroy Francis,) for the sum of $650, due 12 months after date. Soon after the execution of the note, Francis, for valuable consideration, sold the same to J. P. Herren, and endorsed it in blank by writing his name across the back of it, and Herren sold and transferred the note to the plaintiff, and endorsed it in the same way that Francis endorsed it to him. Various payments have been made on said note by the defendant. A. J. Reeves, who seems to have been the principal therein, to the plaintiff, Garrett. These payments have been made at different times, commencing within less than three years from the date of the note; and this first payment was followed by other payments, so as not to make as much as three years intervene between the date of any two of the payments. None of the defendants file any answer or make any other defense to the plaintiff's action, except the defendant Francis. He filed an answer in which he admits that the note was given to him by his codefendant Reeves; that he sold and assigned the same to Herrin, and endorsed the same in blank by writing his name on the back of the note, and pleads the statute of limitations.
The sole question involved is: Did these endorsed payments arrest the operation of the statute of limitations, and prevent it from becoming a bar to the plaintiff's action, as against the defendant Francis? The court held that they did not.
It is not contended but what these payments prevented the statute from becoming a bar to the plaintiff's action, as against A. J. Reeves the principal, and party making the payments. And (531) it is held in Green v. Greensboro College, 83 N.C. 449, cited and approved in LeDuc v. Butler, 112 N.C. 458, and in quite a number of other cases, that a payment made by the principal, before the action is barred, operates as a renewal as to all the obligors — sureties as well as principals. This now seems to be the settled law in this State.
But the defendant Francis says that he is not a surety, but an endorser, and, for this reason the doctrine announced in Green v. Greensboro College, supra, does not apply to him; that the payments made by the principal debtor, Reeves, did not affect him, and that he stands on the same footing as if no such payments had been made; and that the statute barred any action against him after the lapse of three years from the time the note fell due.
This would certainly have been so, before the statute of 1827 (Code, sec. 50). And it is now to be considered what effect this statute has upon the case, if any.
This statute provides that: "Whenever any bill or negotiable bond or promissory note shall be endorsed, such endorsement, unless it be otherwise plainly expressed therein, shall render the endorser liable as surety to any holder of such bill, bond or promissory note, and no demand on the maker shall be necessary, previous to an action against the endorser: Provided, that nothing herein shall in any respect apply to bills of exchange, inland or foreign."
If this statute is construed to mean what it plainly says, "that any such endorser shall be liable as surety to any holder" of the endorsed note, it would seem that the doctrine of Green v. Greensboro College, supra, applies, and that the statute of limitations does not bar the plaintiff's action against the defendant Francis. The plaintiff is the holder of the note, and the defendant Francis is the endorser of the note. This doctrine that an endorser becomes (532) a surety to the holder of the note, seems to be expressly held in Johnson v. Hooker, 47 N.C. 29, where the Court, PEARSON, J., delivering the opinion, says: "The act of 1827, Revised Statutes, ch. 13, sec. 10, (now Code, sec. 50), makes an endorser liable to the holder of a note as surety. The effect is to put him on the footing of a maker of the note, and to make him liable to the holder, the same as if his name was on the face of the note instead of being on the back." If this opinion, which seems to be fully authorized by the language of the statute, is to be considered a correct construction of the statute of 1827 (Code, sec. 50), it would seem that the defendant Francis stands in the same relation to the plaintiff as if he were one of the original makers of the note.
In Bank v. Lumber Co., 123 N.C. 20, and in Moore v. Carr, ibid., 425, it is held that an endorser is a surety on the note to the holder. And in Moore v. Carr it is held that payments made by the principal debtor arrest the operation of the statute of limitations as to the endorser; but, in that case, the endorsement was made before the note was delivered to the payee. And it is contended that this fact distinguishes that from this case. The distinction is attempted to be drawn upon the ground that, in that case, there was "a community of interest between the defendants"; while, in this case, there is no community of interest between the defendant Francis and the original maker of the note; that by reason of this "community of interest" any payment made by the principal debtor tended to discharge the debt, and inured to the benefit of the endorser. This idea is advanced, and the same language and argument used, in some other cases, discussing the effect of the act of 1827. But we do not know what is ment [meant] by a "community of interest" unless it means that they (533) were all interested in having the debt paid. This is what we would take it to mean. It cannot mean that their interests were equal. If it is given this meaning, it would exclude sureties from the effect of a payment made by the principal debtor, and this would destroy the doctrine held in Green v. Greensboro College, supra, and the other cases where the same doctrine is held. But this community of interest, in cases of principal and surety and in cases of principal and endorser before the note is delivered to the payee, must be a "community of interest" in the sense of meaning we have given this language. For their interests are not equal, nor "of the class" any more than that of the defendant Francis. Every surety on a note is interested in the principal's paying the note, because that discharges him from liability. But the surety and principal debtor are not only not equally interested, but they are not "in the same class" of liability. If the surety pays the debt, he has recourse on the principal debtor. But if the principal pays the debt, he has no recourse on the surety. And to hold that this inequality destroys the "community of interest" would be in effect to overrule Moore v. Carr, and to destroy the doctrine of Green v. Greensboro College. If the endorser pays — that is, if Francis pays — he has recourse on all the original makers of the note; but they would have none upon him. It is admitted that the statute of 1827 (Code, sec. 50), does not affect the liability, as between makers and endorsers. It does not claim to do this, but to make the endorser a surety to the holder of the note.
This is what we think must be understood by the term "community of interest" — that the endorser is bound as surety, and is interested, in common with the other parties, in the principal debtor's paying the debt.
The case of Wood v. Barber, 90 N.C. 76, was cited and relied on by the defendant. But when we come to examine that case, we find that it was an action on a partnership debt, out of date, when one of the partners made a payment, after it was barred; and (534) it was claimed by the plaintiff that this payment revived the debt as to all the partners. But the Court held that under sec. 171 of The Code, the payment did not have the effect to revive the debt as to any of the partners, except the one making the payment. So it is seen that that case does not bear upon the question under discussion this case.
The case of LeDuc v. Butler, 112 N.C. 458, was cited and relied on by the defendant Francis; and there is a discussion of the liability of endorsers and the effect of a payment to an endorsee by the payee who had endorsed the note. But it does not seem that the question was presented as to what effect a payment made by the principal debtor would have upon the running of the statute of limitation, upon an endorser, as the defendant Butler, who pleaded the statute of limitations in that case, was one of the original signers and makers of the note sued on. It is true that there are expressions used by the learned judge who wrote the opinion that are favorable to the contention of the defendant. But as they were not presented by the facts of the case, they do not have the character and force of a precedent. It is admitted in this discussion of that case that Johnson v. Hooker, supra, is authority against the position taken by the defendant in this case. It is also said in the discussion of that case ( LeDuc v. Butler): "A clear distinction is marked in all these cases, except possibly the last, between the surety and the endorser in their relations to each other, while, as to the holder, their liability was the same." This is what we contend for in this case — that, "as between the endorser and the holder," that is, as between the plaintiff, the holder, and the defendant Francis, the endorser, the relation between them is the same as if the defendant Francis had been one of the original sureties. (535)
A review of the cases will show that the opinions of the Court have not always been in harmony upon this question. But the most direct expression of the Court that we have seen is the case of Johnson v. Hooker, and that is with the plaintiff.
It seems to us that at least some of the cases cited for the defendant are based on Good v. Martin, 95 U.S. 90, cited in Hoffman v. Moore, 83 N.C. 313, which is put upon the general doctrine of commercial law, in which our statute of 1827 was not (as a matter of course) taken into consideration. And this Court in some of its discussions of this question, we are inclined to think, have not given that consideration to the statute of 1827 that it was entitled to.
We are unable to see how the statute (Code, sec. 50), when construed in the light of the doctrine of Green v. Greensboro College, supra, can be held to relieve the defendant Francis from liability in this action.
This opinion does not conflict with Moore v. Carr, or Bank v. Lumber Co., supra. It only makes an application of section 50 of The Code, not involved in either of these cases.
There is error. New trial.