Upton v. Heiselt Const. Co
| Decision Date | 13 July 1949 |
| Docket Number | 7231 |
| Citation | 116 Utah 83,208 P.2d 945 |
| Court | Utah Supreme Court |
| Parties | UPTON v. HEISELT CONST. CO |
Appeal From District Court, Third District, Salt Lake County; A H Ellett, Judge
Action by A. E. Upton against Heiselt Construction Company and L. H Heiselt on a note and to foreclose a mortgage. From a judgment for plaintiff, L. H. Heiselt appeals and from a judgment for Heiselt Construction Company, the plaintiff cross-appeals.
Affirmed.
Roberts & Roberts, Salt Lake City, for appellant.
William J. Christensen, Salt Lake City, Charles Welch, Jr., Salt Lake City, for respondent and cross-appellant.
J. D Skeen, Attorney at Law, Utah Oil Building, Salt Lake City for respondent on cross-appeal.
This action was commenced by the respondent and cross-appellant, A. E. Upton. Its foundation is a promissory note secured by a mortgage on certain real property situated in Salt Lake City, Utah. The promissory note is dated May 15, 1936, and is payable within one year. The note is signed as follows:
HEISELT CONSTRUCTION CO.
By L. H. Heiselt/s/
President
The instrument is indorsed on the back as follows:
'I, we or either of us, hereby guarantee the payment of the within note, waiving demand, presentment for payment, notice of dishonor, protest and notice of protest.
'L. H. Heiselt /s/
'Pay to the order of A. E. Upton without recourse on me.
'Elmer H. Peterson/s/'
The mortgage, given to secure the note is dated May, 1936. It contains the following provision:
'The mortgagor agrees to pay all taxes and assessments on said premises, and the sum of reasonable Dollars attorney's fees in case of foreclosure.'
This action was commenced on July 9, 1943, some 6 years 1 month and 24 days after the note fell due. Plaintiff prayed judgment in the sum of $ 3,000 and interest and attorney's fees and also for a decree of foreclosure of the mortgage.
The note was made at Denver, Colorado, and was payable at the National City Bank of Denver, Colorado.
The defendants admitted making the note but raised the defense that the action is barred by the Statute of Limitations, Section 104-2-22(2), U.C.A.1943. There were other pleadings in the case, but as they are not before us on this appeal we shall not discuss them.
Plaintiff replied to the defense of the Statute of Limitations, that defendant Heiselt Construction Company paid taxes on the mortgaged property pursuant to the mortgage agreement and therefore that this payment tolled the statute -- Section 104-2-22(2).
The court held that the Statute of Limitations had run in favor of the Heiselt Construction Company, but that it had not run in favor of the indorser, L. H. Heiselt, who divided his time during the six years, one month and twenty-four days, between Colorado, Utah, and California. Accordingly, judgment was rendered in favor of plaintiff and against defendant Heiselt personally.
Defendant Heiselt has appealed from this judgment. Plaintiff Upton has cross appealed from the failure to give a judgment against the Heiselt Construction Company.
Defendant Heiselt by his appeal relies upon three assignments of error, which raise two questions: (1) Whether or not the evidence justified the finding and conclusion that L. H. Heiselt had been out of Utah, Colorado and California during the six year period of limitations when the statute would have run against the note in excess of one month and twenty-four days; and (2) Whether or not the court can render a judgment against an indorser, when the cause of action against the maker is barred by the Statute of Limitations -- this in view of Section 61-1-122, U.C.A.1943? (See quotation hereafter).
Plaintiff Upton in his cross appeal raises two questions by his assignments of error: (1) Even though the Statute of Limitations has run on the note, should not the court have entered a decree of foreclosure on the mortgage; and (2) Does payment of taxes by the mortgagor toll the statute of limitations where the mortgagor by a specific covenant in the mortgage agrees to pay the taxes?
(1) Was defendant L. H. Heiselt in or out of the state? The substance of the testimony given by him is that he did not live in any one of the three states mentioned for a period of six years during the period in controversy. In fact, he answered in the negative, a question as to whether he had lived in any of the three states a total of six years.
(2) Can the court render a judgment against an indorser when the cause of action against the maker is barred by the statute of limitations? This presents a more serious question, and one upon which the authorities are in conflict. Section 61-1-122, U.C.A.1943, reads in part as follows:
'A person secondarily liable on the instrument is discharged:
'(1) By any act which discharges the instrument. * * *
'(3) By the discharge of a prior party.'
In determining this question we have available to us certain interpretations of this same section by courts of other jurisdictions, since Section 61-1-122, U.C.A.1943, is adopted from Section 120 of the Uniform Negotiable Instruments Law. The use of the word 'discharge' as applicable to the statute of limitations of this state will be covered later.
There have been decisions from courts of some of the states where the Uniform Negotiable Instruments Law has been adopted which furnish us a guide at least to the arguments on either side.
In the case of First National Bank of Shenandoah v. Drake, 185 Iowa 879, 171 N.W. 115, the Iowa Supreme Court held that the discharge of the maker of the note by the statute of limitations also discharged the guarantor, who as a non-resident was not otherwise protected by the statute. The case seems to have been controlled almost entirely, however, by the decision of an Iowa case decided prior to the passage of the Negotiable Instruments Law; that of Auchanpaugh v. Schmidt, 70 Iowa 642, 27 N.W. 805, 59 Am.Rep. 459, from the same jurisdiction, which held that a claim barred by the statute of limitations against the principal debtor was also barred against a surety. This latter case was clearly a minority view prior to the Uniform Negotiable Instruments Law.
The contrary view was taken in the case of Romero v. Hopewell, 28 N.M. 259, 210 P. 231, wherein it was held that discharge in subsection (3) contemplates some affirmative act or release on the part of the holder and not a discharge by his mere failure to act. Similarly also in the case of Finance Corp. of New England v. Parker, 251 Mass. 372, 146 N.E. 696. Other cases not involving the statute of limitations, but involving other types of discharge not by act of the holder are the following: Everding & Farrell v. Toft, 82 Or. 1, 150 P. 757, 160 P. 1160; Brooks v. American National Bank of Beaumont, Tex.Civ.App., 103 S.W.2d 246; Corn Exchange National Bank v. Taubel, 113 N.J.L. 605, 175 A. 55; Silverman v. Rubenstein, Sup., 162 N.Y.S. 733; Bromberg v. Self, 16 Ala.App. 627, 80 So. 631; Highleyman v. McDowell Motor Car Co., 202 Mo.App. 221, 216 S.W. 52; Petri v. Manny, 99 Wash. 601, 170 P. 127, 1 A.L.R. 1595; Howard v. First National Bank, 270 Ky. 586, 110 S.W.2d 293; Roberts v. Chappel, 63 Ohio App. 397, 26 N.E.2d 930, and others.
The cases cited set out the arguments pro and con. The numerical weight of authority appears to favor the interpretation that discharge under subsections (1) and (3) refers to discharge only by act of the holder and does not refer to discharge by operation of law.
The running of the statute of limitations is not truly a discharge in any event. It is only a bar to the remedy, where it is plead. 34 Am.Jur. 314,...
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Upton v. Heiselt Construction Co.
...against an endorser. 8 McDONOUGH, C. J., and CROCKETT, WADE and WORTHEN, JJ., concur. 1 Harris v. Butler, 91 Utah 11, 63 P.2d 286.1 116 Utah 83, 208 P.2d 945.2 Plaintiff did not make this last contention a part of his Statement of Points, though he argued it in his brief. Although the case ......