Eilke v. Rice

• Decision Date: 05 August 1955
• Citation: 286 P.2d 349,45 Cal.2d 66
• Court: California Supreme Court
• Parties: Katherine EILKE, as Executrix of the Will of Herta Reinach, Deceased, Plaintiff and Appellant, v. David RICE, Defendant and Respondent. L. A. 23639.

Page 349

286 P.2d 349

45 Cal.2d 66

Katherine EILKE, as Executrix of the Will of Herta Reinach, Deceased, Plaintiff and Appellant, v. David RICE, Defendant and Respondent.

L. A. 23639.

Supreme Court of California, In Bank.

Aug. 5, 1955.

Moore, Trinkaus & Binns and Walter R. Trinkaus, Los Angeles, for appellant.

Morrison, Hohfeld, Foerster, Shuman & Clark, San Francisco, as amici curiae on behalf of appellant.

Vaughan & Brandlin, J. R. Vaughan, Richard I. Roemer and Warren J. Lane, Los Angeles, for respondent.

SHENK, Justice.

This is an appeal from a judgment of dismissal following an order sustaining a demurrer without leave to amend.

On August 1, 1944, the defendant Rice executed two promissory notes to one Herta Reinach, of whose estate the plaintiff is the executrix. Both notes were in the amount of $3,000. The first was payable on or before six months; the second on or before one year. No payments were made on the principal on either note although some thirty payments on account of interest were made regularly through November 15, 1952. The complaint was filed on November 30, 1953. It alleged demand and failure of the defendant to pay the amount of $3,000.00 due on each note and sought recovery of the principal, interest, attorneys' fees and costs.

The demurrer was sustained on the ground that the action was barred by the Code of Civil Procedure, section 337, which outlaws written contracts after four years. Unless tolled or extended by the payments of interest, the statute would have run on the first note on February 1, 1949 and on the second note on August 1, 1949.

The controversy centers upon the correct construction of the Code of Civil Procedure Section 360. That section as amended in 1947 (the amended portion in italics), provides: 'No acknowledgment or promise is sufficient evidence of a new or continuing contract, by which to take the case out of the operation of this title, unless the same is contained in some writing, signed by the party to be charged thereby, provided, that any payment on account of principal or interest due on a promissory note made by the party to be charged shall be deemed a sufficient acknowledgment or promise of a continuing contract to take the case out of the operation of this title and the time within which an action may be brought upon a promissory note or upon any installment of principal or interest thereof shall not commence to run until the last payment of principal or interest made by the party to be charged prior to the time when the statute of limitations would otherwise have run on the principal sum or on the installment thereof last due.'

The principal difficulty arises from the provision that time does not 'commence to run until the last payment of principal or interest made by the party to be charged prior to the time when the statute of limitations would otherwise have run on the principal sum or on the installment thereof last due.' This provision does not indicate the formula for determining when the statute would 'otherwise have run.' The defendant contends that it should be construed to indicate only an extension through the first four years from the original due dates of the notes. It is the position of the plaintiff that it should be read as including extensions resulting from payments of interest. The question is whether the entire section, including the amendment's time extension provision, is embraced within the computing formula for determining when the statute would 'otherwise have run.' There is room for legitimate argument that either view is possible under the language of the section as amended. There is therefore no merit in the defendant's contention that the section is clear and unambiguous and that this court has no power to construe it.

If the first construction were adopted, then, in the present case, the statute running originally on February 1, 1949 and August 1, 1949, the 'last payments' would have been made on November 10, 1948 and May 9, 1949. The amendment would then bar the action four years after those dates; that is on November 10, 1952 and May 9, 1953. Since the action was commenced on November 30, 1953, the first suggested construction of the amendment would bar the action on both notes.

If the second suggested construction were adopted, the payments of November 10, 1948 and May 9, 1949 would have the effect of extending the period to November 10, 1952 and May 9, 1953, but this second period would again be extended for a third period beginning with the last payment made before the second period expired. The defendant's last payments of September 19, 1952 and November 15, 1952 would thus extend the periods to September 19, 1956 and November 15, 1956. Hence under the second suggested construction the action would not be barred.

The part payment problem has suffered a long and tortuous history both at common law and through the decisions in this state under section 360. An examination of this history is desirable in order to clarify the ambiguity found in the present language of the code.

Prior to the 1947 amendment section 360 provided simply that 'No acknowledgment or promise is sufficient evidence of a new or continuing contract, by which to take the case out of the operation of this title, unless the same is contained in some writing, signed by the party to be charged thereby.' This language apparently had its origin in the Statute of Frauds Amendment Act, commonly known as Lord Tenterden's Act, (1828) 9 Geo. IV, Ch. 14, s. 1, which provided: 'In actions of debt or upon the case grounded upon any simple contract no acknowledgment or promise by words only shall be deemed sufficient evidence of a new or continuing contract, whereby to take any case out of the operation (of the statute of limitation) * * *, or to deprive any party of the benefit thereof, of, unless such acknowledgment or promise shall be made or contained by or in some writing to be signed by the party chargeable thereby * * *.' See Fairbanks v. Dawson, 9 Cal. 89.

The purpose of Lord Tenterden's Act was well stated by Chief Justice Tindal in Haydon v. Williams, (1830) 7 Bing. 163, at pages 166-167: 'That statute did not intend, as it appears to us, to make any alteration in the legal construction to be put upon acknowledgments or promises made by defendants, but merely to require a different mode of proof; substituting the certain evidence of a writing signed by the party chargeable, instead of the insecure and precarious testimony to be derived from the memory of witnesses.' This reasoning was apparently considered inapplicable to the acknowledgment of a debt by part payment, for the first section of Lord Tenterden's Act provided that '* * * nothing herein contained shall alter or take away, or lessen the effect of any payment of any principal or interest made by any person whatsoever.' (9 Geo. IV, Ch. 14, s. 1.) Despite this proviso, the statute was first construed to exclude parol evidence of part payment. (Willis v. Newham, (1830) 3 Young & Jer. 518), but the proviso, saving part payment from the operation of the Act, was eventually recognized and Willis v. Newham, supra, was overruled. (Cleve v. Jones (1851) 6 Exch. 573.) This was also the state of the law in American jurisdictions when section 360 of the Code of Civil Procedure was adopted. See Williams v. Gridley, 9 Metc. 482, 50 Mass. 482; Read v. Hurd, 7 Wend.N.Y., 408; Sibley v. Lumbert, 30 Me. 253; Hapgood v. Southgate, 21 Vt. 584.

Because our legislature adopted Lord Tenterden's Act almost verbatim but failed to include the proviso saving part payment transactions, this court has consistently construed section 360 to include part payment. In Fairbanks v. Dawson, supra, 9 Cal. 89, at page 92, it was said: 'From the fact that the proviso found in Lord Tenterden's act is left out of our statute, it would seem to be clear that the Legislature intended to put all acknowledgments and promises upon the same footing, to be governed by the same rule of evidence.' See Clunin v. First Federal Trust Co., 189 Cal. 248, 252, 207 P. 1009; Minifie v. Rowley, 187 Cal. 481, 202 P. 673; Concannon v. Smith, 134 Cal. 14, 66 P. 40; Tuggle v. Minor, 76 Cal. 96, 18 P. 131; Biddel v. Brizzolara, 56 Cal. 374; Pena v. Vance, 21 Cal. 142; Barron v. Kennedy, 17 Cal. 574. These decisions adopted the earlier English rule found in Willis v. Newham, supra, (1830) 3 Younge & Jer. 518, overruled in Cleve v. Jones, supra, (1851) 6 Exch. 573. While the Federal Circuit Court for the District of California reached the opposite result in Palmer v. Andrews, 1859, FedCas.No. 10,683, the rule in Fairbanks v. Dawson, supra, 9 Cal. 89 Was followed in this state until section 360 was amended in 1947.

Having decided that section 360 applied to part payments, it then became necessary to determine whether the requirement of a writing went to the proof of the new promise or merely the act of part payment from which the promise to pay the whole debt could be inferred. This problem was first resolved in favor of limiting the effect of the section to require merely the written proof of the act of part payment. Written evidence of an express recognition or admission of the debt was not required. Minific v. Rowley, supra, 187 Cal. 481, 202 P. 673; Concannon v. Smith, supra, 134 Cal. 14, 66 P. 40; Tuggle v. Minor, supra, 76 Cal. 96; Biddel v. Brizzolara, supra, 56 Cal. 374; Pena v. Vance, supra, 21 Cal. 142; Barron v. Kennedy, supra, 17 Cal. 574; Fairbanks v. Dawson, supra, 9 Cal. 89. When section 360 was reexamined eight months after the decision in Minifie v. Rowley, supra, 187 Cal. 481, 202 P. 673, the rule was extended to require that the writing prove either the new promise or a recognition or admission of the debt, not simply the act from which a promise could be inferred. In Clunin v. First Federal Trust Co., supra, 189 Cal. 248, 253, 207 P. 1009, 1011, this court said: '* * * no writing is sufficient as an...