McDonald v. Mueller

• Decision Date: 14 February 1916
• Docket Number: 186
• Citation: 183 S.W. 751,123 Ark. 226
• Parties: MCDONALD v. MUELLER
• Court: Arkansas Supreme Court

183 S.W. 751

123 Ark. 226

MCDONALD v. MUELLER

No. 186

Supreme Court of Arkansas

February 14, 1916

Appeal from Greene Circuit Court; W. J. Driver, Judge; affirmed.

M. P Huddleston, Robt. E. Fuhr and J. M. Futrell, for appellant.

1. Under section 859 of Kirby's Digest, Mueller became liable for this indebtedness. This is a primary liability and the liability is to all creditors of the corporation. 90 Ark 51; 68 Id. 433; 78 Id. 517. A surety is a creditor and the relation of debtor and creditor arises at the time of becoming surety. 96 Ark. 268; 98 Id 200; 103 Id. 473; 24 Id. 511; 34 Id. 524; 40 Id. 547.

2. The statute does not run until there is some one to sue. The contract of suretyship is not breached until the surety pays the debt. Wood on Lim. to Actions, § 145; Brandt on Sur., § 199; Stearns on Sur. & Guar., § 297; 25 Cyc. 1113; 28 Id. 364; Jones on Mortgages, § 176. The statute of limitation applicable to this case is three years from the time the surety paid the debt. 34 Ark 113; 76 Id. 245; 96 Id. 594.

3. The statute as amended is remedial and the three-year limit applies instead of the two-year penal statute. 68 Ark. 338; 146 U.S. 657; 36 Cyc. 1181-2-3; 134 Mass. 471: 85 N.E. 36; 93 Ark. 42; 146 U.S. 657; 75 Ark. 107.

4. The statute does not commence to run until a complete cause of action has accrued. 3 Ark. 409; 25 Id. 465; 10 Id. 228; 32 Id. 131; 25 Cyc. 1066.

5. A statute may be both penal and remedial. 36 Cyc. 1181-2-3; 134 Mass. 471; 93 Ark. 42.

6. Taking any view the suit is not barred. 2 Dougl. 699; 2 W. Bl. 1226; 2 T. R. 148; 16 Pick. 128, etc. The statute began to run on the maturity of the debt. 75 Ark. 107; 21 Id. 186: 40 Id. 545. But it is not material in this case whether the statute commenced to run from the creation or maturity of the debt, as McDonald was an accommodation endorser and hence a surety, and the statute began to run from the time he paid the debt. Authorities supra; 16 Ark. 81; 21 Id. 99.

Judgment affirmed.

R. P. Taylor and Block & Kirsch, for appellee.

1. It is conceded that appellant was a creditor, and that the liability is primary. 96 Ark. 268; 90 Id. 51. The creditor, so long as he is unpaid, has two remedies, one contractual against the corporation, the other statutory created by law against the officers for official neglect, either or both of which he may pursue. 90 Ark. 51; 53 C. C. A. 14. Against the corporation the suit is not barred until three years from the time he paid the debt. But as against the officers the statute began to run from the time of the creation of the debt. Kirby's Dig., § 848; 68 Ark. 433; 53 C. C. A. 14; 107 F. 188; 75 Ark. 107; 45 P. 662; 47 Vt. 313; 9 Abb. N. C. 275.

2. Whether the statute is penal or remedial or both, this suit is barred. 101 U.S. 188; 68 Ark. 433; 113 U.S. 452, 146 U.S. 657; 158 Id. 337; 35 N.Y. 412; 96 Id. 323; 33 Md. 487, and many others.

OPINION

SMITH, J.

The Mueller Mercantile Company, a corporation, executed a note for $ 5,000, dated March 29, 1910, and due six months after date. This note was endorsed by appellant and appellee, and two other persons. On April 29, 1910, the same corporation executed another note for the sum of $ 10,000, due four months after date, which note was likewise endorsed by both appellant and appellee, together with three other sureties. Neither of said notes was paid and suits were commenced upon them at the October, 1911, term of the Greene Circuit Court. Before the final hearing of said causes, appellant McDonald filed a cross-complaint against appellee Mueller, in which he alleged that Mueller had entered into a contract with him by which he (Mueller) was to indemnify him against the payment of said notes. Mueller answered, denying any such contract, and upon the hearing of the issue, the jury. returned a verdict in his favor. Judgment upon both of the foregoing notes was taken against both McDonald and Mueller and the other endorsers and against the Mueller Mercantile Company as principal. Subsequently Mueller and McDonald each paid one-third of said judgments and costs.

On October 8, 1914, appellant sued appellee for the amount which he had been compelled to pay, on the ground that, when the foregoing notes were executed and delivered, Mueller was the president of the mercantile company, and as such president, had failed to make and file the annual statement of said corporation with the county clerk as required by law. Appellee answered, admitting such failure as president, but pleaded former adjudication and the statute of limitations. Appellant demurred to this answer and stood upon his demurrer, when the same was overruled, whereupon his cause of action was dismissed, and this appeal has been prosecuted to reverse that action.

Appellee insists that the decree should be affirmed for a number of reasons. Among other reasons, he interposes the plea of res adjudicta,9 and has made a most plausible argument on that question. Under our view of the statute upon which this action is predicated, it is unnecessary to pass upon that question. This action is founded upon section 859 of Kirby's Digest, which reads as follows:

"If the president or secretary of any such corporation shall neglect or refuse to comply with the provisions of section 848, and to perform the duties required of them respectively, the persons so neglecting or refusing shall jointly and severally be liable to an action founded on this statute, for all debts of such corporation contracted during the period of any such neglect or refusal."

This statute was amended by the General Assembly of 1909 (Act 222, p. 643, Acts of 1909), by the addition of the following provision: "And shall be deemed guilty of a misdemeanor, and upon conviction shall be fined in any sum not to exceed five hundred dollars, and each and every day such person or persons shall so neglect to comply with the provisions of said section 848 or fail or refuse to perform said duties, shall constitute a separate offense."

Prior to this amendment a case arose in which it became necessary to decide whether this statute was remedial or penal, and in the case of Nebraska National Bank v. Walsh, 68 Ark. 433, 59 S.W. 952, it was held that this was a mere statutory liability and was not a penalty, and that an action might, therefore, be brought under it within three years under the three-year statute applicable to "all actions founded upon any contract or liability, express or implied, not in writing."

It is now strongly urged that the nature of the action has been changed by the amendment set out above, and that even though the original statute was properly held to be remedial, the statute as amended must now be held to be penal, inasmuch as the amendment makes the official dereliction there provided against a misdemeanor. This amendment, however, does not change in any respect the statute which was held to be remedial, but adds only a penal feature, and it, therefore, becomes both remedial and penal. We conclude, therefore, that section 5068 of Kirby's Digest, which requires all actions upon penal statutes to be brought within two years, can not be pleaded in bar of the remedial portion of the statute.

The notes which formed the basis of this action matured, respectively, on September 29, 1910, and August 28, 1910, and this action was commenced October 8, 1914, which is more than three years from either the date or the maturity of the notes. While it does not appear when appellant was called upon to pay the third part of said notes, which he did pay, it is conceded that this payment was within three years of the date of the institution of this suit.

As the statute of limitations applicable to this action is three years, it becomes necessary, therefore, to decide the point of time from which the statute should be computed. A very earnest argument is made by appellee that the statute commenced to run from the date of these notes, and not from their maturity. But it is unnecessary to choose between these dates, because more than three years had elapsed after the maturity, before the institution of this suit. Appellant, on the other hand, very earnestly insists that no cause of action arose in his favor until he had actually paid the money in satisfaction of the judgments rendered against him, and that this action is, therefore, not barred.

We think the case of Griffin v. Long, 96 Ark. 268, 131 S.W. 672, decides when the statute begins to run against the surety who pays his principal's debt insofar, at least, as that question is involved in a suit under sections 848 and 859 of Kirby's Digest. It was there said:

"This was a suit to recover a debt of the principal due to his surety for what he had paid for such principal. The principal in this case was a corporation, and the action was brought to recover the debt from certain officers of said corporation. The action is founded upon the statutes of this State, which provide that said officers of a corporation shall at stated times file reports of the financial condition of the corporation, and upon a failure or refusal to do so, said officers shall jointly and severally be liable 'for all debts of such corporation contracted during the period of such neglect or refusal.' Kirby's Digest §§ 848, 859. The material question involved in this case is: When, under the allegations of the complaint, was the debt due by the corporation to appellant, its surety, contracted? When one becomes surety for a principal, a liability arises upon the part of the principal to indemnify his surety for any payment which he may be compelled to make for the principal. Hill v. Wright, 23 Ark. 530; Rice v. Dorrian, 57 Ark. 541, 22 S.W. 213. The principal thus becomes indebted to the surety for the payments he is...