Fox v. Kroeger, 5266.

• Decision Date: 21 January 1931
• Docket Number: No. 5266.,5266.
• Citation: 35 S.W.2d 679
• Parties: FOX v. KROEGER.
• Court: Texas Supreme Court

Page 679

35 S.W.2d 679

FOX v. KROEGER.

No. 5266.

Supreme Court of Texas.

January 21, 1931.

Error to Court of Civil Appeals of Fourth Supreme Judicial District.

Action by J. H. Kroeger against Ben J. Fox, independent executor of the estate of Mrs. C. M. Fox, deceased. Judgment for plaintiff was affirmed by the Court of Civil Appeals [5 S.W.(2d) 180], and defendant brings error.

Affirmed.

Edward L. Dunlap, of Victoria, for plaintiff in error.

C. C. Carsner, of Victoria, for defendant in error.

CRITZ, C.

This suit was begun in the county court of Victoria county by J. H. Kroeger against Ben J. Fox, independent executor of the estate of Mrs. C. M. Fox, deceased, upon a promissory note in the principal sum of $769.03, dated June 28, 1921, due twelve months after date, signed by Mrs. C. M. Fox as principal and J. H. Kroeger as surety, and payable to the Levi State Bank & Trust Company of Victoria, Tex. It seems to be admitted that Kroeger was an accommodation surety upon the note. Mrs. Fox died on February 3, 1922, prior to the maturity of the note. When the note matured, the bank called upon Kroeger for payment. On or about the due date Kroeger went to the bank and executed and delivered to it his own promissory negotiable note in full satisfaction for the Fox note, and for the amount due thereon, and the bank, by assignment written on the back of the Fox note, transferred the same to Kroeger, and delivered to him the original note. More than two years after Kroeger paid the note, but less than four years after the due date of the original note, Kroeger instituted suit against Ben J. Fox, executor of the estate of Mrs. C. M. Fox on the original note.

The defense was by demurrer in abatement and by the plea of two-year statute of limitation. The trial was before the court, and final judgment entered in favor of Kroeger for the full amount of the principal, interest, and attorney's fees of the Fox note. On appeal, the Court of Civil Appeals for the Fourth Supreme Judicial District of San Antonio affirmed the judgment of the county court. 5 S.W.(2d) 180. The case is before the Supreme Court on writ of error granted on application of Fox.

By his petition in the trial court, Kroeger declared upon the note itself, and prayed for judgment for the principal, interest, and attorney's fees as therein provided.

Fox contended in the county court and Court of Civil Appeals, and now contends, that Kroeger's only cause of action was upon the implied promise of reimbursement after he had paid off and discharged the note upon which he was surety, and that his cause of action was barred after two years from the time of accrual thereof; such accrual being the time of payment by him of the Fox note. Kroeger contended in the trial court and Court of Civil Appeals, and now contends, that a surety on a promissory note, for the accommodation of the maker, can pay off the obligation and have the same transferred to him, and maintain a suit against the original maker on the note itself. The Court of Civil Appeals sustained the contention of Kroeger, that is, the Court of Civil Appeals held that a surety who pays the obligation of his principal, and takes a transfer thereof to himself, can maintain a suit upon the obligation itself. It is admitted by both parties that, if the suit can be maintained upon the note, it is not barred by limitation, but, if the cause of action must be asserted upon the implied promise of reimbursement, it is barred by the two-year statute of limitation.

It seems that the question here presented has been one of great difficulty to the courts of this state, and on which the opinions of our Supreme Court, including the Commission, have seriously conflicted. In the early case of Holliman v. Rogers, 6 Tex. 91, our Supreme Court announced the rule that, where the surety paid the obligation of the principal, the obligation itself was extinguished, and the remedy of the surety against the principal was on an assumpsit, or the obligation implied by law on the part of the principal to reimburse the surety. This rule was reversed in the later case of Sublett v. McKinney, 19 Tex. 439, and the rule announced that in such a case the surety is subrogated to the very debt itself, and can maintain an action thereon, whether it be assigned to him or not, because he is entitled to have it assigned, and the law will regard that as done which ought to have been done. The Supreme Court adhered to the rule announced in Sublett v. McKinney in the subsequent cases of Williams v. Durst, 25 Tex. 667, 78 Am. Dec. 548; Mitchell v. De Witt, 25 Tex. Supp. 181, 78 Am. Dec. 561; Tutt v. Thornton, 57 Tex. 35; and Carpenter v. Minter, 72 Tex. 370, 12 S. W. 180 (Com. App. Opinion Adopted), and this rule does not seem to have been questioned by any opinion of the Supreme Court until the opinion in Faires v. Cockerell, 88 Tex. 428, 31 S. W. 190, 639, 28 L. R. A. 528. In the case last mentioned the Supreme Court, speaking through Judge Brown, expressly reversed the rule announced in Sublett v. McKinney, and the subsequent cases above mentioned, and went back to and reaffirmed the rule announced in Holliman v. Rogers, supra. All subsequent opinions by our Supreme Court which adhere to the rule announced in Faires v. Cockerell do so on the authority of that case.

However, in the very late case of Moore v. Jenkins, 109 Tex. 461, 211 S. W. 975, our Supreme Court, speaking through Judge Greenwood, very clearly gives warning that it is dissatisfied with the holding in Faires v. Cockerell, as regards the rights and remedies of a surety who has paid the obligation of his principal. In that case the commission recommended an affirmance of the judgment on the ground that payment by the surety extinguished the debt. The court refused to adopt this holding, saying that the case did not call for an adjudication of that question, and then proceeded to apply the rule announced in Faires v. Cockerell, where liens existed to secure the original debt. This case seems to be the last direct expression by our Supreme Court. However, in the fairly late case of Security Nat. Bank v. Kynerd (Tex. Com. App.) 228 S. W. 123, delivered long after the opinion in Faires v. Cockerell, the right of a surety who had been compelled to pay the obligation of his principal to have the obligation assigned to him, and to maintain an action on the instrument itself, was upheld. The Supreme Court did not expressly adopt this opinion, but could not have entered the judgment recommended, unless it in fact agreed with the holding. It is true that the opinion in Security Bank v. Kynerd attempts to distinguish that case from Faires v. Cockerell by saying that Faires v. Cockerell involved the unquestioned satisfaction of the debt of the principal by the surety, while in Security Nat. Bank v. Kynerd there was a purchase by the surety of the instrument itself. We do not think the cases can be so distinguished, but that Security Nat. Bank v. Kynerd is in direct conflict with Faires v. Cockerell. In fact, an examination of Faires v. Cockerell will disclose that it did not involve the remedy of a surety who has paid the debt of his principal, but the remedy of a principal against his co-principal. If we regard the opinion in Security Nat. Bank v. Kynerd as the latest Supreme Court authority on the subject, it is certainly authority for the rule that a surety who is compelled to pay the debt of his principal has the right to bring an action on the very debt itself, regardless of the questions of security or priorities.

When we come to examine the authorities on the subject, both English and American, we find that the great weight thereof is in favor of the rule that, where the surety pays the debt of his principal, he is subrogated to all...