#### R. M. SANDERS v. J. B. HAMILTON, et al.

(Filed 2 February, 1951.)

1. Payment § 8—

Where a mortgage is given to secure two debts, nothing else appearing, the law does not perforce prefer one over the other in foreclosure.

2. Trial § 30—

In passing upon whether defendant is entitled to a directed verdict, plaintiff’s evidence should not only be taken as true, but also should be considered in its most favorable light to plaintiff, giving plaintiff every reasonable intendment and legitimate inference fairly deducible therefrom.

3. Limitation of Actions § 12a: Payment § 8 — Whether creditor was entitled to remit interest on one note to make part payment on others held for jury.

Plaintiff’s testimony was to the effect that the chattel mortgage executed by defendants was given as security for money loaned and as additional security for notes secured by a deed of trust theretofore executed by defendants. In plaintiff’s action to foreclose the chattel mortgage, defendants paid a certain sum under a compromise agreement. Plaintiff deducted from the sum recovered the amount actually loaned on the chattel mortgage, without interest, and applied the balance *pro rata*to the notes secured by the deed of trust. *Held:*The prayer for relief in the action to foreclose the chattel mortgage is not controlling, and whether plaintiff was entitled to make the credits in this manner so as to constitute a part payment on ■the notes secured by the deed of trust and thus prevent the bar of the statute of limitations should have been submitted to the jury, and a directed verdict for defendant is error.

4. Mortgages § 38—

In a suit to recover on purchase money notes and to foreclose deed of trust given as security therefor, defendants may not set up as a counterclaim embarrassment resulting from foreclosure of a prior mortgage executed by plaintiffs before their conveyance of the land to defendants, since defendants could have paid the prior lien and avoided the suit to foreclose.

Barnhill, J., dissenting.

Ervin, J., concurs in dissent.

Appeals by plaintiff and defendants from *Godwin, Special Judge,*July Term, 1950, of PeNder.

Civil action to recover on six promissory notes and to foreclose deed of trust on land given as security for tbe payment of tbe notes.

Tbe notes in suit, eacb for tbe sum of $500.00, were executed 24 December, 1926, and matured serially thereafter on 1 November, 1927, ’28, ’29, ’30, ’31, ’32, respectively.

Thereafter, on 5 February, 1927, tbe defendants executed and delivered to plaintiff another note in tbe sum of $400.00 due and payable 1 Novem*176ber, 1927, secured by chattel mortgage, $114.85 of which was for money loaned and the balance of $285.15 “was to better secure these real estate notes,” according to plaintiff’s unchallenged testimony.

In October, 1937, plaintiff brought an action to foreclose this chattel mortgage, and resulted in a compromise settlement of $162.50, which defendants paid to plaintiff’s attorney on 12 January, 1938. Plaintiff’s attorney retained $12.50 as his fee and remitted the balance of $150.00 to plaintiff. The plaintiff credited the chattel mortgage note with $114.85, the loan represented therein, and the balance of $35.15 was credited ratably on the six real estate notes involved herein. (Plaintiff concedes that defendants are entitled to a further credit of $12.50 which his counsel retained as his fee.) Plaintiff testified, without objection, “I did not charge, receive or collect any interest on the $114.85.” This present action was instituted 8 January, 1948.

The defendants set up in bar of plaintiff’s right to recover the ten-year statute of limitations and also allege that they have been damaged in the sum of $1,000.00 over and above plaintiff’s claim, by reason of a suit brought by a prior lienholder to foreclose prior mortgage on the land here involved.

The plaintiff demurred *ore terms*to the allegation of damages in the defendants’ answer.

The court held as a *matter*of law that the notes in suit were barred by the ten-year statute of limitations and so instructed the jury. Exception by plaintiff.

The court also sustained the plaintiff’s demurrer to the allegation of damage in the defendants’ answer. Exception by defendants.

From the judgment entered dismissing the action, both sides appeal, assigning errors.

*John G. Best and J. G. Sedberry for plaintiff, appellant.*

*Mo.ore & Gorbett and Isaac O. Wright for defendants, appellants, appellees.*

Stagy, O. J.

The correctness of the ruling on the statute of limitations turns on the validity of the credits entered by plaintiff on the notes in suit 12 January, 1938. This was a matter for the jury under proper instructions from the court. *Lee v. Manley,*154 N.C. 244, 70 S.E. 385; *Miller v. Womble,*122 N.C. 135, 29 S.E. 102; *Young v. Alford,*118 N.C. 215, 23 S.E. 973.

The contention that the whole of the compromise settlement should first be used to repay the money loaned *with interest*before any part of the settlement could be applied to the real estate notes would seem to overlook the testimony of the plaintiff that he neither charged nor received *177any interest on the money loaned, and the further circumstance that the chattel mortgage was also given “to better secure these real estate notes,” which were then unbarred by the 10-year statute of limitations. Where a mortgage is given to secure two debts, nothing else appearing, the law would not perforce prefer one over the other in foreclosure, since ordinarily there can he but one foreclosure of a security lien. *Layden v. Layden,*228 N.C. 5, 44 S.E. 2d 340. Moreover, on motion to nonsuit or for directed verdict the plaintiff is not only entitled to have the evidence making for his cause taken as true, but also to have it considered in its most favorable light, together with every reasonable intendment and legitimate inference fairly deducible therefrom, the ultimate weight and credibility of the evidence, of course, including any reconciliation of discrepancies or contradictions in plaintiff’s own testimony, being for the jury. *Brafford v. Cook,*232 N.C. 699; *Williams v. Kirkman,*232 N.C. 609, 61 S.E. 2d 706. It is true the jury may reject the favorable intimations of plaintiff’s testimony and accept the unfavorable ones, still this is a matter for them and it is not for the court to determine. *Journigan v. Ice Co., post,*180.

Nor is the prayer of a complaint necessarily controlling in the disposition of a recovery where the plaintiff recovers not according to his prayer, but by compromise, or by agreement *dehors*the prayer. Eecovery is usually determined by evidence, or agreement, and not by the plaintiff’s demand.

The plaintiff admits that the first note — the one that matured 1 November, 1927 — was already barred at the time of the credit of 12 January, 1938, hence under the decision in *Bond v. Wilson,*129 N.C. 387, 40 S.E. 182, he abandons any further right to recover on this note.

No error has been made to appear on defendants’ appeal. They could have avoided any embarrassment by paying the prior encumbrance rather than allowing suit to be brought to enforce it. Moreover, it may be doubted whether the allegations of the answer are sufficient to state a counterclaim. *Smith v. McGregor,*96 N.C. 101, 1 S.E. 695.

On plaintiff’s appeal, New trial.

On defendants’ appeal, Affirmed.

BabNhill, J.,

dissenting: At the time the defendant made compromise settlement of the claim and delivery proceeding instituted on the chattel mortgage, the note secured thereby was more than ten years old. The note was for $400. Plaintiff testified it was given for $114.85, money advanced, and the balance was additional security for real estate notes. The plaintiff, in his complaint in the claim and delivery action, demanded interest on the debt. That demand has never been withdrawn. Nor, on this record, have the defendants ever been notified of his decision (appar*178ently made after be received tbe money) not to charge interest. It constituted a part of bis claim wben settlement was made. Tbe money advanced on tbe note with interest exceeded tbe $162.50 paid in settlement thereof. Tbe payment was made in tbe settlement of tbe pending suit, and nothing was said about crediting any part of tbe payment on tbe real estate notes.

Wben defendant purchased tbe land, be conveyed to plaintiff, in part payment, property valued at $1,800. There was an undisclosed outstanding mortgage on tbe property conveyed to defendants in tbe sum of $3,500, together with taxes for five years, which defendants were compelled to satisfy in order to save tbe property.

In August 1927 plaintiff instituted an action to enjoin tbe defendants from cutting timber standing on tbe land conveyed to them. In bis complaint be swore that be held no security for bis notes other than tbe real estate mortgage. After defendants learned of tbe outstanding first mortgage, they made no further payment on tbe real estate notes and resisted a suit on tbe $700 note. In 1928 plaintiff undertook to foreclose bis real estate mortgage.

These facts, in my opinion, repel any suggestion that defendants paid tbe $162.50 in recognition of tbe alleged debt represented by tbe real estate notes, or with tbe intent that any part thereof should be credited thereon.

This is not a case where tbe debtor made a payment without directions as to its application, leaving tbe creditor to credit it on either debt. Tbe payment was made for tbe specific purpose of settling tbe claim and delivery action and protecting tbe defendants’ personal property conveyed in tbe chattel mortgage. Tbe payment was not sufficient to cover tbe money advanced with interest thereon which was tbe primary consideration of the mortgage. The balance, if any, was to secure the real estate notes, or so plaintiff testified.

A payment sufficient to arrest the statute of limitations must be made by the debtor as a part payment on a larger indebtedness, known to and recognized by him and under circumstances which raise an implied promise to pay tbe balance. 34 A.J. 267. To have tbe effect of tolling tbe statute, tbe payment must be made and accepted as payment of part of the particular indebtedness in question under circumstances such as warrant a clear inference that tbe debtor recognizes tbe whole of tbe debt as an existing liability and indicates bis willingness, or at least his obligation, to pay tbe balance. Tbe payment must be distinct, unequivocal, and without qualification, and tbe debt or obligation must be definitely pointed out by tbe debtor and an intention to discharge it in part made manifest. 34 A.J. 265.

*179Tbis rule bas been adopted in tbis jurisdiction and is fully supported by decisions of tbis Court. *Hewlett v. Schenck,*82 N.C. 234; *Young v. Alford,*113 N.C. 130, and cases cited; *Battle v. Battle,*116 N.C. 161; *Supply Co. v. Dowd,*146 N.C. 191; *Piano Co. v. Loven,*207 N.C. 96; *Bryant v. Kellum,*209 N.C. 112; *Saieed v. Abeyounis,*217 N.C. 644; Anno. 36 A.L.R. 352, 156 A.L.R. 1084.

Tbe subject is fully discussed by *Walker, J.,*in *Supply Co. v. Dowd, supra.*And in *Nance v. Hulin,*192 N.C. 665, *Adams, J.,*after stating tbe abbreviated rule, says: *“It is*necessary tbat tbe payment be voluntary, tbat it be sucb as to imply in law tbat tbe debtor acknowledges tbe debt and distinctly promises to pay it; but a payment made under circumstances wbicb repel sucb implied promise will not stop tbe running of tbe statute. (Citing cases.)”

It may be tbat “recovery is usually determined by evidence, or agreement, and not by tbe plaintiff’s demand.” But bere plaintiff bas no evidence of any agreement other tban tbe one contained in tbe written contract. He bimself testified: “I bave not got anything where anybody bas agreed tbat any part of tbis (payment) should be credited on tbe real estate notes.” In my opinion there is not a single fact or circumstance tending to show tbat tbe payment was “voluntary” in tbe sense it was intended as a payment on these notes, or was made in acknowledgment of tbat debt, or from wbicb a promise to pay those notes may be implied. All tbe circumstances point in tbe other direction.

Plaintiff admits tbat tbe payment made to satisfy tbe first mortgage is not sufficient to toll tbe statute. Had tbe personal property been sold under order in tbe claim and delivery action and tbe proceeds credited on tbe real estate notes, tbis would not suffice. Tbat tbe amount was paid to save tbe personal property from sale does not, in my opinion, change tbis result.

I vote to affirm on both appeals.

EbviN, J., concurs in dissent.