Regan v. Williams

• Decision Date: 21 January 1905
• Citation: Regan v. Williams, 185 Mo. 620, 84 S.W. 959, 105 Am. St. Rep. 600 (Mo. 1905)
• Parties: REGAN v. WILLIAMS.
• Court: Missouri Supreme Court

84 S.W. 959

185 Mo. 620

REGAN v. WILLIAMS.

Supreme Court of Missouri.

January 21, 1905.

PRINCIPAL AND SURETY — CREATION OF RELATION — RELEASE OF SURETY — EXTENSION OF TIME FOR PAYMENT — LIMITATION OF ACTIONS — PART PAYMENT.

1. A sale of mortgaged land by the mortgagor and the assumption of the debt by the grantee convert the grantee into the principal debtor and the mortgagor into a surety.

2. The extension of time for payment of a note secured by mortgage, granted to the purchaser of the mortgaged land, without consideration, is not binding, and does not release the original mortgagor who became surety by transfer of the land.

3. Where the original maker of a note collateral to a deed of trust, in the nature of a mortgage, became surety as to the note by conveyance of the land to one who assumed the debt secured, a payment of interest by the grantee does not arrest the statute of limitation as to such surety.

4. Where the trustee in a deed of trust containing a power of sale sells the land and indorses the proceeds on the note secured, this is not such a part payment of the note as will arrest the statute of limitation as to the original debtor who became surety of the debt by a conveyance of the land to one who assumed the debt.

In Banc. Appeal from Circuit Court, Greene County; Jas. T. Neville, Judge.

Action by S. H. Regan against E. H. Williams. A judgment for defendant was affirmed by the St. Louis Court of Appeals, and by

that court certified to the Supreme Court. Affirmed.

McReynolds & Halliburton, for appellant. Edward J. White, for respondent.

PER CURIAM.

This cause comes to this court on a certificate by the St. Louis Court of Appeals that the opinion of said court herein is in conflict with an opinion by the Kansas City Court of Appeals in Bender v. Markle, 37 Mo. App. 234.

The statement and opinion by Goode, J., of the St. Louis Court of Appeals, is as follows:

"March 21, 1887, the respondent executed to Timothy Regan, the father of the appellant, a promissory note for $4,000, due two years after date, and bearing compound interest at the rate of 8 per cent. The note was given for part of the purchase price of some land in Springfield, and to secure it a deed of trust was executed and delivered, on the same day, by the defendant and wife to Charles H. Goffe, trustee for said Timothy Regan, beneficiary. It contained the usual covenants and powers to the trustee to sell in case of default, `and receive the proceeds of the sale, out of which should be paid, first, the costs and expenses of this trust, and, next, all amounts expended for taxes and other purposes, and, next, the amount that may remain unpaid on said note and the interest thereon.' November 29, 1887, the defendant and wife conveyed the real estate covered by said deed of trust to the Scott Investment Company, which, with the full consent and approval of the payee, Regan, assumed and agreed to pay the note as part of the purchase price of the land. Interest was paid at the end of each year to March 21, 1890, on which date not only the interest, but $1,000 of the principal, were paid by the Scott Investment Company. The following indorsement was put on the note: `Paid on the within $1000.00 as principal in part and $320.00 as interest to March 21, 1890 and time on Bal. of note extended one year.' September 4, 1890, the Scott Investment Company conveyed the land to A. W. Carey, who likewise assumed and agreed to pay the incumbrance on it. Interest was paid to March 21, 1892. Afterwards defaults occurred, and on the 17th day of May, 1894, the trustee, Goffe, at the request of the beneficiary, sold the property under the deed of trust for $2,000, and, after deducting the expenses of the sale, credited the remainder $1,934.80, on the note. The present plaintiff was the owner and holder of the instrument when this action was commenced, but is affected by whatever equities exist against the payee. The defenses are that Williams was released by extensions given by Timothy Regan, and that the debt was barred by the statute of limitations. There is testimony tending to prove that the Scott Investment Company purchased the property with an understanding with Regan that the time of payment should be extended, and would not have purchased without it. The trial court made a special finding of the facts, in which it found against the view that there was an agreement as to the extension of time when Williams sold to the Scott Investment Company. It also found that the defendant had neither made, nor caused to be made, any payment on the note, except that the trustee, under the authority of the deed of trust, credited thereon the amount received at the sale. This finding is supported by the evidence. The action was instituted on the 4th day of May, 1900.

"Opinion of the Court.

"The sale of the land by the original mortgagor, Williams, to the Scott Investment Company, and the assumption of the incumbrance by the latter, converted said company into the principal debtor with reference to the incumbrance, and the defendant into a surety. Wayman v. Jones, 58 Mo. App. 313; Nelson v. Brown, 140 Mo. 580, 41 S. W. 960, 62 Am. St. Rep. 755; Pratt v. Conway, 148 Mo. 291, 49 S. W. 1028, 71 Am. St. Rep. 602. Timothy Regan, who then held the note and knew all about the arrangement, was bound thereafter to recognize said parties in those capacities. Nelson v. Brown, supra.

"We must be controlled by the finding of the lower court that there was no agreement for an extension of the time of payment, either between Williams and the Scott Investment Company, or between the latter and Timothy Regan, at the time the company purchased the land. When the extension was entered on the note, the entire principal and one year's interest were due. The accrued interest and $1,000 of the principal were paid. It is the law in this state that a contract like that, for the extension of the time of payment, is without consideration and not binding, so that the creditor may, if he chooses, immediately press for payment despite his agreement to extend; that therefore a surety is not released by such a transaction between the maker and payee. Brown v. Kirk, 20 Mo. App. 524; Owings v. McKenzie, 133 Mo. 323, 33 S. W. 802, 40 L. R. A. 154. In some jurisdictions the rule is otherwise where there is not simply an agreement to forbear proceedings to collect, but a formal, executed stipulation to postpone the maturity of the instrument. Benson v. Phipps, 87 Tex., loc. cit. 580, 29 S. W. 1061, 47 Am. St. Rep. 128, and many cases cited. The decisions of the court to which we owe fealty must be followed, and we approve the ruling of the learned trial judge that the extension did not discharge the defendant as surety.

"In reply to the defense that the statute of limitations had run against the note before this action was begun, plaintiff asserts that the payments of interest by the Scott Investment Company and Carey to March 21, 1892, prevented the running of the statute not only in favor of said parties, but of the defendant as well. The ruling that payment by a principal will suspend the statute as to a surety is invoked as applicable, because, by operation of law, the subsequent grantees of the land covered by the deed of trust became principals and the defendant a surety. The proposition contended for is sound enough, generally speaking. Craig v. Callaway County Court, 12 Mo. 94; McClurg v. Howard, 45 Mo. 365, 100 Am. Dec. 378; Block v. Dorman, 51 Mo. 31; Vernon County v. Stewart, 64 Mo. 408, 27 Am. Rep. 250; Bennett v. McCanse, 65 Mo. 194. These payments were made while the note was still alive, and the rule is well established that payments made by the principal, or by one of several joint obligors, before the debt is barred, will stop the statute. But the reason why a payment by the principal stops it as to a surety is not because one is principal and the other surety, but because both are usually joint promisors; that is, the surety is affected by the act of the principal in his capacity as a joint promisor. The idea is that persons who jointly bind themselves are all liable to the promisee by virtue of their original agreement, so that performance or part performance by one is the act of all. Sigourney v. Drury, 14 Pick. 387; Brandram v. Wharton, 1 Barn. & Ald. 463; Atkins v. Tredgold, 2 Bar. & Cresw. 23. The principle only applies where the payment was made by one originally liable. Sigourney v. Drury, supra.

"Whether or not the statute ceased to run in favor of the defendant when the payments were made by the subsequent grantees depends, then, on whether he can be considered a joint promisor with them. Undoubtedly he was not. They were not parties to the note when it was made, and only became obligated to pay it by subsequent contracts between themselves and the maker, Williams. Their responsibility, far from resting on a promise by them given in conjunction with Williams to the payee, Regan, rests exclusively on the promises they made afterwards to assume the debt. In no sense were they joint obligors with him. Their promises neither coincided with his in point of time, nor were made with the same person, nor based on the same consideration. They were separate and distinct undertakings. Maddox v. Duncan, 143 Mo., loc. cit. 621, 45 S. W. 688, 41 L. R. A. 581, 65 Am. St. Rep. 678; Corbyn v. Brokmeyer, 84 Mo. App. 649. Those cases hold that a payment made by one whose promise is collateral does not interrupt the statute as to the original obligor. The precedents are all against this contention of the appellant. Trustee of Old Almshouse Farm v. Smith, 52 Conn. 434; Cottrell v. Shepherd, 86 Wis. 649, 57 N. W....