Weems v. Carter

• Decision Date: 14 January 1929
• Docket Number: No. 2743.,2743.
• Citation: 30 F.2d 202
• Parties: WEEMS et al. v. CARTER et al.
• Court: U.S. Court of Appeals — Fourth Circuit

30 F.2d 202 (1929)

WEEMS et al. v. CARTER et al.

No. 2743.

Circuit Court of Appeals, Fourth Circuit.

January 14, 1929.

D. O. Dechert, of Harrisonburg, Va. (Donald L. Weems, of Winchester, Va., on the brief), for appellants.

T. W. Harrison and R. Gray Williams, both of Winchester, Va. (George H. Lamar, of Washington, D. C., and Harrison & Harrison, of Winchester, Va., on the brief), for appellees.

Before PARKER and NORTHCOTT, Circuit Judges, and COLEMAN, District Judge.

NORTHCOTT, Circuit Judge.

In the years 1921 and 1922, Cuatotolapam Sugar Company executed three negotiable notes, two for $10,000 each, and one for $7,500. One of the $10,000 notes was payable to Berkeley Woolen Company, and the other two notes were payable to Virginia Woolen Company. Payments were made on these notes until the total was reduced to $17,500. One of the appellees, Shirley Carter, a resident of Virginia, acquired all of the notes from the payees.

Contemporaneously with the execution of said notes, appellants, who were plaintiffs below, and who will here be referred to as plaintiffs, with others, whose interests have been assigned to plaintiffs, assigned and delivered to the payees of said notes, as collateral security therefor, certain bonds and stocks. Of this collateral one Liberty bond for $1,000 is the property of plaintiff Emily E. Weems, $4,000 in Liberty bonds is the property of plaintiff C. W. Weems, and the residue of said collateral is the property of plaintiff Mrs. Courtenay W. Weems.

All of the notes became barred by the Virginia Statute of Limitations (Code Va. 1924, § 5810) and on December 9, 1927, one of the appellees, W. G. Hardy, cashier of the Shenandoah Valley National Bank of Winchester, Va., named in the assignment of collaterals as attorney in fact of the depositors thereof, with authority to sell the same in default of the payment of said notes at their maturity, gave notice that he would, on December 23, 1927, pursuant to a request from said Carter, proceed to sell said collateral for the satisfaction of said balance due on said notes.

Plaintiffs then brought this suit in equity in the District Court of the United States for the Western District of Virginia, praying that the proposed sale of said collateral be enjoined, and that Carter be required to restore same to the possession of the plaintiffs.

The bill alleged that the maker of the notes, the sugar company, was at that time insolvent and in the hands of a receiver, appointed in the Republic of Mexico.

Motion was made to dismiss the bill, and it was urged that the Statute of Limitations was a personal right that could only be pleaded by the maker of the notes, and that though the statute might have run as against the notes, the right of the holder of the notes, as to the collateral, was in no way affected.

The court below sustained the motion to dismiss as to plaintiff Emily E. Weems for lack of jurisdictional amount, and as to the remaining plaintiffs, on the merits, from which action this appeal was brought.

The plaintiffs are third persons who have pledged their property to secure the debt of another, a debt for which they are in no way personally liable. They are asking the relief of a court of equity because the Statute of Limitations has run against the debt. In order to enforce his remedy against the collateral in his hands, the creditor does not ask or need the aid of a court. The question to be considered is whether the running of the Statute of Limitations in favor of a principal extinguishes the right of the creditor to proceed, as agreed, against the collateral. On this question there is some conflict of authority, but we agree with the learned judge below when he says that both "the weight of authority and the better reason lead to the conclusion that the running of the Statute of Limitation in favor of the principal, does not extinguish the obligation of a surety on a promissory note in whose favor limitation has not run."

Though a debt has been declared barred in an action on it, yet the security is unaffected. Brent v. Bank of Washington, 10 Pet. 596, 9 L. Ed. 547; Gage v. Riverside Trust Co. (C. C.) 86 F. 984; 2 Williston on Contracts, § 1231; Johnson v. Planters' Bank, 4 Smedes & M. (Miss.) 165, 43 Am. Dec. 480, 481, 482; Minter v. Branch Bank of Mobile, 23 Ala. 762, 58 Am. Dec. 315; Ashby v. Johnston, 23 Ark. 163, 79 Am. Dec. 102; Bull v. Coe, 77 Cal. 54, 18 P. 808, 11 Am. St. Rep. 235, 239; Willis v. Chowning, 90 Tex. 617, 40 S. W. 395, 59 Am. St. Rep. 842, 845, 846; Darby v. Berney Nat. Bank, 97 Ala. 643, 11 So. 881, 882; Johnson v. Success Brick Mach. Co., 104 Miss. 217, 61 So. 178, 179, 62 So. 4; Charbonneau v. Bouvet, 98 Tex. 167, 82 S. W. 460, 461; Eickhoff v. Eikenbary, 52 Neb. 332, 72 N. W. 309, 310.

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