Garrett v. Reeves

• Decision Date: 22 December 1899
• Citation: 34 S.E. 636,125 N.C. 529
• Parties: GARRETT v. REEVES et al.
• Court: North Carolina Supreme Court

34 S.E. 636

125 N.C. 529

GARRETT v. REEVES et al.

Supreme Court of North Carolina

December 22, 1899

Appeal from superior court, Haywood county; Coble, Judge.

Action by W. G. B. Garrett against A. J. Reeves and others, as makers, and T. L. Francis, as indorser, of a promissory note. From a judgment against the makers only, plaintiff appeals. Reversed.

Faircloth C.J., dissenting.

Smith & Valentine and Moody & Welch, for appellant.

W. T Crawford and G. S. Ferguson for appellees.

FURCHES J.

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 indorsed it in blank by writing his name across the back of it; and Herren sold and transferred the note to the plaintiff, and indorsed it in the same way that Francis indorsed 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 co-defendant Reeves, and that he sold and assigned the same to Herren, and indorsed 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 indorsed 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 it is held in Green v. College, 83 N.C. 449, cited and approved in Le Duc v. Butler, 112 N.C. 458, 17 S.E. 428, 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 indorser, and for this reason the doctrine announced in Green v. 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, § 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 indorser shall be "liable as surety to any holder" of the indorsed note, it would seem that the doctrine of Green v. College, supra, applies, and that the statute of limitations does not bar the plaintiff's action against the defendant Francis. The plaintiff's is the holder of the note, and the defendant Francis is the indorser of the note. This doctrine that an indorser becomes 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 (Rev. Code, c. 13, § 10; now Code, § 50) makes an indorser 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, § 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, 31 S.E. 348, and in Moore v. Carr, 123 N.C. 425, 31 S.E. 832, it is held that an indorser 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 to the statute of limitations as to the indorser, but in that case the indorsement 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 interests 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 indorser. 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 meant by a "community of interest," unless it means that they 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. 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 indorser before the note is delivered to the payee, must be a "community of interest" in the sense or 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. College. If the indorser 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, § 50) does not affect the liability, as between makers and indorses. It does not claim to do this, but to make the indorser a surety to the holder of the note. This is what we think must be understood by the term "community of interest,"--that the indorser 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 it was claimed by the plaintiff that this payment revived the debt as to all the partners. But, the court held that, under section 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 in this case. The case of Le Duc. v. Butler, 112 N.C. 458, 17 S.E. 428, was cited and relied on by the defendant Francis; and there is a discussion of the liability of indorsers, and the effect of a payment to an indorses by the payee, who had indorsed 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 limitations upon an indorser, 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 (Le Duc v. Butler): "A clear distinction is marked in all these cases, except possibly the last, between the surety and the indorser, 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 indorser and the holder" (that is, as between the plaintiff, the holder,...