Burrus v. Cook

• Decision Date: 05 March 1906
• Citation: 93 S.W. 888,117 Mo. App. 385
• Parties: BURRUS v. COOK et al.
• Court: Missouri Court of Appeals

93 S.W. 888

117 Mo. App. 385

BURRUS v. COOK et al.

Kansas City Court of Appeals. Missouri.

March 5, 1906.

LIMITATION OF ACTIONS—PRINCIPAL AND SURETY — SUBROGATION — ACTION AGAINST CO-SURETY.

Though a judgment creditor held no securities for his debt, a surety of the judgment debtor having satisfied the judgment, there was an equitable assignment to him, and he might maintain an action against his co-surety after the running of limitations against the statutory actions for contribution, and within the period within which the judgment creditor might have asserted his rights against the principal.

Ellison, J., dissenting.

Appeal from Circuit Court, Jackson County; A. F. Evans, Judge.

Action by J. M. Burrus against J. M. Cook and others. From a judgment in favor of defendants, plaintiff appeals. Reversed.

J. Allen Prewitt and Olney Burrus, for appellant. Paxton & Rose, for respondents.

JOHNSON, J.

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 $3,050, 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 nonresident 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 assignment 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 fides 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 by limitation, seeks, as the equitable assignee and owner of the judgment, to recover one-half thereof from his co-surety. The petition is in three counts and alleges other facts, but those stated are sufficient for the purposes of this inquiry.

The principal questions for solution are these: First. 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? Second. 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 20 years from the date of its rendition. Is plaintiff, as the equitable substitute for Bowlin, the judgment creditor, the successor to all of 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 payment alone) also should be applied to actions founded upon the equitable ownership of the debt.

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, 85 S. W. 927, 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 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 are now 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 subrogation—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 in the civil law is thus stated by Pothier in his Treatise on Obligations: "It is to be holden, as a principle, that all who are bound for a debt for others or with others, by whom they ought to be discharged either for the whole or a part, have a right, in paying such debt, to require the cession of the actions of the creditor against the other debtors, who are liable for it. This obligation of the creditor to cede his actions is grounded on this rule of equity, that being commanded to love all men, we are bound to grant them everything which they have an interest in having, when we may do so without injuring ourselves. A debtor in solidum having, then, a just interest in having the actions of the creditor, against his co-debtors, to make them pay their part of a debt, which they owe as well as he, the creditor cannot refuse it. For the same reason he cannot refuse it to a surety and generally to all those who, being bound for the debt, have an interest in being discharged in whole or in part by those for or with whom they are debtors." 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 law 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 debt as extinguished by payment, evolved the idea of founding an equitable right, not upon the creditor's "actions," but upon the fact of payment. In effect, they held that, notwithstanding the debt itself must be treated as nonexistent, the fact that one of two or more co-sureties has paid the debt of all gives him in equity the right to be substituted for the creditor as to all liens and securities incidental to the debt. In short, the paying surety was given everything the creditor had except the debt itself, to indemnify him against the default of his principal and co-sureties.

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...